<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1998.
REGISTRATION NO. 333-58731
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 2 TO
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 36-4247116
(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, SUITE 2600 NEW YORK, NEW YORK 10005
CHICAGO, ILLINOIS 60601 (212) 530-5349
(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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<TABLE>
<CAPTION>
AMOUNT MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE FEE(1)
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<S> <C> <C> <C>
Pass Through Certificates, Series
1998-1............................... $167,000,000 $167,000,000 $49,265(2)
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Equipment Notes, Series 98-A, 98-B,
98-C(3).............................. $160,000,000 $160,000,000 $47,200
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</TABLE>
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(1) Registration fee calculated pursuant to Rule 457(o) on the basis of the
maximum principal amount of securities to be offered.
(2) Previously paid.
(3) The proceeds of the offering of the Pass Through Certificates will be used
to purchase all of the Equipment Notes, and no separate consideration will
be received for the Equipment Notes.
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 SEPTEMBER 21, 1998
PROSPECTUS
$159,574,146
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") newly organized in July 1998 as a Delaware
corporation, and State Street Bank and Trust Company ("State Street"), as Pass
Through Trustee (the "Pass Through Trustee"). The property of the Pass Through
Trust will consist of $159,574,146 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 direct obligations of, nor are they
guaranteed by, the Company.
(continued on following page)
When issued, the Pass Through Certificates will be investment grade
securities and are expected to be rated at least Aa2 and AA by Moody's and S&P,
respectively. See "Ratings."
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 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
INITIAL PRINCIPAL FINAL
PASS THROUGH PRINCIPAL INTEREST DISTRIBUTION DISTRIBUTION PRICE TO
CERTIFICATES AMOUNT RATE DATE(1) DATE(1) PUBLIC(2)(3)
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<S> <C> <C> <C> <C> <C>
1998-1 $159,574,146 % October 20, 2001 September 20, 2020 100%
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</TABLE>
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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 October 20, 1998, and September 20, 2017,
respectively.
(2) Plus accrued interest, if any, from September , 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 $1,000,000, 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 September , 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
<PAGE>
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 October 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 October 20, 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 are non-recourse obligations of the applicable Owner Trust
and do not represent obligations of, and are not guaranteed by GATC, the
Company's parent corporation, 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."
i
<PAGE>
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, D.C. 20549, and at the following Regional
Offices of the Commission: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and New York Regional
Office, 7 World Trade Center, 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
had no prior operations and will not engage in any activity other than leasing
the Equipment from the Owner Trusts, the purchase of which Equipment by the
Owner Trusts is to be funded in substantial part with the proceeds of this
offering, and the subleasing of such 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
State Street, 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."
ii
<PAGE>
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 an explanation of defined terms used in this Prospectus, please see
the Glossary attached to this Prospectus as Appendix A.
TRANSACTION OVERVIEW
The Pass Through Certificates are being offered (the "Offering") as part of a
series of transactions that will close contemporaneously on the Closing Date of
the Offering in connection with the financing of the acquisition of a fleet of
railcars from GATC, as follows:
. The Company will form a Pass Through Trust pursuant to a pass through
trust agreement between the Company and State Street as pass through
trustee (the "Pass Through Trustee").
. Contemporaneously, GATC will sell the Equipment to the Company and assign
to the Company the related Subleases previously entered into by GATC with
its customers.
. In three separate leveraged lease transactions, the Company will then
immediately sell to each of three Owner Trusts a separate diversified
group of the Equipment such that the Owner Trusts together will own all
of the Company's railcar fleet.
. Each Owner Trust will finance the acquisition of its respective Equipment
Group by: (1) receiving at least 20% of the total Equipment Cost from an
equity investment in such Owner Trust by the related owner participant,
and (2) the sale to the Pass Through Trust of Equipment Notes at par
representing in aggregate principal amount not more than 80% of the
Equipment Cost of the related Equipment Group.
. On the Closing Date, the Pass Through Trust will issue to investors the
Pass Through Certificates representing fractional undivided interests in
the assets of the Pass Through Trust.
. Using all of the proceeds from the Offering, the Pass Through Trust will
acquire all of the Equipment Notes issued by each of the Owner Trusts.
The aggregate principal amount of the Equipment Notes will equal the
aggregate face amount of the Pass Through Certificates and payments of
principal and interest on the Equipment Notes will be passed through to
holders of the Pass Through Certificates on the corresponding payment
date.
. Pursuant to the Leases, the Company will lease back from each Owner Trust
all of the Equipment purchased by such Owner Trust.
. On the Closing Date, the Company will enter into the Management Agreement
and the Intercreditor Agreement with certain of the other parties as
described below.
Pursuant to an Operation, Maintenance, Servicing and Remarketing Agreement
(the "Management Agreement"), the Company has engaged GATC to act as the
manager of the fleet of railcars leased by the Company and to 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 direct obligations of, and are not
guaranteed by, the Company or GATC or any of their affiliates.
In connection with the leveraged lease transactions described above, pursuant
to the Collateral Agency and 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 the Collateral (including the Subleases and the rights to receive
any payments thereunder) along with any amounts held in certain accounts to be
maintained by the Collateral Agent. The parties to the Intercreditor Agreement
1
<PAGE>
agree that so long as the Equipment Notes are outstanding, all amounts due to
the Company will flow through the Collateral Agent and will be disbursed
according to the terms of the Intercreditor Agreement. The security interest of
the Collateral Agent in the Collateral is subject to the terms of the
Intercreditor Agreement, and under such agreement, the Collateral Agent's
security interest in the Subleases will not be perfected. See "The
Intercreditor Agreement."
THE EQUIPMENT
The equipment consists of 3,380 railroad tank cars and covered hopper cars
newly manufactured by Trinity Industries Inc. ("Trinity") during 1997 or 1998.
The fleet composition is approximately 75% tank cars and approximately 25%
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. 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 newly
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 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 an equity
contribution of $2,000,000 at the Closing Date. The Company's principal
executive office is located at 500 West Monroe Street, Chicago, Illinois 60661
(telephone: 312-621-6451).
THE FULL SERVICE RAILCAR LEASING BUSINESS
The Company will be 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 property taxes and provides several other ancillary services,
including auditing of Railroad Mileage Credit payments due from railroads. See
"--Summary of Principal Agreements--Railroad Mileage Credits." Pursuant to the
Management Agreement, the Company has engaged the Manager to 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"),
Trinity 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
2
<PAGE>
("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
initial Subleases, which will be assigned to the Company by GATC in connection
with GATC's sale of the Equipment to the Company on the Closing Date, are
contracts which GATC has entered into with customers over the last two years
when the Equipment was newly delivered to GATC from the manufacturer. 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 82
Sublessees whose businesses fall within the chemical, petroleum, agriculture
and mineral industries. Currently, 51.6% of the Equipment is Subleased to
Sublessees which are, or whose parent companies are, rated BBB- or Baa3 or
higher (although the obligation of such Sublessees may not be guaranteed by
their parent companies) and 32.2% are unrated by the Rating Agencies. As of
September 1, 1998, each of the Sublessees was current in respect of its
obligations under its Sublease. 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."
3
<PAGE>
[Transaction Schematic]
4
<PAGE>
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 payment 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 engage GATC under a Management
Agreement 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, effectively outsourcing all of the
Company's day-to-day operations. 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. Under
the terms of the Management Agreement, the Manager
will receive a monthly fee consisting of a Base
Component, an Incentive Component and a charge for
reimbursable services. The Base Component will be
the product of (i) a monthly fee payable per
Equipment Unit (initially $20) multiplied by (ii)
the number of Units managed. The Incentive
Component will be $5 per Unit per month for the
period from the Closing Date through December 31,
1999. Thereafter, the per Unit Incentive Component
will be calculated based on the gross sublease
revenues of the Company net
5
<PAGE>
of write-offs multiplied by .000238%, as more fully
described under "The Management Agreement--
Compensation of Manager."
THE INTERCREDITOR
AGREEMENT................ Pursuant to an Intercreditor Agreement among the
Company, the Owner Trustees, the Indenture
Trustees, the Manager, the Insurance Manager and
The First National Bank of Chicago, as collateral
agent (the "Collateral Agent"), the Company will
pledge to the Collateral Agent all of its rights,
title and interests under 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 to be disbursed in
accordance with the terms of the Intercreditor
Agreement.
THE INSURANCE AGREEMENT...
Pursuant to an Insurance Agreement between the
Company and the Insurance Manager, the Insurance
Manager will maintain or cause to be maintained,
with insurers with whom the Insurance Manager or
its affiliates insure equipment owned or managed by
them, (i) 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 the Insurance 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 Insurance
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 Leases. Compensation to the
Insurance Manager for its performance under the
Insurance Agreement will be included in the Base
Component under the Management Agreement so long as
the Insurance Manager is acting as Manager under
the Management Agreement. See "The Management
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.. Railcars are required to carry a "mark" consisting
of letters registered in the name of the owner of
the railcar mark and a car number (e.g., GATX 1234)
(the "Mark"). Such Marks are stenciled on the side
of each railcar.
Railroad Mileage Credits are cash credits paid by
the railroads to the registered owner of the
railcar Marks. The credit is a product of the
number of loaded miles a railcar travels on a given
railroad (which the railroad tracks by the Mark)
and a specific amount determined by agreement with
the railroads. The latter amount is based upon the
original cost and age of the railcar. Accordingly,
the more expensive a
6
<PAGE>
car is to manufacture and the newer the car, the
higher will be the attributable amount of mileage
credit.
Under the terms of the leases GATC enters into with
its customers and under the terms of the Subleases,
GATC and the Company, respectively, agree to pay to
or credit their customers all of the payments
received 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 carry Marks
registered with the AAR in the name of General
American Marks Company, a Delaware business trust
(the "Marks Company"). Payment 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 the Manager, will, in
turn, credit such payments in accordance with the
applicable Sublease against the Sublessee's
account. 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 "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 all defined terms used herein.
THE OFFERING
SECURITIES OFFERED........
$159,574,146 % 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 at the time of sale the Pass
Through Certificates will be investment grade
securities 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" or "S&P"). The
ratings on the Pass Through 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
7
<PAGE>
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
solely 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 and
all funds deposited in the related Certificate
Account, Special Payments Account and any other
account maintained as a part of the Pass Through
Trust, including any proceeds from the sale by the
Pass Through Trustee of any Equipment Notes in an
Event of Default. For a description of the
Equipment securing the Equipment Notes, see "The
Equipment." See "Description of the Pass Through
Certificates--General" and "--Payments and
Distributions."
PASS THROUGH CERTIFICATES:
SCHEDULED MATURITY DATE... September 20, 2017 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 11.4 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.
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 October 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 October 20, 1998, 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
8
<PAGE>
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.
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 October 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
9
<PAGE>
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."
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
10
<PAGE>
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 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) (A) 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 or (B) the Company
exercises its option to purchase the Equipment
in the event that the Company is unable to
procure certain insurance coverages, 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).
11
<PAGE>
(c) If, at any time on or after the seventh
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 together with
accrued interest thereon plus the Make-Whole
Amount.
(d) If (i) the Company exercises its rights on the
applicable date, occurring on or after the
seventh anniversary of the Closing Date, to
purchase all of the Equipment pursuant to the
related Lease (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 together
with accrued interest thereon plus the Make-
Whole Amount.
(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 all of
an Equipment Group pursuant to the 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
or the Company being unable to procure certain
insurance coverages, 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
12
<PAGE>
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 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.
At the Closing Date the balance in the Cash
Trapping Account will be $0. Thereafter, the
Company will fund the Cash Trapping Account from
available amounts with equal monthly deposits of
$109,100 until such time as the balance in the Cash
Trapping Account equals $6,000,000. 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, for so long as such Cash Trapping
Event is continuing, and held in the Cash Trapping
Account, up to a maximum aggregate balance of
$16,000,000. Amounts held in the Cash Trapping
Account will be released to the Company, subject to
a minimum balance requirement of $0 on the Closing
Date and increasing to $6,000,000 after 55 months
(i.e., increasing by $109,100 each month up to the
$6,000,000), when no Cash Trapping Event or Cash
Trapping Hold is continuing. See
13
<PAGE>
"Collection and Application of the Company's Cash
Flows--Cash Trapping Events; Required Cash Trapping
Amount; Release From Cash Trapping Account."
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 Confirmation, and (viii)
restrict the extent to which the Equipment is used
outside the United States.
PASS THROUGH TRUSTEE,
INDENTURE TRUSTEE AND
COLLATERAL AGENT......... State Street will act as Pass Through Trustee, as
paying agent and registrar for the Pass Through
Certificates, and as the Indenture Trustee under
each Indenture. The First National Bank of Chicago
will act as Collateral Agent pursuant to the
Intercreditor Agreement. See "Risk Factors--
Potential Conflicts of Interest."
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.
14
<PAGE>
SCHEDULED AND RATED AMORTIZATION SCHEDULES
The preliminary Scheduled Amortization and Rated Amortization for the
Equipment Notes as of the date shown for 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)). These
amortization schedules are subject to change based upon the interest rate
established for the Equipment Notes and are included herein for illustrative
purposes only. All principal payments on the Equipment Notes will be passed
through to Certificateholders when received.
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION* RATED AMORTIZATION*
------------------------ ------------------------
CUMULATIVE
EXCESS OF
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL SCHEDULED
DATE PAYMENT BALANCE PAYMENT BALANCE OVER RATED*
---- ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Closing.... $ -- $159,574,146 $ -- $159,574,146 $ --
9/20/99.... 4,466,674 155,107,472 -- 159,574,146 4,466,674
9/20/00.... 3,535,849 151,571,623 -- 159,574,146 8,002,523
9/20/01.... 3,784,484 147,787,139 -- 159,574,146 11,787,007
9/20/02.... 5,066,473 142,720,667 4,466,674 155,107,472 12,386,806
9/20/03.... 7,483,557 135,237,110 3,535,849 151,571,623 16,334,513
9/20/04.... 6,840,340 128,396,770 3,784,484 147,787,139 19,390,369
9/20/05.... 9,059,307 119,337,463 5,066,473 142,720,667 23,383,204
9/20/06.... 7,684,405 111,653,057 7,483,557 135,237,110 23,584,052
9/20/07.... 5,636,212 106,016,846 6,840,340 128,396,770 22,379,924
9/20/08.... 5,265,505 100,751,341 9,059,307 119,337,463 18,586,122
9/20/09.... 7,567,044 93,184,297 7,684,405 111,653,057 18,468,761
9/20/10.... 9,645,166 83,539,130 5,636,212 106,016,846 22,477,715
9/20/11.... 11,606,233 71,932,897 5,265,505 100,751,341 28,818,444
9/20/12.... 12,629,355 59,303,542 7,567,044 93,184,297 33,880,754
9/20/13.... 12,338,768 46,964,774 9,645,166 83,539,130 36,574,356
9/20/14.... 7,388,763 39,576,011 11,606,233 71,932,897 32,356,886
9/20/15.... 13,489,408 26,086,603 12,629,355 59,303,542 33,216,939
9/20/16.... 13,147,741 12,938,862 12,338,768 46,964,774 34,025,912
9/20/17.... 12,938,862 -- 7,388,763 39,576,011 39,576,011
9/20/18.... -- -- 13,489,408 26,086,603 26,086,603
9/20/19.... -- -- 13,147,741 12,938,862 12,938,862
9/20/20.... -- -- 12,938,862 -- --
</TABLE>
- --------
* Amounts may not total due to rounding.
15
<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.
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. Since all of the marks
will be owned by the Marks Company, 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 nor should
monies owed to any Sublessee in respect of Railroad Mileage Credits become
property of the bankruptcy estate if the Company were to become a debtor in
bankruptcy. 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
16
<PAGE>
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 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."
ABILITY OF PASS THROUGH TRUST TO MAKE 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.
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ABILITY OF COMPANY TO MAKE 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
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 by the Company of the Early
Purchase Option relating to each Equipment Group on the specified Early
Purchase Option 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
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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."
EFFECT OF YEAR 2000 UPON THE MANAGER
GATC utilizes in-house developed software as well as vendor-produced
software. Certain computer software GATC uses was written using two digits
rather than four to define the applicable year in a date. As a result, dates
beginning in the year 2000 and thereafter are not properly recognized by the
software. Since the software is time-sensitive, a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities could result from the software's
inability to recognize the correct date.
GATC has completed an assessment and has begun modifying and replacing its
in-house developed software as well as upgrading its vendor-supported software
so that its computer systems will function properly with respect to dates in
the year 2000 and thereafter. Modification of GATC's software is expected to
be completed during 1999, prior to any anticipated impact on its operating
systems, and the cost thereof is estimated to be immaterial to GATC's results
of operations. GATC believes that with modifications to existing software,
upgrading vendor-supported software, and conversions to new software, the Year
2000 issue should not pose significant operational problems. However, the
inability of the Manager to successfully address Year 2000 issues could result
in interruptions in the Manager's and the Company's businesses and
consequently could have a material adverse effect on both the Manager's and
the Company's results of operations.
Because the Company has been organized for the limited purpose of, and may
not engage in any business activity other than, leasing the Equipment, and
because the Company has effectively outsourced its operations to the Manager,
it is not expected that the Company will otherwise be impacted directly by the
Year 2000 issue.
POTENTIAL CONFLICTS OF INTEREST
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 July 31, 1998, the portfolio of railcars owned or leased by GATC in
the United States (the "Manager's Fleet") consisted of approximately 73,339
railcars, including railcars managed for other wholly-
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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
3,380 railcars, or 4.6% 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 at a level of care and diligence consistent with customary
commercial practices as would be used by a prudent Person in the railcar
leasing industry and the level of care and diligence utilized by the Manager
in its business and in the management of the Manager's Fleet (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.
The First National Bank of Chicago will act as the Collateral Agent and the
Lockbox Bank. In addition, an affiliate of the parent of The First National
Bank of Chicago is one of the Owner Participants. In the event any conflict or
potential conflict of interest should arise due to the multiple capacities in
which the bank serves or otherwise, the Collateral Agent may elect to resign
or may be removed. Any delay in the appointment of a successor agent could
adversely affect the interests of Certificateholders.
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
July 31, 1998) of the Subleases are approximately 5.7 years and 5.1 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 5.4 years and 4.8 years, respectively. Approximately
1%, 8%, 71% and 20% of the Equipment is subject to Subleases which will expire
within the next three years, from three up to four years, from four up to five
years, and five or more years, respectively, from July 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 to 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."
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
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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 42%, 28% and 29% of the covered hopper
cars (25% of all railcars) included in the Equipment are currently leased to
users in the plastics, minerals and food and agriculture industries,
respectively, and approximately 64%, 26%, 7% and 4% of the tank cars (75% 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
82 customers, none of which is expected to account initially for more than 8.5%
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, ACF and
Trinity) 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. Competition in the railcar leasing business
is primarily based on the ability to supply the desired type of railcar as and
when needed by the customer and to provide related services. Although customer
selection of full service railcar suppliers may be price driven, industry
demand for full service railcar leases is not particularly price sensitive.
Competitive factors do not generally affect early termination of Subleases or
switching between railcars due to costs to the customer associated with the
return of a railcar and to customization and delivery of a replacement railcar.
To the extent competitive factors adversely affect the Company's utilization
rates of the Equipment, the Company's revenues would be adversely affected. See
"--Risks Related to the Leases--Sublease Renewals."
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.
Limited Number of 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
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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.
Uncertain Enforceability of Remedies Relating to Use of Railcars in Mexico
and Canada. The Company may, subject to certain limits, sublease a portion of
the Equipment Units to Mexican or Canadian Sublessees. However, 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. The Company is generally restricted to subleasing no more than 9% of
the Company Fleet under each Lease to Mexican Sublessees and no more than 15%
of the Company Fleet under each Lease to Canadian Affiliates, provided that
the Company is permitted to sublease up to 20% and 30% of the Company Fleet to
Mexican Sublessees and Canadian Affiliates, respectively, if it receives a
Rating Agency Confirmation. In addition, under the Leases, the Company is not
permitted to sublease more than 50 Equipment Units to any single Mexican
Sublessee (other than (A) with Rating Agency Confirmation, to a Mexican
Affiliate which is sub-subleasing such Equipment Units to Mexican sub-
sublessees and which sub-sublessees satisfy either the 50 car limit with
respect to each Mexican sub-sublessee or such Mexican sub-sublessee satisfies
the credit test set forth next in this proviso, or (B) a Mexican Sublessee
with a credit rating of at least BBB and Baa2 as determined by S&P and
Moody's, respectively (or, in the event that either S&P or Moody's does not or
ceases to provide a credit rating for such entity, a credit rating of at least
BBB or Baa2 by S&P or Moody's, as the case may be)). See "The Leases--
Restrictions on Subleases."
Upon any exercise of the remedies under the Indentures with respect to the
Equipment Units then located outside of the United States, the Indenture
Trustee will be required to enforce such remedies in the foreign jurisdiction
or jurisdictions in which such Equipment Units are located. Due to differences
in or an absence of Canadian and Mexican laws as compared to those of the
United States, 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 Mexican or Canadian jurisdictions and, accordingly,
collection of payments due under such foreign subleases, if any, may be more
difficult than in the United States. 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 Obsolescence 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 92% 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
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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 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.
RATINGS
Ratings are not a recommendation to purchase, hold or sell the Pass Through
Certificates, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor. The ratings are based on
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information furnished to Moody's and S&P by GATC and the Company and obtained
from other sources, including the Structuring Assumptions used to develop the
cash flow model on which the Rated Amortization Schedule has been based. The
ratings may be changed, suspended or withdrawn at any time as a result of
changes in, or unavailability of, such information.
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 Trustees will fund the Company's payment of its
purchase price of the Equipment from GATC.
The Equipment Notes will be issued under three separate Trust Indenture and
Security Agreements (each an "Indenture"), each such Indenture being between
State Street as trustee thereunder (in such capacity, the "Indenture Trustee"),
and Wilmington Trust Company, not in its individual capacity (except as
expressly set forth therein) but solely as Owner Trustee under each of three
separate Delaware business trusts (one each for the benefit of a single 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. None of the Owner Participants who has agreed
with the Company to participate in the leveraged lease transactions is related
to the Company.
Each of the three Equipment Groups (consisting of an aggregate of 3,380
railcars) to be purchased by the Owner Trustees and leased to the Company is
expected to have approximately the same percentage composition of the six
different railcar types to be included in the total Company Fleet. The
aggregate Equipment Cost of the Equipment is anticipated to be approximately
$209 million. See "The Equipment" for a description of the different railcar
types.
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 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), (b) the appointment of two independent directors to
the board of directors of the Company, (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."
24
<PAGE>
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 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 3,380
railcars, including 2,533 tank cars and 847 covered hopper cars.
The following is a pro forma balance sheet of the Company as of the Closing
Date giving effect to the minimum capital contribution to be made by GATC at
or prior to the Closing Date:
<TABLE>
<S> <C>
ASSETS:
Cash........................................................ $ 0
Liquidity Reserve Amount.................................... 500,000
Cash Trapping Account....................................... 0
Collection Account.......................................... 1,500,000
Accounts Receivable......................................... 210,100
----------
Total Assets.............................................. $2,210,100
==========
LIABILITIES AND EQUITY:
Liabilities................................................. $ 0
Equity...................................................... 2,210,100
----------
Total Liabilities and Equity.............................. $2,210,100
==========
</TABLE>
THE EQUIPMENT
Each of the 3,380 Equipment Units in the Company Fleet was newly
manufactured by Trinity Industries Inc. during 1997 or 1998. The Company Fleet
is composed of 75% tank cars and 25% 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).
25
<PAGE>
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, 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>
NUMBER PERCENT
OF OF
COMMODITY CARRIED CARS TOTAL
----------------- ------ -------
<S> <C> <C>
Chemical................................................... 1,612 47.7%
Petroleum.................................................. 648 19.2
Agricultural............................................... 431 12.7
Mineral.................................................... 331 9.8
Plastics................................................... 358 10.6
----- -----
3,380 100.0%
===== =====
</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
26
<PAGE>
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. Under the
Leases, the Company is required to carry insurance. See "The Leases--
Insurance" 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 from January 1, 1993 to June 30, 1998. In isolated instances, a customer
or other third parties may be responsible for damage to, or total 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>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Casualty Cars........... 64 155 153 136 141 108
Total Number of Cars in
Manager's Fleet
(at period end)........ 72,815 70,689 66,775 64,866 59,808 55,763
Casualty Cars as a
Percentage of Manager's
Fleet.................. 0.09% 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
27
<PAGE>
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 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
28
<PAGE>
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.
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
29
<PAGE>
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.
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
30
<PAGE>
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 5.4 years assuming the exercise of
"early-out" options. As of July 31, 1998, the average remaining term for all
Subleases with respect to the Company Fleet was approximately 5.1 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 July 31, 1998, 14%
of the Subleases contained "early-out" options. The range of the Sublease
terms with and without the exercise of the "early-out" options is as follows:
INITIAL SUBLEASE TERM STRATIFICATIONS
<TABLE>
<CAPTION>
NUMBER OF EQUIPMENT
UNITS
--------------------
TERM FULL TERM EARLY-OUTS
---- --------- ----------
<S> <C> <C>
1 year............................................... 1 28
2 years.............................................. 0 128
3 years.............................................. 30 325
4 years.............................................. 0 0
5 years.............................................. 2,756 2,338
6 years.............................................. 8 13
Over 6 years......................................... 585 548
</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
31
<PAGE>
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 (excluding those in Canada and Mexico) from 1979 through 1997,
showing the percentage of all railcars owned or leased by the Manager
(excluding those owned or leased 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.
YEAR-END UTILIZATION PERCENTAGE FOR ALL
RAILCARS OWNED OR LEASED BY THE MANAGER IN THE U.S.
[Line Graph]
32
<PAGE>
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.
The initial Sublease rates average $622 per month per Equipment Unit and
range as follows:
INITIAL SUBLEASE RATE STRATIFICATION
<TABLE>
<CAPTION>
LEASE RATE # OF CARS % OF CARS
---------- --------- ---------
<S> <C> <C>
Less than $500........................................ 82 2.4%
$500-$599............................................. 1,540 45.6%
$600-$699............................................. 1,054 31.2%
$700-$799............................................. 660 19.5%
$800 and over......................................... 44 1.3%
----- ------
Total............................................. 3,380 100.0%
===== ======
</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
33
<PAGE>
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 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.
34
<PAGE>
RENT ABATEMENTS
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.
CUSTOMER RESPONSIBILITY
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 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 determines whether to insure against such
risks and the Company is not named in or a party to such insurance. Under the
Leases, the Company is required to carry insurance. See "The Leases--
Insurance" below. Each customer is further responsible for the cost of any
customer owned 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. In certain instances the
Company may own some linings.
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."
35
<PAGE>
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 carry 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 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
36
<PAGE>
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 Company expects ad valorem property
taxes initially to be approximately $640,000 per full calendar year based on
current tax rates and, since such taxes are based upon the value of the
railcars, expects that such amounts will generally decline over time.
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 82 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 8.5% 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 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, 19% in the petroleum products industry, 13% in the food products
industry, 11% in the plastics industry and 10% 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
37
<PAGE>
ratings concentrations, by number of Equipment Units, as of July 31, 1998, for
the Sublessees or their parents, as applicable.
RATINGS OF SUBLESSEES(1)
AS OF JULY 31, 1998
<TABLE>
<CAPTION>
MOODY'S
- --------------------------------
# OF % OF
RATING CARS RATED
- ------ ----- ------
<S> <C> <C>
Aaa................ 2 0.09
Aa1................ 45 1.96
Aa2................ 114 4.97
Aa3................ 632 27.56
A1................. 65 2.83
A2................. 56 2.44
A3................. 255 11.12
Baa1............... 142 6.19
Baa2............... 205 8.94
Baa3............... 56 2.44
Ba1................ 132 5.76
Ba2................ 82 3.58
Ba3................ 200 8.72
B1................. 114 4.97
B2................. 189 8.24
B3................. 4 0.17
----- ------
Total Rated..... 2,293 100.00%
===== ======
Total Rated........ 2,293 67.84
Non-Rated.......... 1,087 32.16
----- ------
Total Railcars.. 3,380 100.00%
===== ======
</TABLE>
<TABLE>
<CAPTION>
S&P
- --------------------------------
# OF % OF
RATING CARS RATED
- ------ ----- ------
<S> <C> <C>
AAA................ 47 2.21
AA+................ 5 0.24
AA................. 109 5.13
AA-................ 590 27.75
A+................. 44 2.07
A.................. 103 4.84
A-................. 153 7.20
BBB+............... 216 10.16
BBB................ 259 12.18
BBB-............... 132 6.21
BB+................ 40 1.88
BB................. 25 1.18
BB-................ 328 15.43
B+................. 65 3.06
B.................. -- --
B-................. 10 0.47
----- ------
Total Rated..... 2,126 100.00%
===== ======
Total Rated........ 2,126 62.90
Non-Rated.......... 1,254 37.10
----- ------
Total Railcars.. 3,380 100.00%
===== ======
</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.
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 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
six-month period ended June 30, 1998, and the aging of the Manager's railcar
lease receivables at June
38
<PAGE>
30, 1998, and at the end of each of such years. 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 WRITE- LEASE
PERIOD REVENUE OFFS REVENUE
- ------ ------- ------ -------
<S> <C> <C> <C>
Six months ended 06/30/98................................ $210 $0.163 0.08%
Year ended 12/31/97...................................... 406 0.306 0.07%
Year ended 12/31/96...................................... 391 0.913 0.23%
Year ended 12/31/95...................................... 354 1.232 0.35%
Year ended 12/31/94...................................... 318 0.604 0.19%
Year ended 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
------------------------------------------------------
OVER 90
0-30 DAYS(1) 31-60 DAYS 61-90 DAYS DAYS(2) TOTAL
------------- ------------ ------------ -------------- MANAGER'S
% OF % OF % OF % OF FLEET
DATE AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL RECEIVABLES
- ---- ------ ----- ------ ----- ------ ----- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/98... $13,771 129.7 $2,806 26.4 $1,403 13.2 $(7,365) (69.4) $10,615
12/31/97... 12,836 102.9 3,319 26.6 300 2.4 (3,979) (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.
(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 $6.5 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 table above). 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.
39
<PAGE>
Set forth below is historical Rent Abatement data for the Manager's Fleet
for the years ended December 31, 1993 to December 31, 1997 and the six months
ended June 30, 1998. The reduction in Rent Abatements over this period is due
primarily to the reduction in service center turnaround time. Turnaround time
has 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>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE ----------------------------------
30, 1998 1997 1996 1995 1994 1993 1992
---------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue.................. $210 $406 $391 $354 $318 $296 $285
Rental Abatements............... 2.9 6.5 6.4 7.1 8.2 8.0 8.3
Rent Abatement as a % of
Revenue........................ 1.38% 1.60% 1.64% 2.01% 2.58% 2.70% 2.91%
Average Maintenance Turnaround
Time (days).................... 33 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.
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
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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 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
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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 20 plaintiffs are excessive, and intend 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 20 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 of these cases, the Manager, as the owner or sublessor of the railcar,
has been 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, has been 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.
IMPACT OF YEAR 2000
The Manager utilizes in-house developed software as well as vendor-produced
software. Certain of the Manager's computer software was written using two
digits rather than four to define the applicable year in a date. As a result,
dates beginning in the year 2000 and thereafter are not properly recognized by
the software. Since the software is time-sensitive, a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities could result from the software's
inability to recognize the correct date.
The Manager has completed an assessment and has begun modifying and
replacing its in-house developed software as well as upgrading its vendor-
supported software so that its computer systems will function properly with
respect to dates in the year 2000 and thereafter. Modification of the
Manager's software is expected to be completed during 1999, prior to any
anticipated impact on its operating systems, and the cost thereof is estimated
to be immaterial to the Manager's results of operations. The Manager believes
that with modifications to existing software, upgrading vendor-supported
software, and conversions to new software, the year 2000 issue should not pose
significant operational problems.
AVAILABLE INFORMATION RELATING TO THE MANAGER
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
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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, and makes use of terms defined in, 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 of the material terms of the
Management Agreement.
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 using
Company funds; (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, to the extent practicable, separate 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) complying with the return conditions under the Lease
with respect to any Units which are being returned to the Lessor thereunder;
(xviii) 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; (xix) enforcing on behalf of the
Company the warranties with respect to all repairs, maintenance and
modifications made with respect to the Equipment Units; (xx) 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 (xxi) 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 2.2, 4.1 and 4.2) 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 2.2(t)) See "The
Insurance Agreement."
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In performing its duties and obligations under the Management Agreement, the
Manager is required to comply with the Services Standard. (Management
Agreement, Section 3.1) 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. Unless otherwise
directed by the Company, 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, 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
3.1)
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 ownership or any other
potentially discriminatory basis. (Management Agreement, Section 3.2) 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 3.4)
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, an Incentive Component and a charge for
reimbursable services. (Management Agreement, Section 5.1) The Base Component
will 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 5.2) The per Unit Incentive Component will be
$5 per month for the period from the Closing Date through and including
December 31, 1999, and shall thereafter be calculated based on the gross
sublease revenues of the Company for the preceding calendar month net of
write-offs multiplied by .000238%. (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 will reimburse the Manager for costs and expenses,
including, without limitation: (i) maintenance, modification and repair
expenses; (ii) all taxes (other than income taxes) paid by the Manager with
respect to the Equipment; (iii) switching and storage expenses; and (iv) the
amount of fines, penalties, judgements or similar charges paid by the Manager
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
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(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 the Sublease Lockbox. 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 and 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 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 in effect until all the
obligations of the Company under any Operative Agreement have been satisfied
or waived or assumed by the Manager under an agreement in form and substance
satisfactory to each of the Owner Participants and the Indenture Trustees.
(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 (other than pursuant to the Management Agreement) 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. (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
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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
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 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 $50,000,000. (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 9.1) 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 9.2) In a third
party claim giving rise to indemnification under the Management Agreement, the
indemnifying party will have the right to defend such claim, at its expense,
by giving notice of such claim and acknowledging liability in respect to such
claim; 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 the responsibility for the
defense of such claim at the expense of the indemnifying party. (Management
Agreement, Section 9.4)
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 September 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 Assignment 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, (ii) its rights in the accounts established pursuant to
the Intercreditor Agreement (provided that only the specific Beneficiary to
which any Non-Shared Payment relates will have the benefit of the security
interest in the related Non-Shared Payments 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"). Under the terms of the Intercreditor Agreement,
the Collateral Agent's security interest in the Subleases will not be
perfected.
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--
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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;
(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;
(viii) the "Special Insurance Reserves Account" into which amounts
required to be held due to the occurrence of the unavailability of certain
insurance required under the Leases will be deposited (Lease, Section
12.3(c)) for the benefit of the Lessor and Owner Participant;
(ix) 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; and
(x) the "Post Lease Term Reserve Account" into which up to $8,000,000
will be deposited following the later to occur of the date of payment of
the Equipment Notes and the return of all the Equipment to be returned
under any Lease.
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 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 any such Non-Shared Payment was made. Amounts on deposit in the
Accounts will be invested in Permitted Investments at the direction of the
Company, which may, in the case of (i) the Cash Trapping Account, include
investing up to $3,000,000 of such amounts in obligations of GATC, and (ii)
the Special Insurance Reserve Account, include investing all such amounts in
the obligations of GATC, and any amounts earned in respect of such investments
will be deposited in the Collection Account.
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ACTIONS UPON A LEASE EVENT OF DEFAULT
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 a Lease Event of Default pursuant to any
Lease, 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 except in accordance with the Intercreditor Agreement. 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 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 the 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
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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 on deposit at 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 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
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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. Within two Business Days of
receipt of payments, the Servicer will allocate mileage credits to the
beneficiaries (including the Company) on a cumulative, historical experience
basis. The Servicer will make month-end settlements once it is able to
determine the allocation of mileage credit receipts based on then available
current information. Any final adjustments will be made quarterly. 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 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
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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 Thirteenth 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 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;
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 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 Loan Documentation,
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 or are not then being satisfied from the Special
Reserves Account, and (b) any amounts that have been previously requested
pursuant to this clause and not paid, less amounts, if any, then on deposit
in the Special Reserves Account and being applied 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 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
and being applied, if necessary, and transferring such amount pursuant to
this clause; provided, further, that if the aggregate of all amounts
available for transfer pursuant to this clause shall continue to be
insufficient, 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 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 Lessor Agent an amount sufficient to pay any Rated
Rent 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 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 Loan
Documentation 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 Monthly Transfer Date would result in an event
of default with respect to such Assumed Debt), and (c) without duplication
of amounts specified above in this clause, to each Lessor Agent and each
Lender Agent any amounts pursuant to this clause 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, 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;
provided, further, that if the aggregate 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 will
transfer the amounts then available for transfer pro rata among the Lender
Agents and the Lessor Agents in the same proportion that the amount due
pursuant to this clause related to each Agent bears to the total amount due
under this clause to all such Agents on such Monthly Transfer 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
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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 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 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 or Assumed Debt, 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 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;
Seventh, (a) to each Lessor Agent an amount sufficient to pay any
Scheduled Rent 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 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 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 Fourth, above) and (c) without duplication of amounts
specified above in this clause, to each Lessor Agent and Lender 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 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 will
transfer the amounts then available for transfer pro rata among the Lender
Agents and the Lessor Agents in the same proportion that the amount due
pursuant to this clause related to each Agent bears to the total amount due
under this clause to all such Agents on such Monthly Transfer Date;
Eighth, (a) to each Lessor Agent an amount sufficient to pay the
Accumulated Equity Deficiency Amount under 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 the
Accumulated Equity Deficiency Amount due or to become due pursuant to its
related Lease on or before such Monthly Transfer Date, and (b) without
duplication of amounts specified in this clause, 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 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 amount due pursuant to this clause
related to each Lessor Agent bears to the total amount due under this
clause to all such Lessor Agents on such Monthly Transfer Date;
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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 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;
Tenth, 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 Lender Documents, Lease or Loan Documentation 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, 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;
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 any
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, 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;
Thirteenth, unless a "Manager Default" (as defined in the Management
Agreement) has occurred and is continuing, 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 Base Component or
Incentive Component of the Management Fee previously requested and not
paid;
Fourteenth, to the Special Insurance 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 Insurance Reserves Amount; and
Fifteenth, and 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, the Special Insurance
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, the Required Special
Insurance Reserves Amount and the Required Cash Trapping Amount,
respectively, and (b) no Lease Default with respect to payment or
bankruptcy or Lease Event of Default shall have occurred and be continuing,
to the Excess Cash Account any remaining amounts on deposit in the
Collection Account; provided that if any Lease Default with respect to
payment or bankruptcy
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or Lease Event of Default shall have occurred and be continuing, all
remaining amounts shall remain on deposit in the Collection Account for
application as provided above on the next succeeding Monthly Transfer Date.
Set forth opposite the following page is a diagram depicting the typical
anticipated cash flows as described above. The explanatory notes should be
read in connection with the diagram. The diagram illustrates the typical
operating cash inflows that are anticipated to occur between each Monthly
Transfer Date (i.e., Sublease revenues and Railroad Mileage Credit
collections) and the application of such amounts on each Monthly Transfer
Date. The diagram does not illustrate each of the possible cash flow
application scenarios. In particular, the diagram does not illustrate the
funding of the Post Lease Term Reserve Account. All transfers described in
(c)-(p) below are anticipated to occur on each Monthly Transfer Date to the
extent applicable.
EXPLANATORY NOTES
Sublease Payments:
(a) All payments by Sublessees under the Subleases, the GATC Leases and other
GATC Managed Leases are deposited into the Sublease Lockbox in the name of
GATC, as trustee for itself, General American Railcar Corporation, the
Company and other persons as their interests may appear.
(b) On a daily basis, amounts on deposit in the Sublease Lockbox will be
segregated by the Manager and allocated among GATC, General American
Railcar Corporation, the Company and the other beneficiaries of the
Sublease Lockbox. Not later than the second Business Day after receipt,
amounts allocable to the Company will be transferred to the Collection
Account maintained with the Collateral Agent.
(c) To the extent required to allow the Manager to pay Sublessees entitled to
receive Mileage Credit payments from the Company in respect of their
Subleases, amounts in the Collection Account are transferred by the
Collateral Agent to the Manager to make such payments.
(d) To the extent amounts are available after making the transfer required
above, amounts are transferred from the Collection Account to the
Operating Account to pay Operating Expenses and the Base Component of the
Management Fee.
(e) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to each Lender
Agent or Lessor Agent to pay Category 1 Supplemental Expenses.
(f) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to each Lessor
Agent to pay an amount equal to Rated Rent and to each Lender Agent to pay
principal and interest payable in respect of Assumed Debt. All such
amounts paid to the Agents will be passed through to Certificateholders.
(g) To the extent amounts are available after making the transfers required
above, amounts, if any are required, are transferred from the Collection
Account to the Stipulated Loss Value Deficiency Account so that the
balance in such account is at least equal to the Required Stipulated Loss
Value Deficiency Amount.
(h) To the extent amounts are available after making the transfers required
above, amounts, if any are required, are transferred from the Collection
Account to the Liquidity Reserve Account so that the balance in such
account is at least equal to the Required Liquidity Reserve Amount.
(i) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to each Lessor
Agent to pay an amount equal to Scheduled Rent and to each Lender Agent an
amount sufficient to pay principal and interest due on any Assumed Debt.
All such amounts paid to the Agents will be passed through to
Certificateholders.
(j) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to each Lessor
Agent which are sufficient to pay the Accumulated Equity Deficiency
Amount.
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(k) To the extent amounts are available after making the transfers required
above, amounts, if any are required, are transferred from the Collection
Account to the Special Reserves Account so that the balance in such
account is at least equal to the Required Special Reserves Amount.
(l) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to each Lender
Agent or Lessor Agent to pay Category 2 Supplemental Expenses.
(m) To the extent amounts are available after making the transfers required
above, amounts, if any are required, are transferred from the Collection
Account to the Cash Trapping Account, up to the Required Cash Trapping
Amount.
(n) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to each Person
entitled to receive Category 3 Supplemental Expenses.
(o) To the extent amounts are available after making the transfers required
above, amounts are transferred from the Collection Account to the Manager
to pay the Incentive Component of the Management Fee, if any.
(p) To the extent amounts are available after making the transfers required
above, amounts, if any are required, are transferred from the Collection
Account to the Special Insurance Reserves Account.
(q) To the extent amounts are available after making the transfers required
above, and if (i) amounts on deposit in the Stipulated Loss Deficiency
Account, the Liquidity Reserve Account, the Special Reserves Account, the
Special Insurance Reserves Account and the Cash Trapping Account are each
at least equal to the balances required to be maintained in each such
account, and (ii) no Lease Event of Default or Lease Default relating to
payments or bankruptcy has occurred and is continuing, all remaining
available cash from the Collection Account is transferred to the Excess
Cash Account.
(r) Amounts on deposit in the Excess Cash Account will be transferred at the
direction of the Company from time to time to GATC in respect of its 100%
ownership interest in the Company.
Mileage Credits Payments:
(1) The Railroads will pay to the Mileage Credits Lockbox all Railroad Mileage
Credits payable in respect of the Marks registered in the name of the
Marks Company (including the Marks on the Company Fleet).
(2) GATC, as Servicer for the Marks Company, will allocate amounts received in
the Mileage Credits Lockbox among GATC, General American Railcar
Corporation, the Company and the other beneficiaries of the Mileage
Credits Lockbox. Amounts payable to the Company are transferred to the
Collection Account maintained by the Collateral Agent.
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[Diagram of Typical Operating Cash Flows]
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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:
(i) 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 any of the immediately preceding five years, and (ii) is less than $536;
or
(b) the Monthly Utilization Rate for the immediately preceding calendar
month shall have been 86% or less; or
(c) (i) any Coverage Ratio shall be less than 1.15:1 (a "Level 1 Cash
Trapping Event"), or (ii) any Coverage Ratio shall be less than 1.10:1 (a
"Level 2 Cash Trapping Event").
As used above, the following terms have the meanings set forth below.
"Monthly Average Lease Rate" means for any calendar month, the aggregate
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 with respect to which the Manager, the
Company or any Affiliate thereof is lessor or sublessor (as applicable) 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 with respect to which the
Manager, the Company or any Affiliate thereof is lessor or sublessor (as
applicable) 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 and principal and interest on any Assumed Debt 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 or, following a Cash Trapping Event, no
Cash Trapping Hold exists with respect to such Monthly Transfer Date, an
amount equal to $109,100 as of the first Monthly Transfer Date following
the Closing Date and thereafter increasing by $109,100 on each succeeding
Monthly Transfer Date until such time as such amount shall equal or exceed
$6,000,000 and thereafter $6,000,000; or
(ii) if for such Monthly Transfer Date a Cash Trapping Event exists, an
amount equal to $10,500,000, provided that in the event that a Level 2 Cash
Trapping Event exists such amount shall equal $15,000,000;
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provided further that if a Forecasting Error exists as of such Monthly
Calculation Date, the amount will be increased to $11,500,000 (for a Level
1 Cash Trapping Event) or $16,000,000 (for a Level 2 Cash Trapping Event);
or
(iii) if, following a Cash Trapping Event, a Cash Trapping Hold exists
with respect to such Monthly Transfer Date, the amount then on deposit in
the Cash Trapping Account at the time such Cash Trapping Event ceased to
exist (but in no event less than the amount required pursuant to clause (i)
above).
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
$536, (b) if such Cash Trapping Event related to the Monthly Utilization Rate,
the Monthly Utilization Rate is less than 90% for such Calculation Date, or
(c) if such Cash Trapping Event is related to any Coverage Ratio (i) with
respect to a Level 1 Cash Trapping Event any Coverage Ratio on such
Calculation Date is less than 1.165:1 (a "Level 1 Cash Trapping Hold"), or
(ii) with respect to a Level 2 Cash Trapping Event any Coverage Ratio on such
Calculation Date is equal to or less than 1.14:1 (a "Level 2 Cash Trapping
Hold"). On each Monthly Transfer Date amounts on deposit in the Cash Trapping
Account will be applied as provided in "--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 the then
applicable Required Cash Trapping Amount shall be released from the Cash
Trapping Account in equal installments over 12 months (provided that no Cash
Trapping Event occurs during such period and such installments will be reduced
by amounts otherwise drawn from the Cash Trapping Account during such time
period) 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."
REQUIRED SPECIAL RESERVES ACCOUNT; REQUIRED SPECIAL INSURANCE RESERVES ACCOUNT
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, an amount with respect to each Required Modification such that
an amount equal to one-third of the total remaining 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 aggregate cost of implementing such modification in
any 12-month period 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 (in accordance with the Insurance Services Standard) that there
exists a reasonable likelihood that the Company will be required to pay any
claim not covered by existing insurance or any expenses not covered as a
result of any insurance deductible, an amount (to be payable in level
installments commencing with the first Monthly Transfer Date after the
Insurance Manager shall have determined (in accordance with the Insurance
Services Standard) that there exists a reasonable likelihood that such
claim or the insurance deductible will be required to be paid) that will
result in (A) 100% of the applicable 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 earliest date such
claim or amount may be required to 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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Under the Intercreditor Agreement amounts are required to be transferred to
the Special Insurance Reserves Account if (i) the Company is unable to obtain
certain insurance coverages required under each Lease, and (ii) the Lessor has
waived such requirement under Section 12.3(c) of the Lease (and has not waived
the requirement to fund the Special Insurance Reserves Account). Such amounts,
if any, are accumulated only out of cash flow that would otherwise be
available for transfer to the Excess Cash Account and are held, as security,
and to provide payment, for the Company's obligations to the Lessors and Owner
Participants which would otherwise be covered by the insurance which has not
been obtained. Upon obtaining the required insurance coverage (or if such
coverage is no longer necessary), the Company may withdraw any amounts on
deposit in the Required Special Insurance Reserves Account.
THE LEASES
The following summary relates to, and makes use of terms defined in, 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 of the material terms 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 October 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
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that it will not sublease to a sublessee formed under the laws of Mexico or
any state thereof more than the lesser of (i) 9% (or, with Rating Agency
confirmation, 20%) of the Equipment Units within any Equipment Group, or (ii)
the percentage of railcars subleased to Mexican sublessees in the Total
Managed Fleet. In addition, in no event will the Company sublease more than 50
Equipment Units to any single Mexican sublessee (other than (A) with Rating
Agency confirmation, a wholly-owned subsidiary of GATC organized under the
laws of Mexico (or any province or state thereof), a "Mexican Affiliate" which
is sub-subleasing such Equipment Units to Mexican sub-sublessees and which
sub-sublessees, as to such Mexican Affiliate, satisfies either the 50 car
limit with respect to each Mexican sub-sublessee or such Mexican sub-sublessee
satisfies the credit test set forth next in this proviso, or (B) a Mexican
Sublessee with a credit rating of a least BBB and Baa2 as determined by S&P
and Moody's, respectively (or, in the event that either S&P or Moody's does
not or ceases to provide a credit rating for such entity, a credit rating of
at least BBB or Baa2 by S&P or Moody's, as the case may be)). 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 continental 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 GATC and to its Affiliates, except that (i) an aggregate of
not more than 15% (or, with Rating Agency confirmation, 30%) 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. Any such Equipment
Units subleased to Affiliates must in turn be sub-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 or interference with use or possession 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 or interference with use or possession 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
The Company may terminate a 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 (provided that if such
termination is for less than all of the Equipment Units in a Functional Group
across the Company Fleet, the Company shall exercise such termination under
all of the Leases, (i) with respect to at least 50 Equipment Units in the
aggregate of the type included in such Functional Group, (ii) no fewer than 25
Equipment Units of the type included in such Functional Group shall in the
aggregate remain subject to the Leases, (iii) such termination shall be made
under the Leases pro rata in accordance with the number of Equipment Units in
such Functional Group subject to each Lease, and (iv) the determination as to
which Equipment Units are subject to termination shall otherwise be made by
the Company on a random basis without discrimination based on maintenance
status, operating condition or otherwise) (the "Terminated Units") if the
Company determines in
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good faith (as evidenced by a certified copy of a resolution adopted by its
Board of Directors and a certificate executed by the Chief Financial Officer
of the Company and the Chief Financial Officer of the Manager) 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 Unit may be terminated as
obsolete or surplus if it is subject to a Sublease. The Company through the
Manager will act as non-exclusive 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 Participant) 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 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 product obtained by multiplying the
unpaid principal amount of the Equipment Notes with respect to such Terminated
Units scheduled to be outstanding on such date (after deducting therefrom the
principal installment, if any, to be paid on such date) by a fraction, the
numerator of which shall be the Equipment Cost of the Terminated Units and the
denominator of which shall be the aggregate Equipment cost of all Units then
subject to the relevant Lease, 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
The Company has an option to purchase on the Early Purchase Option Date all
(but not less than all) of the Equipment Units subject to each Lease, across
the Company Fleet, at a price equal to the Early Purchase Price of the
Equipment Units. The Company is required to give notice to the related Owner
Trustee not less than 90 days and not more than 180 days prior to the date of
its election to exercise the 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
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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 Company
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 and Indenture 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 and
sufficient amounts have been made available to the Collateral Agent for
certain payments under the Intercreditor Agreement, replace such Equipment
Unit. If the Company elects to replace such Equipment Unit, it must do so
within 60 days after the 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), having a fair
market value, utility, capacity, residual value, remaining economic useful
life and condition at least equal to the Equipment Unit being replaced and
then subject to a currently effective sublease (which sublease shall be a
permitted sublease under the terms of the relevant Lease) having a remaining
term of not less than six months. If the Company elects to pay the Stipulated
Loss Value of any 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 is not less than 25 days nor more than 60 days
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 Company 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 Company's reasonable judgment (as evidenced by an Officer's Certificate of
the Company to such effect, confirmed by an Officer's Certificate by the
Manager), 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 (or, if
earlier, the end of the Basic Term or Renewal Term of the applicable Lease);
(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 of Mexico or any
state thereof, in which case such period shall be the lesser of the period
described above or 365 days). (Lease, Section 11.1)
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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, so long as any Equipment
Note remains outstanding, failure to pay Basic Rent on any Rent Payment Date
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
(provided, however, that, so long as any Equipment Notes remain outstanding,
failure to make payment of any of the amounts referred to in clauses Fifth
through Fourteenth in "Collection and Application of the Company's Cash
Flows--Application of Amounts in the Collection Account" shall not constitute
a Lease Event of Default); (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 (in any material respect) certain
agreements or covenants contained in 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 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;
provided that if such untruth or incorrectness is capable of being remedied,
no such untruth or incorrectness shall constitute a Lease Event of Default for
a period of 30 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; (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, Owner
Participant or Indenture Trustee demanding that such action be taken; (j) the
Insurance Manager shall have defaulted in the performance of any of its
obligations under the Insurance Agreement and the Company shall have failed to
exercise its rights under the Insurance Agreement in respect of such default
for a period of 30 days after receipt by the Company of written notice from
the related Lessor, Owner Participant or Indenture Trustee demanding that such
action be taken; and (k) the Administrator shall have defaulted in the
performance of any of its obligations under the Administrative Services
Agreement and the Company shall have failed to exercise its rights under the
Administrative Services Agreement in respect of such default for a period of
30 days after receipt by the Company of written notice from the related
Lessor, Owner Participant or 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)
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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.
INSURANCE
Each Lease requires the Company, at its own expense, to keep or cause the
Insurance Manager under the Insurance Agreement to keep the Equipment insured
by insurers of recognized responsibility in amounts and against risks and with
deductibles and terms and conditions not less than the insurance, if any,
maintained by Company or GATC 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. (Lease, Section 12.1)
Each Lease requires that insurance against physical damage to any Unit shall
be in an amount not less than the Stipulated Loss Value attributable thereto,
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. (Lease, Section 12.1(a)) The insurance maintained pursuant to
the Lease is required to 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, the Company 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. (Lease, Section
12.2(a)) In lieu of maintaining the physical damage insurance required, the
Company may self-insure with respect to the Equipment for such amounts and
against such risks as shall be consented to by Lessor and the Indenture
Trustee, which consent shall be based upon reasonable practices then in effect
in the railcar leasing and insurance industries and upon the financial
condition of the Lessee taking into account the Lessee's capital structure and
that the Lessee is a special purpose vehicle. (Lease, Section 12.2(b))
Each Lease requires that public liability insurance be maintained naming the
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
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the Equipment) against bodily injury, death or property damage arising out of
the use or operation of the Equipment with general and excess liability limits
of not less than $100,000,000 per occurrence 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 in the aggregate in respect of the entire Company Fleet
of up to $100,000 (adjusted periodically for inflation). (Lease, Section
12.1(b)) Each Lease requires the Company to use its reasonable efforts to
obtain public liability insurance policies stipulating that coverage
thereunder will not be invalidated (as to the Owner Participant, Loan
Participant, Lessor, as Lessor of the Equipment and in its individual
capacity, and the Indenture Trustee) by any act or neglect of the Lessee or
any breach or violation by the Lessee of any warranties, declarations or
conditions contained in such policies, but shall be under no obligation to
obtain such policies containing such stipulations if they are not available to
the Company at commercially reasonable rates in the markets in which Company
has then placed its insurance program. (Lease, Section 12.3(b)) Each Lease
requires the Company to use reasonable efforts to cause its independent
insurance broker to agree that, with respect to any policy of insurance
maintained pursuant to Section 12.1 of such Lease, such broker will provide
not less than 30 days' prior written notice to Lessor, the Indenture Trustee,
Loan Participant and Owner Participant of any non-renewal or material adverse
change with respect to such policy. For purposes of this provision, "material
adverse change" shall mean a material adverse change in policy limits,
exclusions or deductibles or any material adverse change in policy coverage
inconsistent with the requirements of Section 12.1(b) of each Lease. (Lease,
Section 12.1(b))
The insurance required under the Lease 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 the Lease and any policy
purchased in substitution or replacement for any of such policies shall
provide that if any such insurance is canceled 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. (Lease, Section 12.1)
In the event any public liability insurance policy or coverage thereunder
which are required by the Leases is not available to the Company in the
commercial insurance market on commercially reasonable terms, each Lessor
agrees not to unreasonably withhold its agreement to waive such requirement.
(Lease, Section 12.3(c)). In such circumstances the Lessee will, absent a
waiver from the Owner Participant of this requirement, be required to hold
some or all cash that would otherwise be available for dividends to GATC in
the Special Insurance Reserve Account for the benefit of the Lessor and Owner
Participant. In the event that the Company is unable to procure the waiver of
such certain insurance coverages required by a Lease, or the waiver by the
Owner Participant of the requirement to hold cash in the Special Insurance
Reserve Account, the Company has the option, in certain instances, to purchase
the Equipment at a purchase price equal to the greater of the Termination
Value for such Units or the fair market value of the Units as of the date of
purchase including the payment of the Make-Whole Amount, if any, or other
premium. The Lien of the related Indenture shall terminate with respect to the
Equipment Units after the payment of such purchase price. (Participation
Agreement, Section 6.9)
THE PARTICIPATION AGREEMENTS
The following summary relates to, and makes use of terms defined in, 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 of material terms 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 the Loan Participant, each Owner
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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) GATC is required to indemnify each
Owner Participant, each Owner Trustee, each Indenture Trustee and the Pass
Through Trustee for any failure by GATC to perform any of its obligations
under any of the Operative Agreements to which it is a party, and for certain
other matters. (Participation Agreements, Section 7.3)
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 which competes (directly or
indirectly) (other than as a passive investor or loan participant in the
financing of equipment or facilities used in full service railcar leasing)
with GATC in any respect material to the business of GATC of leasing railcars
under full service operating leases, 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, either the purchase price specified in
clause (i) or the difference between the Termination Value for such Equipment
Units, together with all other amounts due and owing by the Company with
respect to such Units, and the unpaid principal amount of the Equipment Notes
scheduled to be outstanding as of the relevant Regular Distribution Date
(after deducting therefrom the principal installment, if any, to be paid on
such date). 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, and makes use of terms defined in, 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 of material terms 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 2.1) See "The Leases-- Insurance."
The Insurance Manager is required to use reasonable care and diligence,
consistent with customary commercial practice, as would be used by a prudent
Person in the railcar leasing industry and the level of care and diligence
utilized by the Insurance Manager in its business and the management of its
fleet. (Insurance Agreement, Section 3.1) Under the Insurance Agreement, the
Insurance Manager will maintain or cause to be maintained, with insurers with
whom the Insurance 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 Insurance 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
Insurance 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 2.2)
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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, the
Manager under the Management Agreement, the Owner Participants and the Lessors
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 2.3)
REIMBURSEMENT OF INSURANCE MANAGER
The Company will reimburse the Insurance Manager monthly in an amount equal
to the greater of (i) an appropriate share of the Insurance 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 Insurance Manager's marginal insurance
costs resulting from such insurance coverage, as reasonably determined by the
Insurance Manager. 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 Insurance Manager or its affiliates. (Insurance Agreement, Section 4.1)
OTHER MATTERS
The term of the Insurance Agreement shall continue for the term of the
Leases. (Insurance Agreement, Section 6.1) 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 failure to perform in
any material respect any of its obligations under the Insurance Agreement
where such failure materially and adversely affects the rights of holders of
the Equipment Notes, and such failure is not remedied within 60 days of
receipt of written notice, subject to certain conditions and exceptions or
(ii) certain events involving the voluntary or involuntary bankruptcy of the
Insurance Manager, subject to certain conditions and exceptions. (Insurance
Agreement, Section 6.2)
The Insurance Manager 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, the Owner Participants and the
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 6.3)
The Insurance Manager is required to indemnify the Company, the Owner
Trustees, the Owner Participants, the Indenture Trustees, the Collateral
Agent, their affiliates and their respective directors, officers, employees
and agents for certain losses, fees and expenses and for certain other matters
arising out of its actions under the Insurance Agreement. (Insurance
Agreement, Section 7.1) The Company is also required to indemnify the
Insurance Manager (to the extent occurring or arising at a time when the
Company and the Insurance Manager are not Affiliates) for certain losses, fees
and expenses and for certain other matters arising out of its actions under
the Insurance Agreement. (Insurance Agreement, Section 7.2)
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
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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 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."
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 of
material terms of the Basic Agreement and the Trust Supplement. This summary
makes use of terms defined in 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 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 Trustees in their individual capacities, the Owner Participants, 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
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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 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.
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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 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 October
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 September 20, 1999,
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(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 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
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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 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
face 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
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(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) So long as the Certificates are
registered in the name of Cede, 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 Pass Through Trustee
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
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
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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.
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
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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 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, 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 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
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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
State Street 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) State Street will also be the Indenture Trustee of
the Indentures under which the Equipment Notes are issued.
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 Company 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
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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 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.
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
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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 22
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 5.625% 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 five years is
assumed to be the actual average lease rate at closing.
(ii) After the first five years, the average sublease rate is assumed to
increase at an average annual rate of 0.919%, reflecting the combined effects
of assumed inflation and lease rate reductions over time due to aging of the
Company Fleet.
Utilization
(i) The utilization for the first five 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>
6........................... 97%
11........................... 96%
16........................... 96%
21........................... 94%
</TABLE>
(ii) The initial Subleases are assumed to have five year terms. Thereafter,
the assumed lease renewal terms range from one to five years, with the average
Sublease term for the Equipment assumed to be approximately 3 years over the
entire transaction.
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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 five years of the transaction the
Equipment Units will not require maintenance.
(ii) Commencing in year six, maintenance costs are assumed to increase with
the age of the Equipment Units. Maintenance age curves were developed for each
of the Equipment Types. Maintenance costs are assumed to be 6.2% of gross
revenues in year six, increasing to 23.4% 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 6 through 10 of the transaction and once every three years
thereafter.
Receivables Write Offs
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 initial incremental costs (before
giving effect to the assumed cost of inflation) for the Required Maintenance
Programs (including costs related to Rule HM201 and Rule 88B) are assumed to
be $2,667 per Unit, which costs are assumed to be incurred once every
approximately 10 years and are adjusted for inflation through the date assumed
to be incurred.
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 14% of the cars.
The average amount for such Optional Modifications is assumed to be $1,359
per modified car.
(ii) Optional Modifications are assumed to be requested by customers with
respect to approximately 0.5% of the cars over the course of 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.
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(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, principally ad valorem property taxes, are assumed to
be $189 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%.
Trustees Fees
Aggregate fees of the Owner Trustees, Pass Through Trustee and the Indenture
Trustees 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 79.2%
Annual Maintenance Cost 40% increase 92.8
Mandated Improvements 40% increase 98.1
Utilization after year 70% 76.8
five
Lease Rate Growth Rate 100 bps lower than the 84.3
expense inflation rate
Receivables Write-Offs 1% of revenues 99.0
</TABLE>
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
Cash Flow that is approximately 70.2% of the Pre-Financing Cash Flow under the
Structuring Assumptions. 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 5 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.
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When applying all of the above stresses simultaneously:
The Equipment Notes were repaid in 22 years.
The weighted average life of the debt was 12.3 years.
The resulting cash flow is 70.2% of Pre-Financing Cash Flow under the
Structuring Assumptions. All rated obligations (Interest and Rated
Amortization) were paid.
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 initially be the sole beneficiary of its Owner
Trust.
DESCRIPTION OF THE EQUIPMENT NOTES
The summaries below make use of terms defined in the Equipment Notes, the
Indentures, the Leases, the Participation Agreements and the Trust Agreements.
Except as otherwise indicated, the following summaries describe material terms
of 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 Wilmington Trust Company, as Owner Trustee
of a Delaware business trust for the benefit of the Owner Participant who is
the beneficial owner of such Equipment Group, and State Street, 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 $159,574,146.
Scheduled Amortization of the Equipment Notes represents the aggregate
amount of principal which the Owner Trusts must pay (on a cumulative basis)
through each Regular Distribution Date in order to avoid payment
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of Late Payment Premiums. The "Scheduled Maturity Date," which is September
20, 2017, represents the Regular Distribution Date on which the Owner Trusts
will pay the final installments of principal, if all payments of principal are
made in accordance with Scheduled Amortization. Rated Amortization of the
Equipment Notes represents the minimum aggregate amount of principal which the
Owner Trusts must pay (on a cumulative basis) through each Regular
Distribution Date in order to avoid any 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 Trusts must pay all outstanding principal
on the Equipment Notes.
The preliminary Scheduled Amortization and Rated Amortization for the
Equipment Notes as of the particular Regular Distribution Date shown for each
year in which the Equipment Notes are outstanding, are set forth below. These
amortization schedules are subject to change based upon the final
determination of the interest rate on the Equipment Notes and are included for
illustrative purposes only. (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................. $ -- $159,574,146 $ -- $159,574,146 $ --
9/20/99................. 4,466,674 155,107,472 -- 159,574,146 4,466,674
9/20/00................. 3,535,849 151,571,623 -- 159,574,146 8,002,523
9/20/01................. 3,784,484 147,787,139 -- 159,574,146 11,787,007
9/20/02................. 5,066,473 142,720,667 4,466,674 155,107,472 12,386,806
9/20/03................. 7,483,557 135,237,110 3,535,849 151,571,623 16,334,513
9/20/04................. 6,840,340 128,396,770 3,784,484 147,787,139 19,390,369
9/20/05................. 9,059,307 119,337,463 5,066,473 142,720,667 23,383,204
9/20/06................. 7,684,405 111,653,057 7,483,557 135,237,110 23,584,052
9/20/07................. 5,636,212 106,016,846 6,840,340 128,396,770 22,379,924
9/20/08................. 5,265,505 100,751,341 9,059,307 119,337,463 18,586,122
9/20/09................. 7,567,044 93,184,297 7,684,405 111,653,057 18,468,761
9/20/10................. 9,645,166 83,539,130 5,636,212 106,016,846 22,477,715
9/20/11................. 11,606,233 71,932,897 5,265,505 100,751,341 28,818,444
9/20/12................. 12,629,355 59,303,542 7,567,044 93,184,297 33,880,754
9/20/13................. 12,338,768 46,964,774 9,645,166 83,539,130 36,574,356
9/20/14................. 7,388,763 39,576,011 11,606,233 71,932,897 32,356,886
9/20/15................. 13,489,408 26,086,603 12,629,355 59,303,542 33,216,939
9/20/16................. 13,147,741 12,938,862 12,338,768 46,964,774 34,025,912
9/20/17................. 12,938,862 -- 7,388,763 39,576,011 39,576,011
9/20/18................. -- -- 13,489,408 26,086,603 26,086,603
9/20/19................. -- -- 13,147,741 12,938,862 12,938,862
9/20/20................. -- -- 12,938,862 -- --
</TABLE>
- --------
* Amounts 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.
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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))
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 2.0% (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 related
Owner Trust, the related Indenture Trustee, the Pass Through Trustee and the
related 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
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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))
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 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 the 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 the Early
Purchase Option, the prepayment price shall be equal to the unpaid principal
amount thereof (computed as provided in the preceding paragraph in the case of
the Obsolescence Termination Option) 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. 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 (A) 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, or
(B) exercises its option to purchase the Equipment due to the Company's
failure to maintain certain insurance coverages and the related Owner
Trustee's and Owner Participant's failure to waive such insurance coverages or
have granted such waiver but have refused to further waive the requirement of
holding cash in the Special Insurance Reserve Account, 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
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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 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
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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.
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 the 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" or the Company
being unable to procure certain insurance coverages, 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);
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(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
(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, (iii) 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 (iv) 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 or 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.
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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 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 ten 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)
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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))
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 20 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 18 consecutive or 36 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 $20,000,000, 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)
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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
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 270
days. The Indenture Trustee, after the occurrence of any Indenture Event of
Default, shall give the related Owner Participant and the related Owner
Trustee 10 business days (or such shorter period as practical) prior notice of
the date before which the Indenture Trustee shall not exercise any remedy
which would result in the exclusion of such Owner Trustee from the relevant
trust indenture estate. 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)
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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.
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)
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FEDERAL INCOME TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of all 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.
Except as expressly indicated, it is addressed only to Certificateholders
which are "United States persons" (as defined below) purchasing Pass Through
Certificates at their issue price and holding such Certificates as capital
assets and does not deal with Certificateholders which are: (i) dealers in
securities or currencies, (ii) holding such Pass Through Certificates 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 (iii) 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 this discussion, (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.
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.
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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 12 months and 28% for capital assets
held for 12 months or less.
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 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,
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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 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.
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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.
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
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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 individual administrative exemptions to
the Underwriters which are substantially the same as the administrative
exemption issued to Salomon Brothers Inc (the predecessor to Salomon Smith
Barney 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 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
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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 Smith Barney Inc. and Morgan Stanley & Co. Incorporated (the
"Underwriters") have severally agreed to purchase from the Pass Through
Trustee the aggregate principal amount of Pass Through Certificates set forth
opposite their respective names below:
<TABLE>
<CAPTION>
AMOUNT OF
UNDERWRITERS PASS THROUGH CERTIFICATES
- ------------ -------------------------
<S> <C>
Salomon Smith Barney Inc.............................. $
Morgan Stanley & Co. Incorporated.....................
------------
Total............................................. $159,574,146
============
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Pass Through Certificates is subject to,
among other things, the approval of certain legal matters by 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 and GATC have 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 intend to make a market in the
Pass Through Certificates, as permitted by applicable laws and regulations.
The Underwriters are not obligated, however, to make a market in the Pass
Through Certificates and any such market making may be discontinued at any
time at the sole discretion of 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
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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.
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 Bingham Dana LLP,
Hartford, Connecticut, special counsel to the Pass Through Trustee, 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.
"ACF" means the Shippers Car Line division of ACF Industries, Incorporated.
"Administrative Services Agreement" means the Administrative Services
Agreement (GARC II) dated as of September 1, 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, the Post Lease Term Reserve Account, the Special Insurance
Reserves Account, and the Excess Cash Account.
"Accumulated Equity Deficiency Amount" shall mean, on any Payment Date, the
aggregate amount equal to the Equity Portion of Basic Rent previously
scheduled for payment and not paid plus the Equity Portion of any Stipulated
Loss Value, Equity Portion of Termination Value or Equity Portion of Early
Purchase Price, or Basic Term Purchase Price, if any, then due and owing.
"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.
"Assumed Debt" means any Lender Loan which, subject to Section 6.4(c) of the
Intercreditor Agreement, shall have been assumed by the Company in connection
with Section 22.1 of any Lease or Section 6.9 of a Participation Agreement.
"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.
"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.
"Bankruptcy Code" means Title 11 of the United States Code.
"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, to be dated as of
September 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.
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"Beneficiaries" means the Lessors, the Manager and the Insurance Manager for
whose benefit the Company grants a security interest in and pledge to the
Collateral Agent of all of its right, title and interest in and to the Company
Documents and the Collateral, pursuant to the terms of the Intercreditor
Agreement.
"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.
"Canadian Affiliate" means a wholly-owned subsidiary of GATC organized under
the laws of Canada.
"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."
"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.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"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.
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"Claims" means all liabilities, charges, costs, losses, damages, expenses or
demands (including reasonable attorneys' fees and court costs) made against
the Company or which the Company may incur arising out of a Sublessee's
failure to comply with the terms and conditions of a Sublease.
"Closing Date" means September , 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, (ii) the Accounts (provided that (i) the Post
Lease Term Reserve Account is not included, (ii) only the specific Beneficiary
to which any Non-Shared Payment relates will have the benefit of the security
interest in the related subaccount of the Non-Shared Payments Account, and
(iii) with respect to the Special Insurance Reserves Account, only for the
Owner Participants to secure certain amounts payable) 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.
"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
Assignment 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.
"D&B" means Dun & Bradstreet.
"Default Rate" means a rate per annum equal to the Note Rate plus 2.0%.
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"Definitive Certificates" means Pass Through Certificates which are issued
in fully registered, certificated form.
"DOL Regulations" means rules and regulations promulgated by the DOL.
"DOL" means the United States Department of Labor.
"DOT" means the United States Department of Transportation.
"DTC" means the Depository Trust Company.
"DTC Participants" means participants whose securities are held by DTC.
"Early Purchase Option" means the right of the Company pursuant to the
Leases to purchase all of the Equipment on the Early Purchase Option Date.
"Early Purchase Option Date" means the date on or after the seventh
anniversary of the Closing Date as set forth in each Lease on which the
Company can elect, subject to certain conditions, to purchase all of the Units
subject to such Lease.
"Early Purchase Price" shall mean the amount set forth in each Lease which
represents the price the Company is required to pay to acquire all of the
Units on the Early Purchase Option Date.
"EPA" means the United States Environmental Protection Agency.
"Equipment" means all of the Equipment Units leased by the Owner Trustees to
the Company pursuant to the Leases.
"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.
"Equity Portion of Basic Rent" shall mean, at any Payment Date, the amount
set forth in on Schedule 3 of the relevant Participation Agreement
corresponding to such Payment Date.
"Equity Portion of Early Purchase Price" shall mean the amount designated as
such in accordance with Schedule 6 to the relevant Participation Agreement.
"Equity Portion of Stipulated Loss Value" shall mean, as of any date, the
amount set forth in Schedule 4 of the relevant Participation Agreement
corresponding to such date.
"Equity Portion of Termination Value" shall mean, as of any date, the amount
set forth in Schedule 4 to the relevant Participation Agreement corresponding
to such date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means employee benefits subject to the requirements of ERISA.
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"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."
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Field Service Network" means the service centers where the Manager
maintains, repairs and modifies railcars.
"Financial Institution" means a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business.
"Forecasting Error" means the occurrence of either of the following: (i) the
certification by the Manager of a Projected Coverage Ratio equal to or greater
than 1.15:1 for which the Historical Coverage Ratio for the same period is
below 1.15:1, or (ii) the certification by the Manager of a Projected Coverage
Ratio equal to or greater than 1.10:1 for which the Historical Coverage Ratio
for the same period is below 1.10:1. Once a Forecasting Error is in effect, it
shall remain in effect until such time as the Projected Coverage Ratios
certified by the Manager have equaled or been exceeded by the Historical
Coverage Ratios for the same periods over a period of 6 consecutive
Calculation Dates.
"Foreign Subleases" means subleases of Equipment Units by Canadian
Affiliates or Mexican Affiliates upon terms and conditions similar in all
material respects to the Subleases.
"FRA" means the Federal Railroad Administration, a division of the DOT.
"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 Leases" means the leases maintained by GATC (in its individual
capacity and not as Manager for the Company or manager for any other entity)
with certain sublessees.
"GATC Managed Leases" means the leases maintained by GATC (in its capacity
as manager or agent) with certain sublessees.
"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.
"GATX" means GATX Corporation, a New York corporation.
"GE Railcar" means General Electric Railcar Service Corporation.
"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.
"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
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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 per Unit" is an amount determined for each calendar
month, commencing January 1, 2000, which is equal to the product of (x)
.000238%, and (y) the gross sublease revenues of the Company net of any write-
offs.
"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.
"Insolvency Law" means any Federal or state bankruptcy, insolvency,
reorganization or similar law for the relief of debtors in effect from time to
time.
"Insurance Agreement" means the Insurance Agreement (GARC II) dated as of
September 1, 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 September 1, 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.
"Investment Banker" means an independent investment banking institution of
national standing selected by the Company or the applicable Indenture Trustee
to determine the Make-Whole Amount, if any, payable with respect to the
Equipment Notes.
"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.
"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.
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"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.
"LIBOR" means the London Interbank Borrowing Rate.
"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."
"Loan Documentation" means the documentation evidencing the Assumed Debt.
"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.
"Lockbox Bank" means The First National Bank of Chicago.
"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 (GARC II) dated as of September 1, 1998 between the
Company and GATC, as such agreement may be amended or supplemented in
accordance with its terms.
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"Management Fee" means the Base Component plus the Incentive Component plus
a charge for reimbursable expenses.
"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, and those managed for other wholly-owned special purpose
subsidiaries of GATC, other than the Company Fleet.
"Mark" means the identification mark of a railcar registered with the AAR,
consisting of letters registered in the name of the owner of the railcar mark
and the car number.
"Marks Company" or "General American Marks Company" means General American
Marks Company, a Delaware business trust, formed in 1997, to own the marks
previously registered to GATC and its affiliates or the marks relating to
certain cars managed by GATC or its affiliates.
"Mexican Affiliate" means a wholly-owned subsidiary of GATC organized under
the laws of Mexico or any political subdivision thereof.
"Mileage Credits Lockbox" means the lockbox account in the name of "General
American Marks Company, as agent for the beneficiaries of the Railroad Mileage
Credits as their interest may appear" into which all payments of Railroad
Mileage Credits in respect of railcars carrying marks owned by the Marks
Company will be deposited.
"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, Termination Value, Early Purchase Price,
Basic Term Purchase Price or other purchase price or termination sum of or
relating to 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."
"Non-U.S. Certificateholder" means any beneficial owner of a Pass Through
Certificate that is a non-United States person.
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"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).
"Obsolescence Termination Option" means the right of the Company pursuant to
the Leases 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.
"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.
"OID" means original issue discount.
"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 Assignment 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, the Intercreditor Agreement, and the agreement between
GATC and the Lockbox Bank relating to the Sublease Lockbox.
"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 (other than Programmatic Optional
Modifications).
"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 Trust" means the Delaware business trust formed between the Owner
Trustee, not in its individual capacity but solely as trustee, and an Owner
Participant.
"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.
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"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 State Street Bank and Trust Company, 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
next Monthly Transfer Date), (ii) commercial paper (other than commercial
paper issued by the Company or GATC or any Affiliate thereof 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, (vi) repurchase agreements and similar short term instruments, (vii)
so long as (A) no Cash Trapping Event is in effect, (B) GATC maintains at
least a rating of BBB- from S&P and Baa3 from Moody's, and (C) GATC is not on
credit watch with negative implications if its rating is BBB- from S&P or Baa3
from Moody's, then, with respect to no more than $3,000,000 of amounts on
deposit in the Cash Trapping Account which are in excess of $3,000,000,
Permitted Investments will include securities or obligations of GATC which are
priced and documented on an arm's length basis (which will be deemed to
include notes issued by GATC priced with references to GATC's commercial
paper) and have a rating of A2/P2 or better; provided further that if a Cash
Trapping Event has occurred and is continuing, such investments as they mature
shall not be reinvested in GATC securities or obligations until such Cash
Trapping Event shall no longer be continuing and all amounts in excess of
those required to be on deposit in the Cash Trapping Account in excess of
those specified in clause (i) thereof shall have been released, and (viii)
with respect to all amounts on deposit in the Special Insurance Reserve
Account, Permitted Investments will include securities or obligations of GATC
which are priced and documented on an arm's length basis (which will be deemed
to include notes issued by GATC priced with references to GATC's commercial
paper).
"Person" means an individual, a corporation, a partnership, a trust, an
unincorporated organization, a limited liability company, or a government or
political subdivision thereof.
"Plans" means those plans not subject to ERISA but which are subject to
Section 4975 of the Code, together with ERISA Plans.
"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
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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.
"Pre-Financing Cash Flow" means the net cash flow computed by deducting all
assumed expenses from assumed gross revenues of the Company.
"Programmatic Optional Modifications" means any Optional Modification (other
than a Required Modification) to one or more Equipment Units in the Company
Fleet the aggregate cost of implementation for which in any 12-month period 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 (or
corresponding dates in respect of the Assumed Debt) 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.
"PTCE" means a Prohibited Transaction Class Exemption issued by the DOL.
"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.
"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 September 20, 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.
"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.
"Rated Rent" means, as of any Rent Payment Date with respect to any Lease,
that portion of the accrued and unpaid Basic Rent and Supplemental Rent which
equals the Rated Obligations Due thereunder.
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"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.
"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 maintain a rating of at least A in the
case of S&P or A2 in the case of Moody's and in any event not reduce its then
current rating on the Pass Through Certificates.
"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.
"Registration Statement" means the Registration Statement on Form S-3 with
respect to the Pass Through Certificates filed with the Commission by the
Company.
"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.
"Regulators" means the AAR, DOT, RSPA and FRA.
"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.
"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; provided, however,
that interest and Late Payment Premium payable on such Rent Payment Date,
shall be computed as of the date which would have been a Rent Payment Date if
such date were a Business Day.
"Required Beneficiaries" means, at any time, Beneficiaries (excluding the
Manager, the Administrator and the Insurance Manager) 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 Insurance Reserves Amount" means the sum of: (i) the
amount (not to exceed $90,000,000) by which the general and excess liability
limits of public liability insurance maintained by or on behalf of the Company
pursuant to Section 12.1(b) of the Leases, in respect of the current or any
prior period (which prior periods shall not include any period for which the
statute of limitations for making claims has
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expired), falls below $100,000,000 per occurrence or in the aggregate, and
(ii) the amount by which the deductible for such public liability exceeds
$10,000,000, in each case for which the Lessee shall, pursuant to Section
12.3(c) of each of the Leases, have received a waiver by the respective Lessor
in respect of the public liability insurance coverage required thereunder.
Notwithstanding the foregoing, the Required Special Insurance Reserves Amount
shall be zero if consented to by each of the Owner Participants in writing.
"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.
"Rider" means the rider to a car service contract entered into between the
Company and its customer which describes the specific Equipment Units to be
leased by the customer, together with the applicable term and lease rates
applicable to such Equipment Units.
"RSPA" means the Research and Special Programs Administration, a division of
the DOT.
"Rules" means the rules, regulations and procedures creating and affecting
DTC and its operations.
"S&P" or "Standard & Poor's" 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.
"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 September 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.
"Scheduled Rent" means, as of any Rent Payment Date with respect to any
Lease, that portion of the accrued and unpaid Basic Rent which equals the
Scheduled Obligations Due (as defined in such Lease) thereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicing Agreement" means the Amended and Restated Management and
Servicing Agreement dated as of September 1, 1998, between the Marks Company
and GATC, as such agreement may be amended or supplemented in accordance with
its terms.
"Services Standard" means customary commercial practices as would be used by
a prudent person in the full service railcar leasing industry.
"Servicer" means GATC as servicer for the Mileage Credits Lockbox pursuant
to the Servicing Agreement.
"Special Distribution Date" means each date on which a Special Payment will
be distributed.
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"Special Insurance Reserves Account" means the Account of that name
established pursuant to the Intercreditor Agreement for the purposes described
under the "Intercreditor Agreement--The Accounts."
"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 (other than commercial
paper issued by the Company or GATC 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.
"State Street" means State Street Bank and Trust Company which will act as
Pass Through Trustee and as Indenture Trustee with respect to the Equipment
Notes issued by each Owner Trust.
"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.
"Structuring Assumptions" means the key assumptions used by the Company to
develop the cash flow model from which the Scheduled Amortization Schedule is
derived.
"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.
"Sublease Lockbox" means the lockbox account in the name of "GATC, as
Trustee for GATC, individually, General American Railcar Corporation, General
American Railcar Corporation II and other beneficiaries as their interests may
appear" into which all payments made by the Sublessees under the Subleases,
the GATC Leases and other GATC Managed Leases will be deposited.
"Sublessee" means any Person who subleases the Equipment from the Company
pursuant to a Sublease.
"Sublessor" means the Company.
"Successor Manager" means any successor Manager appointed upon the
termination of GATC as Manager.
A-14
<PAGE>
"T+5" means the settlement cycle pursuant to which delivery of the Pass
Through Certificates will be made against payment therefor on or about the
fifth business day following the date of pricing of the Pass Through
Certificates.
"Terminated Units" means any Equipment Units with respect to which the
Company has terminated a Lease pursuant to its Obsolescence Termination
Option.
"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.
"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))
"Trial Court" means the Civil District Court in the Parish of Orleans
(Louisiana).
"Trinity" means Trinity Industries Inc., a manufacturer of railcars.
"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 Smith Barney Inc. and Morgan Stanley & Co.
Incorporated.
"Underwriting Agreement" means the underwriting agreement by and among the
Company and the Underwriters, pursuant to which the Underwriters have agreed
to purchase the Pass Through Certificates.
"Underwriter Exemption" means the individual administrative exemption issued
to Salomon Brothers Inc. (the predecessor to Salomon Smith Barney Inc.) by the
DOL in Prohibited Transaction Exemption 89-89 (54 Fed. Reg. 42569 (1989)), as
amended.
"Union Tank Car" means Union Tank Car Company.
A-15
<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 OF
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
---- --------- --------- ------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing.......
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......
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE
-------------------------- -------------------------- EXCESS OF
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
---- --------- --------- ------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
02/20/02......
03/20/02......
04/20/02......
05/20/02......
06/20/02......
07/20/02......
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......
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE
-------------------------- -------------------------- EXCESS OF
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
---- --------- --------- ------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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......
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......
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE
-------------------------- -------------------------- EXCESS OF
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
---- --------- --------- ------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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......
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......
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE
-------------------------- -------------------------- EXCESS OF
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
---- --------- --------- ------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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......
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......
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE
-------------------------- -------------------------- EXCESS OF
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
---- --------- --------- ------ --------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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-6
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS 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 CRE-
ATE 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 SOLICI-
TATION 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> <C>
Available Information...................................................... ii
Reports to Certificateholders by The Trustee............................... ii
Prospectus Summary......................................................... 1
Risk Factors............................................................... 16
Use of Proceeds............................................................ 24
The Company................................................................ 24
The Equipment.............................................................. 25
Railcar Leasing Industry................................................... 27
The Subleases.............................................................. 30
The Sublessees............................................................. 37
The Manager................................................................ 40
The Management Agreement................................................... 43
The Intercreditor Agreement................................................ 46
Collection And Application Of the Company's Cash Flows..................... 48
The Leases................................................................. 59
The Participation Agreements............................................... 65
The Insurance Agreement.................................................... 66
Formation of The Pass Through Trust........................................ 67
Description of The Pass Through Certificates............................... 68
Maturity, Payment And Yield Considerations................................. 77
Structuring Assumptions.................................................... 77
The Owner Trusts........................................................... 81
Description of The Equipment Notes......................................... 81
Federal Income Tax Considerations.......................................... 91
Certain Illinois Taxes..................................................... 94
ERISA Considerations....................................................... 95
Underwriting............................................................... 97
Legal Matters.............................................................. 98
Ratings.................................................................... 98
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 DEAL-
ERS 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$159,574,146
GENERAL AMERICAN RAILCAR
CORPORATION II
1998-1 PASS THROUGH TRUST
% PASS THROUGH CERTIFICATES,
SERIES 1998-1
--------
PROSPECTUS
, 1998
--------
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........... $ 96,465
Legal Fees.................................................... 600,000
Accounting Fees............................................... 35,000
Trustees' Fees and Expenses................................... 25,000
Rating Agencies' Fees......................................... 100,000
Printing Costs................................................ 100,000
Miscellaneous................................................. 43,535
----------
Total..................................................... $1,000,000
==========
</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
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in
II-1
<PAGE>
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 the security rating
required for use of Form S-3 will be assigned by the date of the sale of the
securities offered hereby, and thus the registrant meets all of the
requirements for filing on Form S-3 and has duly caused this document or
amendment thereto to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, state of Illinois on the 21st day of
September, 1998.
General American Railcar
Corporation II
/s/ D. Ward Fuller
By: ____________________________
Name: D. Ward Fuller
Title: President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT, OR AMENDMENT THERETO, HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON THE 21ST DAY OF SEPTEMBER, 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
/s/ Frank B. Bilotta* Director
___________________________________________
Frank B. Bilotta
/s/ Peter H. Sorensen* Director
___________________________________________
Peter H. Sorensen
</TABLE>
*Signed pursuant to power of attorney by:
/s/ Ronald J. Ciancio
_____________________________________
Ronald J. Ciancio
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement+
3.1 Certificate of Incorporation of the Company*
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 (included in Ex-
hibit 5.1)*
23.2 Consent of counsel for the Pass Through Trustee (included in
Exhibit 5.2)
24.1 Powers of Attorney (filed herewith or previously filed on the
signature page to the Registration Statement)
25.1 Statement of Eligibility of Pass Through Trustee on Form T-1+
</TABLE>
- --------
* Previously filed.
+Filed herewith.
II-4
<PAGE>
Exhibit 1.1
FORM OF
GENERAL AMERICAN RAILCAR CORPORATION II
1998-1 PASS THROUGH TRUST
$167,000,000 [ ]% General American Railcar Corporation II
Pass Through Certificates, Series 1998-1
UNDERWRITING AGREEMENT
New York, New York
September [ ], 1998
Salomon Smith Barney Inc.
Seven World Trade Center
New York, New York 10048
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Ladies and Gentlemen:
General American Railcar Corporation II, a Delaware corporation (the
"Company"), in connection with the financing of the debt portion of [three
separate] leveraged lease transactions in which the Company is lessee, proposes
that State Street Bank and Trust Company, as trustee (the "Pass Through
Trustee") of the General American Railcar Corporation II 1998-1 Pass Through
Trust (the "Pass Through Trust") established under the Pass Through Trust
Agreement, to be dated as of September [ ], 1998 (the "Basic Agreement"),
between the Pass Through Trustee and the Company, and Trust Supplement No. 1
thereto, to be dated as of September [ ], 1998 (the "Trust Supplement" and,
together with the Basic Agreement, the "Pass Through Trust Agreement"), between
the Pass Through Trustee and the Company, will issue and sell $167,000,000
aggregate principal amount of Pass Through Certificates, Series 1998-1 (the
"Securities"), with the interest rate and final distribution date set forth on
Schedule A hereto to you, as Underwriters (the "Underwriters").
As used in this Agreement capitalized terms used herein but not
defined herein shall have the meanings attributed to them in each of the [three]
Trust Indenture and Security Agreements, dated as of September ___, 1998 between
the applicable Owner Trustee and the applicable Indenture Trustee (each an
"Indenture" and collectively, the "Indentures") whether expressly set forth
therein or by reference to another agreement. All other capitalized terms used
herein shall, for the purposes hereof, have the meanings attributed to them in
this Agreement.
The terms that follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean such date that the
Registration Statement (as hereinafter defined) and any post-effective amendment
or amendments thereto became or become effective. "Execution Time" shall
<PAGE>
mean the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) below contained in the Registration Statement at
the Effective Date that omits Rule 430A Information. "Prospectus" shall mean the
prospectus relating to the Pass Through Certificates that is first filed
pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to
Rule 424(b) is required, shall mean the form of final prospectus relating to the
Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to in
paragraph 1(a) below including incorporated documents and exhibits, as amended
at the Execution Time (or, if not effective at the Execution Time, in the form
in which it shall become effective) and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended. Such term
shall include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 424" and "Rule 430" refer to such
rules or regulations under the Securities Act of 1933, as amended (the "Act").
Any reference herein to the Registration Statement, any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Securities and Exchange Act of 1934 (the "Exchange Act") on or
before the Effective Date or the issue date of any Preliminary Prospectus or the
Prospectus, as the case may be; and any reference herein to the terms "amend",
"amendment" or "supplement" with respect to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the filing of any document under the Exchange Act after the Effective Date of
the Registration Statement, or, the issue date of any Preliminary Prospectus or
the Prospectus, as the case may be, deemed to be incorporated therein by
reference.
All of the outstanding equity securities of the Company are owned by
General American Transportation Corporation, a New York corporation ("GATC"). As
an inducement to the Underwriters to enter into this Agreement, and in
consideration of the benefits that each of the Company and GATC expects to
receive from the sale of the Securities, GATC hereby agrees to certain
representations and warranties and covenants and agrees to indemnify or
reimburse each Underwriter and certain related persons against or for certain
liabilities, as set forth herein.
Representations and Warranties of the Company.
The Company and GATC each represents and warrants to, and agrees with,
each Underwriter as set forth below in this Section 1.
(a) The Company meets the requirements for the use of Form S-3
under the Act and has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (file number 333-58731) on such
Form including a Preliminary Prospectus, for the registration under the Act
of the offering and sale of the Securities. If the Company shall have
filed any amendments thereto, or used a Preliminary Prospectus, each such
amendment or Preliminary Prospectus has previously been furnished to the
Underwriters. Such Registration Statement, as amended, has become
effective. The Company will next file with the Commission pursuant to Rule
424(b) and 430A of the Act, a final prospectus relating to the Securities
and the offering thereof. As filed, such amendment and form of final
prospectus or such Prospectus shall include all Rule 430A Information,
together with all other required information with respect to the Securities
and the offering thereof and, except to the extent the Underwriters shall
agree in writing to a modification, shall be in all substantive respects in
the form furnished to the Underwriters prior to the Execution Time or, to
the extent not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that contained in
the latest Preliminary Prospectus) as the Company has advised the
Underwriters, prior to the Execution Time, will be included or made
therein.
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(b) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in accordance
with Rule 424(b) of the Act, and on the Closing Date (as hereinafter
defined), the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act and the
Exchange Act, and the respective rules and regulations thereunder, on the
Effective Date, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; on the Effective Date and on the Closing Date, the
Pass Through Trust Agreement and the Trust Supplement did or will comply in
all material respects with the requirements of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules thereunder;
and, on the Effective Date, the Prospectus, if not filed pursuant to Rule
424(b), did not or will not, and on the date of any filing pursuant to Rule
424(b) and on the Closing Date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to (i) that part of the registration
Statement which shall constitute the Statement of eligibility (Form T-1)
under the Trust Indenture Act of the Pass Through Trustee and (ii) the
information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Underwriters specifically for use in connection with the preparation of the
Registration Statement or the Prospectus (or any supplement thereto) (which
the parties agree consists solely of the offering price and the last
paragraph of the cover page, the stabilizing legend and the information
included under the heading "Underwriting" therein).
(c) [The documents incorporated by reference in any Preliminary
Prospectus or the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and (in the case of any amendment or
supplement to any such document, or any material incorporated by reference
in any document filed with the Commission after the date as of which this
representation is being made) will comply in all material respects with the
requirements of the Exchange Act, and the rules and regulations
thereunder.]
(d) Since the respective dates as of which information is given
in the Registration Statement, any Preliminary Prospectus or the
Prospectus, except as otherwise stated therein or contemplated thereby,
there has been no material adverse change in the business, properties,
condition (financial or other), or results of operation of the Company.
(e) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, with full
corporate power and authority to own its properties and conduct its
business as described in any Preliminary Prospectus or the Prospectus, and
it is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, except
in such jurisdictions in which the failure to qualify would not have a
material adverse effect on the Company, and has all corporate power and
authority necessary to own or hold its properties and to perform its
obligations under this Agreement, the Participation Agreements, the Pass
Through Trust Agreement, each Lease and the other Operative Agreements to
which it is a party or is to become a party and the Intercreditor
Agreement, the Transfer and Contribution Agreement, the Management
Agreement, the Administrative Services Agreement, the Lockbox Agreements,
the Insurance Agreement and each Sublease (collectively, the "Company
Documents"), to grant security as contemplated by the Intercreditor
Agreement and otherwise to
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conduct the business in which it proposes to be engaged. The Company has
not engaged in any business or activity other than as contemplated by the
Company Documents and the Operative Agreements to which it is a party.
(f) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and perform its obligations
hereunder, under the Company Documents and under the Operative Agreements
to which the Company is a party and this Agreement and such Company
Documents and Operative Agreements have each been duly authorized, executed
and delivered by the Company.
(g) Each of the Company Documents and the Operative Agreements
to which the Company is a party has been duly authorized by the Company;
and when duly executed and delivered by the Company (assuming due
authorization, execution and delivery by the other parties thereto), each
of the Company Documents and the Operative Agreements to which the Company
is a party will constitute the legal, valid and binding obligations of the
Company enforceable in accordance with its respective terms, except as such
enforceability may be limited in each case by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws affecting
the enforceability of creditors' rights generally (and to the possible
judicial application of foreign laws or governmental action affecting the
rights of creditors generally) and except as such enforceability is subject
to the application of general principles of equity (regardless of whether
the issue of enforceability is considered in a proceeding in equity or at
law), including without limitation (i) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy, (ii)
concepts of materiality, reasonableness, good faith and fair dealing. The
Pass Through Trust Agreement and the Securities conform in all material
respects to the descriptions thereof in the Prospectus.
(h) The execution, delivery and performance of the Company
Documents and the Operative Agreements to which the Company is a party, the
issuance, authentication, sale and delivery of the Securities, and
compliance with the terms thereof, and the consummation by the Company of
the transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result (except as contemplated by the
Intercreditor Agreement) in the creation or imposition of any lien or
encumbrance upon any properties or assets of the Company pursuant to the
terms of, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the properties or assets of the Company
is subject, and which is material to the Company nor will such actions
result in any violation of, or conflict with, the provisions of the
certificate of incorporation of the Company or any statute or any order,
decree, Rule or regulation of any court or governmental agency or body
having proper jurisdiction over the Company or any of its properties or
assets.
(i) Except for such consents as have been obtained and are in
full force and effect and except for compliance with the securities or
"blue sky" laws of the various states and jurisdictions other than the
United States, no consent, approval, authorization or order of, or filing
or registration with, any court or governmental agency or body having
jurisdiction over the Company or any of its properties or assets is
required for the execution, delivery and performance of the Company
Documents and the Operative Agreements to which the Company is a party by
the Company and the consummation of the transactions contemplated hereby
and thereby, including the issuance, authentication, sale and delivery of
the Securities, and compliance with the terms thereof.
(j) Except as disclosed in the Prospectus, there are no legal
or governmental
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proceedings pending to which the Company is a party or of which any
property of the Company is the subject (i) asserting the invalidity of the
Securities, this Agreement or any other Company Document or Operative
Agreement to which the Company is a party, (ii) seeking to prevent the
issuance of the Securities or the consummation of any of the transactions
contemplated by any of the Company Documents or Operative Agreements to
which the Company is a party, (iii) seeking any determination or ruling
that would materially and adversely affect the performance by the Company
of its respective obligations under the Company Documents or Operative
Agreements to which the Company is a party, (iv) seeking any determination
or ruling that would adversely affect the validity or enforceability of the
Securities, any Company Document or any Operative Agreement or (v) seeking
to affect adversely the United States Federal or State of New York income
tax attributes of the Company, the Pass Through Trust, the Securities, any
Company Document or any payments to be made by any party under this
Agreement, the Pass Through Trust Agreement, the Securities, the Company
Documents or any Operative Agreement.
(k) The Company has not taken any corporate action nor, to the
best of its knowledge, have any other steps been taken or legal proceedings
been started or threatened against it which would reasonably be expected to
cause it to become bankrupt or cause its winding-up, dissolution or
reorganization or for the appointment of a receiver, administrator,
administrative receiver, examiner or similar officer of it or of any or all
of its assets or revenues.
(l) Assuming due authorization and execution by the Pass Through
Trust and due authentication by the Pass Through Trustee, the Securities
will be duly issued and delivered by the Pass Through Trust, will be
entitled to the benefits of the Pass Through Trust Agreement and will
constitute valid and binding obligations of the Pass Through Trust,
enforceable against the Pass Through Trust in accordance with their terms
(subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws affecting creditors'
rights generally from time to time in effect, and subject, as to
enforceability, to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(m) Since the date as of which information is given in the
Prospectus through the date hereof, the Company has not (i) issued or
granted any securities, (ii) incurred any liability or obligation
(including without limitation with respect to any debt securities), direct
or contingent (excluding liabilities and obligations which were incurred in
the ordinary course of business and on ordinary business terms), (iii)
entered into any transaction not set forth in the Company Documents or the
Operative Agreements or in the ordinary course of business or (iv) declared
or paid any dividend on its capital stock.
(n) The Company (i) is not in violation of its certificate of
incorporation, (ii) is not in default in any respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is subject or
(iii) is not in violation of any law, ordinance, governmental rule,
regulation or court decree to which it or its properties or assets may be
subject, nor has it failed to obtain any license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
conduct by the Company of its business.
(o) The Company has not engaged in any material activities since
its incorporation (other than those incidental to its registration under
applicable laws and the authorization of the Company Documents and the
Operative Documents to which the Company is a
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<PAGE>
party) and has neither paid any dividends nor made any distributions since
incorporation.
(p) The Intercreditor Agreement upon its execution and delivery
will be effective to create in favor of the Collateral Agent for the
benefit of the Beneficiaries, as security for the payment and performance
of the Secured Obligations (as defined therein), a valid and perfected Lien
in the Collateral (as defined therein) purported to be covered thereby,
superior in right to any other Liens or interests.
(q) The Company is not, and following the sale of the
Securities, will not be, an "investment company", or an entity "controlled"
by an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act").
(r) All filings, recordings, registrations and other actions
have been, or on or prior to the Closing Date will be, made, obtained and
taken in all relevant jurisdictions that are necessary to create and
perfect the Liens purported to be granted by the Intercreditor Agreement in
all right, title, estate and interest of the Company in the Collateral (as
defined in the Intercreditor Agreement) subject to no prior or equal Liens.
(s) As of the Closing Date, all of the issued shares of capital
stock of the Company will have been duly and validly authorized and issued,
fully paid and non-assessable, and owned by [GATC]; and the Company, as of
the date hereof, has no subsidiaries.
(t) The Company has not sustained, since the date of the
Prospectus, any material loss or interference with its business from any
court or governmental action, order or decree; and, since such date, there
has not been any change in the capital stock or debt of the Company or any
material adverse change in or affecting the financial condition, results of
operations or business of the Company whether or not arising from
transactions in the ordinary course of business, other than as set forth in
or contemplated by the Prospectus.
(u) There are no facts, circumstances, conditions or occurrences
that could reasonably be expected to
(i) form the basis of an environmental claim arising
against the Company, that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect on the
business or operations of the Company or on its ability to
perform its obligations under the Company Documents or the
Operative Agreements to which the Company is a party,
(ii) cause the Company to be subject to any
restrictions on ownership, occupancy, use or transferability
under any environmental law which are reasonably expected to
result in a material adverse change in the business, results of
operations, condition (financial or otherwise) or property of the
Company, or
(iii) require the filing or recording of any notice,
registration or permit under any environmental law which are
reasonably expected to result in a material adverse change in the
business, results of operations, condition (financial or
otherwise) or property of the Company.
(v) The Equipment Notes to be issued under the Indentures, when
duly
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authorized, executed and delivered by the Owner Trustee and duly
authenticated by the Indenture Trustee in accordance with the
terms of the Indentures, will be duly issued under the Indentures
and will constitute valid and binding obligations of the Owner
Trustee; and the holders thereof will be entitled to the benefits
of the Indentures.
(w) As of the Closing Date, the Securities will be
rated ["AA"] by Standard & Poor's Corporation ("S&P") and "[Aa2]"
by Moody's Investors Service, Inc. ("Moody's").
2. Representations and Warranties of GATC.
GATC represents and warrants to and agrees with, the Underwriters as
set forth below in this Section 2.
(a) GATC is duly incorporated and is validly existing under the
laws of its jurisdiction of incorporation, is duly qualified to do business
in each jurisdiction in which the ownership or leasing of its properties,
the conduct of its business or its performance of this Agreement and the
Operative Agreements and Company Documents, to which it is a party requires
such qualification, except where the failure to be so qualified would not
have a material adverse effect on the consolidated financial condition,
results of operations or business of GATC and its subsidiaries, taken as a
whole, or its performance of this Agreement and such Operative Agreements
and Company Documents, with full corporate power and authority necessary to
own or hold its properties and to conduct the business in which it is
engaged as described in the Prospectus.
(b) GATC has all necessary corporate power and authority to
execute and deliver this Agreement and perform its obligations hereunder
and under the Operative Agreements and Company Documents to which GATC is a
party and this Agreement and such Operative Agreements and Company
Documents have each been duly authorized, executed and delivered by GATC.
(c) GATC has all necessary corporate power and authority to
execute and deliver each of the Operative Agreements and Company Documents
to which it is a party and to perform its obligations thereunder, and each
Operative Agreement and Company Document to which GATC is a party has been
or will be duly authorized, executed and delivered and constitutes or will
constitute a valid and binding agreement of GATC, enforceable against GATC
in accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws
affecting creditors' rights generally from time to time in effect, and
subject, as to enforceability, to general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or
at law).
(d) There are no legal or governmental proceedings pending to
which GATC is a party or of which any property of GATC is the subject (i)
asserting the invalidity of this Agreement or any Operative Agreement or
Company Document to which it is a party, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any Operative Agreement or Company Document to which it is a party, (iii)
seeking any determination or ruling that would materially and adversely
affect the performance by GATC of its obligations under this Agreement or
any Operative Agreement or Company Document to which it is a party, or (iv)
seeking any determination or ruling that would adversely affect the
validity or enforceability of this Agreement or any Operative Agreement or
Company Document to which it is a party.
(e) The execution, delivery and performance of this Agreement by
GATC, and
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of the Operative Agreements and Company Documents to which GATC is a party,
and compliance with the terms of this Agreement and of such Operative
Agreements and Company Documents by GATC, and the consummation by GATC of
the transactions contemplated by this Agreement and such Operative
Agreements and Company Documents, will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien or
encumbrance upon any properties or assets of GATC pursuant to the terms of,
any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which GATC is a party or by which GATC is bound or to
which any of the properties or assets of GATC is subject, and which is
material to GATC and its subsidiaries taken as a whole, nor will such
actions result in any violation of, or conflict with, the provisions of the
certificate of incorporation of GATC or any statute, or any order, decree,
Rule or regulation of any court or governmental agency or body having
proper jurisdiction over GATC or any of its properties or assets (except
for such statutes, orders, decrees, rules or regulations the violation of
which would not have a material adverse effect on the consolidated
financial condition, results of operation or business of GATC and its
subsidiaries, taken as a whole).
(f) No consent, approval, authorization or order of, or filing
or registration with, any court or governmental agency or body having
jurisdiction over GATC or any of its properties or assets is required for
the execution, delivery and performance of this Agreement and the Operative
Agreements and Company Documents to which GATC is a party and the
consummation of the transactions contemplated hereby and thereby (other
than such consents the failure of which to obtain would not have a material
adverse effect on the consolidated financial condition, results of
operations or business of GATC and its subsidiaries, taken as a whole).
(g) GATC is not, and following the sale of the Securities, will
not be an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined by the Investment Company Act.
(h) All the information relating to GATC which GATC has supplied
to the Underwriters and the Rating Agencies in connection with the actual
or prospective issuance of the Securities (as supplemented or superseded
from time to time prior to the date of this Agreement) was at the time it
was supplied, and to the best of the knowledge of GATC is, true and correct
in all material respects and is not misleading in any material respect, and
did not fail to disclose any information which was necessary to make the
information so given not misleading in the context in which it was given.
3. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to sell
to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Company the principal amount of the
Securities at a purchase price of 100% of the principal amount of the
Securities set forth opposite its name in Schedule I hereto (the "Selling
Price").
(b) The Company agrees to pay the Underwriters an underwriting
fee of $[________] payable upon on the Closing Date.
[(c) The Company agrees to pay the Underwriters a structuring
fee of $[_______], payable upon on the Closing Date. ]
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(d) The Underwriters may, to the extent permitted by applicable
laws, overallot and make purchases and sales of the Securities in the open
market or otherwise for the purpose of stabilizing the market in the
Securities, but in such event and in relation thereto the Underwriters
shall be acting on their own behalf and not as agent of the Company, and
any loss or profit resulting therefrom shall be for the account of the
Underwriters. The Underwriters acknowledge that the Company has not
authorized the issue of Securities in a principal amount exceeding the
amount set forth on the first page of this Agreement.
4. Delivery and Payment.
Delivery of and payment for the Securities shall be made at 10:00 AM,
New York City time, on _________________, 1998, which date and time may be
postponed by agreement between the Underwriters and the Company or as provided
in Section 11 hereof (such date and time of delivery and payment for the
Securities being herein called the "Closing Date"). Delivery of the Securities
shall be made to each of the Underwriters' respective accounts at the Depository
Trust Company against payment by the Underwriters of the purchase price thereof
in Federal (same day) funds by wire transfer to an account in The City of New
York previously designated to the Underwriters by the Company.
The Securities shall be registered in such names and in such
denominations as each Underwriter may request, without interest coupons, in
minimum denominations of $100,000 and integral multiples of $1,000 in excess
thereof, not less than two full business days in advance of the Closing Date or
such other date as may be agreed upon. The Company agrees to have the Securities
available for inspection, checking and packaging by the Underwriters in New
York, not later than 1:00 p.m. on the business day prior to the Closing Date.
5. Offering by the Underwriters.
It is understood that, after this Agreement has been entered into and
the Registration Statement becomes effective, the Underwriters propose to offer
the Securities for sale to the public as set forth in any Preliminary Prospectus
and the Prospectus.
This Agreement has been duly authorized, executed and delivered by the
Underwriters.
6. Agreements.
The Company agrees with the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective and the Pass Through Trust Agreement
to be qualified under the Trust Indenture Act. Prior to the Closing Date,
the Company will not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Company has furnished the
Underwriters a copy for your review prior to filing and will not file any
such proposed amendment or supplement to which the Underwriters may
reasonably object. Subject to the foregoing sentence, if filing of the
Prospectus is required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed with
the Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to the
Underwriters of such timely filing. The Company will promptly advise the
Underwriters (when the Registration Statement, if not effective at the
Execution Time, and any amendment thereto, shall have become effective,
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(ii) when the Prospectus, and any supplement thereto, shall have been filed
(if required) with the Commission pursuant to Rule 424(b), (iii) when,
prior to termination of the offering of the Pass Through Certificates, any
amendment to the Registration Statement shall have been filed or become
effective, (iv) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any
additional information, (v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose, (vi) of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (vii)
during the period when a prospectus relating to the Securities is required
to be delivered under the Act, of the mailing or the delivery to the
Commission for filing of any document to be filed pursuant to the Exchange
Act. The Company will use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules and regulations thereunder,
the Company promptly will prepare and file with the Commission, subject to
paragraph (a) of this Section 6, an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Underwriters an earnings
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and the applicable rules
and Rule 158 under the Act.
(d) The Company will furnish to each Underwriter and the
Underwriters' counsel, without charge, a signed copy of the Registration
Statement (including exhibits thereto and materials incorporated by
reference therein) and, so long as delivery of a prospectus by the
Underwriters or a dealer may be required by the Act, as many copies of any
Preliminary Prospectus and the Prospectus and any amendments thereof and
supplements thereto as any Underwriters may reasonably request.
(e) The Company will arrange for the qualification of the
Securities for sale under the laws of such jurisdictions as each of you may
designate, will maintain such qualifications in effect so long as required
for the distribution of the Securities; provided, however, that the Company
will not be required to file any general consent to service of process or
qualify to do business in any jurisdiction in order to effect such
qualification.
(f) The Company will not amend or supplement the Prospectus
without the prior consent of the Underwriters.
(g) The Company will notify the Underwriters promptly of any
change having or potentially having a material adverse effect on the
financial condition, results of operations or business of the Company or
relating to any of its representations, warranties, covenants or agreements
contained herein that occurs at any time prior to payment of the full
Selling Price to the Company on the Closing Date.
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(h) The Company will use the net proceeds received from the
issuance of the Securities in the manner specified in the Prospectus under
"Use of Proceeds".
(i) The Company will obtain, make and keep in full force and
effect for so long as any of the Securities remain outstanding all
authorizations from and registrations with governmental authorities that
may be required for the issuance, validity or enforceability against the
Company of this Agreement, the Pass Through Trust Agreement and the
Securities.
(j) The Company will hold each Underwriter harmless against any
documentary, stamp or similar transfer or issue tax, including any interest
and penalties, on the issue, sale and delivery of the Securities in
accordance with the terms of this Agreement and on the execution and
delivery of the Pass Through Trust Agreement and this Agreement which are
or may be required to be paid under the laws of the United States or any
political subdivision or taxing authority thereof or therein; all payments
to be made by the Company hereunder shall be made in U.S. dollars, at such
place as indicated by the Underwriters, without withholding or deduction
for or on account of any present or future taxes, duties or governmental
charges whatsoever imposed or levied by or on behalf of the United States
or any taxing authority therein, unless the Company is compelled by law to
deduct or withhold such taxes, duties or charges; in that event, the
Company shall pay such additional amounts as may be necessary in order that
the net amounts after such withholding or deduction shall equal the amounts
that would have been payable if no such withholding or deduction had been
made.
(k) The Company will not be or become an open-end investment
company, unit investment trust or face-amount certificate company that is
or is required to be registered under Section 8 of the Investment Company
Act, nor is, nor will be or become, a closed-end investment company
required to be registered, but not registered, under the Investment Company
Act.
(l) The Company will cooperate with the Underwriters and use its
best efforts to permit the Securities to be eligible for clearance and
settlement through DTC.
(m) For a period of [one year] following the Closing Date, the
Company will notify the Underwriters prior to mailing any consent
solicitation or other request for an amendment, modification or waiver of
any of the Company Documents or Operative Agreements to the holders of any
of the Securities.
(n) To the extent, if any, that the ratings provided with
respect to the Securities by any Rating Agency are conditional upon the
furnishing of documents or the taking of any other actions by the Company,
the Company will furnish such documents and take any such other actions.
(o) Between the date of this Agreement and the Closing Date, the
Company will not without the Underwriters' prior written consent, offer,
sell, or enter into any agreement to sell, any public debt securities
registered under the Act which are substantially similar to the Securities
(other than the Pass Through Certificates).
[(p) As of the date hereof it is in compliance with all
provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating
to Disclosure of Doing Business with Cuba, and the Company further agrees
that if it commences engaging in business with the government of Cuba or
with any person or affiliate located in Cuba after the date the
Registration Statement becomes or
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has become effective with the Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes
in any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the
Department.]
Agreement of GATC.
GATC agrees with each Underwriter to notify the Underwriters promptly
of any change affecting any of its representations, warranties, covenants,
agreements and indemnities herein at any time prior to payment for the
Securities being made to the Company by the Underwriters on the Closing Date.
Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Securities shall
be subject to the accuracy of the representations and warranties on the part of
the Company and GATC contained herein as of the Execution Time and the Closing
Date, to the accuracy of the statements of the Company and GATC made in any
certificates pursuant to the provisions hereof, to the performance by the
Company and GATC of their obligations hereunder and to the following additional
conditions:
(a) If the Registration Statement has not become effective prior
to the Execution Time, the Registration Statement shall have become
effective not later than (i) 5:00 p.m., New York City time, on the date of
determination of the public offering price, if such determination occurred
at or prior to 3:00 p.m., New York City time, on such date or (ii) 12:00
noon on the business day following the day on which the public offering
price was determined, if such determination occurred after 3:00 p.m., New
York City time, on such date; if filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b), the Prospectus,
and any such supplement, shall have been filed in the manner and within the
time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Pass Through
Trust Agreement, the Securities, the Company Documents, the other Operative
Agreements and all other legal matters relating to this Agreement and the
transactions contemplated hereby, shall be reasonably satisfactory in all
material respects to counsel for the Underwriters, and the Company shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass on such matters.
(c) GATC shall have furnished to the Underwriters the opinion of
Ronald J. Ciancio, Esq., Assistant General Counsel for GATC, dated the
Closing Date, in form and substance reasonably satisfactory to the
Underwriters.
(d) The Company and GATC shall have furnished to the
Underwriters the opinion or opinions of Vedder, Price, Kaufman & Kammholz,
counsel for the Company and GATC, dated the Closing Date, in form and
substance reasonably satisfactory to the Underwriters.
(e) The Underwriters shall have received the opinion or opinions
of Morris, James, Hitchens & Williams, special counsel for each Owner
Trustee, dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters.
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<PAGE>
(f) The Underwriters shall have received the opinion or opinions
of (i) ____________, special counsel for the Owner Participants, and (ii)
the general counsel of each Owner Participant, each dated the Closing Date,
in form and substance reasonably satisfactory to the Underwriters.
(g) The Underwriters shall have received the opinion or opinions
of Bingham Dana LLP, special counsel of each Indenture Trustee, dated the
Closing Date, in form and substance reasonably satisfactory to the
Underwriters.
(h) The Company and GATC shall have furnished to the
Underwriters the opinion of Bingham Dana LLP, special counsel for the Pass
Through Trustee, dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters, and the Company and GATC shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.
(i) The Underwriters shall have received from Milbank, Tweed,
Hadley & McCloy, special counsel for the Underwriters, such opinion or
opinions, dated the Closing Date, with respect to the issuance and sale of
the Securities, the Pass Through Agreement, the Prospectus (together with
any amendment or supplement thereto) and other related matters as the
Underwriters may reasonably require, and the Company and GATC shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(j) The Underwriters shall have received a copy of each opinion
provided to any investment rating agency in connection with their rating of
the Securities, each of which shall state therein that the Underwriters may
rely thereon, in form and substance reasonably satisfactory to the
Underwriters.
(k) At the Execution Time and at the Closing Date, Ernst & Young
LLP shall have furnished to the Underwriters a comfort letter or letters,
dated as of the Execution Time and as of the Closing Date, respectively, in
form and substance reasonably satisfactory to the Underwriters.
(l) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Prospectus (exclusive of any
amendment thereof or supplement thereto), there shall not have been any
change, or any development involving a prospective change, in or affecting
the business or properties of either of the Company or GATC, the effect of
which, in the judgment of the Underwriters, would be likely to impair
materially the marketability of the Securities or is so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Prospectus
(exclusive of any amendment thereof or supplement thereto).
(m) On or before the Closing Date, this Agreement, each
Operative Agreement and each Company Document shall each be satisfactory in
form and substance to the Underwriters, 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 the Underwriters or their
counsel on or before the Closing Date.
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<PAGE>
(n) Each of the Company and GATC shall have furnished to the
Underwriters a certificate, dated the Closing Date, signed by its Chairman
of the Board or President and its principal financial or accounting
officer, to the effect that the signers of such certificate have carefully
examined this Agreement, the Prospectus, any amendment thereof or
supplement thereto and that:
(i) the representations and warranties of each of the
Company and GATC in this Agreement are true and correct in all
material respects on and as of the Closing Date with the same
effect as if made on the Closing Date, each of the Company and
GATC has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior
to the Closing Date, and the conditions precedent to the
obligations of the Underwriters set forth herein have been
fulfilled;
(ii) (A) nothing has come to their attention that would
lead either of them to conclude that the Registration Statement
included any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein, under the circumstances in which
they were made, not misleading, and, (B) since the date of the
Registration Statement (exclusive of any amendment thereof or
supplement thereto), there has been no material adverse change in
the financial condition, earnings, business or properties of
either of the Company or GATC, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated in the Registration Statement (exclusive
of any amendment thereof or supplement thereto); and
(iii) since such date there shall not have been any
change in the capital stock of the Company or GATC, or long-term
debt of the Company or GATC.
(o) Each of the Company and GATC shall have delivered to the
Underwriters a certificate, dated the Closing Date, of its secretary
certifying as to its articles or certificate of incorporation, by-laws or
other organizational documents; board resolutions authorizing the
execution, delivery and performance of the Company Documents or Operative
Agreements to which it is a party, as applicable; and the incumbency of all
officers that signed any of the Company Documents and such Operative
Agreements.
(p) The Underwriters shall have received (x) any certificate
relating to insurance that is required pursuant to [Section 12] of any
Lease and (y) a certificate from a nationally recognized insurance broker
in the form of [Exhibits A-1 and A-2] to the Participation Agreement with
respect to the public liability insurance required by [Section 12.1(b)] of
the Lease.
(q) Any Operative Agreements which are required to be executed
on or prior to the Closing Date that have not been executed by the date of
this Underwriting Agreement will be subject to a condition precedent which
requires such agreements to be in form and substance satisfactory to the
Underwriters.
(r) On or prior to the Closing Date, the Company and GATC shall
have furnished to the Underwriters such further information, certificates
and documents as the Underwriters may reasonably request.
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<PAGE>
(s) (i) Each of the Rating Agencies shall have delivered to the
Company and the Underwriters a final rating letter setting forth a rating
with respect to the Securities of at least ["AA"] by S&P and ["Aa2"] by
Moody's and (ii) subsequent to the execution and delivery of this Agreement
such organizations shall not have announced in writing (which shall
include, without limitation, any press release by such organization) that
it has under surveillance or review, with possible negative implications,
its rating of any of the Securities.
(t) On or before the Closing Date the Company 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, to be duly filed, recorded and
deposited with the Surface Transportation Board of the United States of
America in conformity with 49 U.S.C. (S)11301 and with the Registrar
General of Canada pursuant to Section 90 of the Railway Act of Canada 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 the Company shall furnish the
Underwriters with proof thereof.
(u) Simultaneous with or prior to the Closing Date the Equipment
Notes shall have been issued and sold to the Pass Through Trust.
(v) On or prior to the Closing Date, the Company shall have
funded the Liquidity Reserve Account and the Cash Trapping Account with
cash in an amount equal to $___________ and $__________ respectively.
(w) The Company shall have furnished evidence to the
Underwriters that, upon consummation of the transactions contemplated
hereby on the Closing Date, it will have capital of at least $_________,
exclusive of Subleases, together with an Officer's Certificate as to the
solvency of the Company as of the Closing Date.
(x) Each of the conditions contained in [Section 4] of each of
the Participation Agreements shall have been fulfilled to the satisfaction
of the Underwriters.
If any of the conditions specified in this Section 8 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriters and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Underwriters[; provided that
the entire structuring fee set forth in Section 3(c) of this Agreement shall be
payable to the [Underwriters] in the event that at any time prior to the
expiration of two years after such cancellation a financing is consummated by
GATC or the Company involving a financing structure which is deemed to be
materially similar to the transactions described in the Prospectus. Notice shall
be given to the Company in writing or by telephone or telegraph confirmed in
writing].
The documents required to be delivered by this Section 8 shall be
delivered at the office of Vedder, Price, Kaufman & Kammholz, special counsel
for the Company at 222 North LaSalle Street, Chicago, IL 60601-1003, on the
Closing Date.
Expenses.
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(a) The Company and GATC, jointly and severally, agree to pay
all expenses charged to either of them or the Underwriters incident to the
performance by any of them of their respective obligations under this
Agreement. The Underwriters will pay their own out-of-pocket expenses
incurred by the Underwriters in connection with the marketing, offer and
sale of the Securities, other than the costs and expenses of [Lewton
Technologies] which shall be paid by the Company and GATC regardless of
whether the sale of the Securities provided for herein is consummated. The
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
counsel to the Underwriters, shall be paid by each Owner Trustee or Owner
Participant pursuant to Section 2.5 of each Participation Agreement.
(b) The Company and GATC, jointly and severally, agree to pay
all expenses incidental to the performance of their obligations under this
Agreement, the Company Documents and the other Operative Agreements,
including, without limitation, (i) the fees and expenses of the Pass
Through Trustee and its professional advisers; (ii) all expenses in
connection with the execution, issue, authentication, packaging and initial
delivery of the Securities, the preparation, printing and distribution of
this Agreement, the Securities, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto, the Pass Through Trust
Agreement, each of the other Company Documents and Operative Agreements and
any other document relating to the issuance, offer, sale and delivery of
the Securities, (iii) the costs incident to the authorization, issuance,
sale, authentication, transfer and delivery of the Equipment Notes to the
Pass Through and the Securities to the Underwriters; (iv) the fees and
expenses or qualifying the Securities under securities laws of the several
jurisdictions and of preparing, printing and distributing a Blue Sky
memorandum (including related fees and expenses of counsel to the
Underwriters); (v) the cost and charges of DTC and its nominee in
connection with the Securities, including the book-entry ownership system
for the Securities; (vi) the cost and charges of any transfer agent,
registrar or paying agent; (vii) the fees and disbursements of the
Company's and GATC's counsel and accountants and (viii) any fees charged by
investment rating agencies for the rating of the Securities, regardless of
whether the sale of the Securities provided for herein is consummated.
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Indemnification and Contribution.
(a) Each of the Company and GATC jointly and severally agree to
indemnify and hold harmless each Underwriter, the directors, officers,
employees and agents of each Underwriter and each person who controls each
Underwriter within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or in any
amendment thereof, or in any Preliminary Prospectus or the Prospectus, or
in any amendment thereof or supplement thereto, or any information provided
by the Company or GATC to any holder or prospective purchaser of
Securities, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that (i) none of the
Company or GATC will be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus or the Prospectus in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of the Underwriters specifically for inclusion therein and
(ii) such indemnity with respect to any Preliminary Prospectus shall not
inure to the benefit of the Underwriters (or to the benefit of any person
controlling the Underwriters) if the person asserting any such loss, claim,
damage or liability purchased the Securities which are the subject thereof
but did not receive a copy of the Prospectus (or the Prospectus as amended
or supplemented) at or prior to the confirmation of the sale of such
Securities, in any case where (A) the untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented) and (B) if a copy
of such Prospectus (or Prospectus as amended or supplemented) had been sent
or given to the person asserting any such loss, claim, damage or liability,
such delivery would have cured the defect giving rise to the claim asserted
by such person. This indemnity agreement will be in addition to any
liability which the Company or GATC, as the case may be, may otherwise
have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless each of the Company and GATC, each of their respective directors,
officers, employees and agents, and each person who controls the Company or
GATC within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company and GATC to each
Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Company by or on behalf of such
Underwriter specifically for inclusion in any Preliminary Prospectus or the
Prospectus. This indemnity agreement will be in addition to any liability
which any Underwriter may otherwise have. Each of the Company and GATC
acknowledges that the offering price and the statements set forth in the
last paragraph of the cover page, the stabilizing legend and the
information included under the heading "Underwriting" therein in any
Preliminary Prospectus or the Prospectus constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in
any Preliminary Prospectus or the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
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writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph
(a) or (b) above unless and to the extent it did not otherwise learn of
such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided,
however, that such counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
the institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 10 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, each of the Company, GATC and the
Underwriters agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending the same) (collectively
"Losses") to which the Company, GATC and one or more of the Underwriters
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company and GATC, on one hand, and by the
Underwriters, on the other hand, from the offering of the Securities;
provided, however, that in no case shall any Underwriter be responsible for
any amount in excess of the underwriting discount or commission applicable
to the Securities purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable
for any reason, the Company and GATC, on the one hand, and the
Underwriters, on the other, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company and GATC, on the one hand, and of the
Underwriters, on the other, in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and GATC shall be deemed
to be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company and GATC, on the
one hand, or the Underwriters, on the other. The parties hereto
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<PAGE>
agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 10, each
person who controls any Underwriter within the meaning of either the Act or
the Exchange Act and each director, officer, employee and agent of any
Underwriter shall have the same rights to contribution as such
Underwriters, and each person who controls either of the Company or GATC
within the meaning of either the Act or the Exchange Act and each officer
and director of either of the Company or GATC shall have the same rights to
contribution as the Company or GATC, as the case may be, subject in each
case to the applicable terms and conditions of this paragraph (d).
Termination.
This Agreement shall be subject to termination in the absolute
discretion of the Underwriters, by notice given to the Company prior to delivery
of and payment for the Securities, if prior to such time (i) trading in
securities generally on the New York Stock Exchange shall have been suspended or
limited or minimum prices shall have been established on such Exchange, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities, (iii) there shall have occurred any outbreak or material escalation
of hostilities in or involving the United States or the declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the judgment of
the Underwriters, impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Prospectus (exclusive of any
amendment thereof or supplement thereto), (iv) any material adverse change in
United States or international financial, political or economic conditions such
as to make it, in the judgment of the Underwriters, impractical or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the Prospectus (exclusive of any amendment thereof or supplement thereto), (v)
any downgrading in the rating of any debt securities of the Company by any
"nationally recognized statistical ratings organization" (as defined for
purposes of Section 436(g) under the Securities Act), or any public announcement
that any such organization has under surveillance or review any debt securities
of the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading of such rating)
or (vi) there shall have been any material adverse effect with respect to the
Company or GATC, otherwise than as set forth or contemplated in the Prospectus,
so as to make it, in any such case, in the judgment of the Underwriters,
impractical or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Prospectus (exclusive of any amendment thereof
or supplement thereto).
Agreements, Representations and Indemnities to Survive.
The respective agreements, representations, warranties, indemnities
and other statements of the Company and GATC or their respective officers and of
the Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriters, the Company, GATC or any of the officers, directors or
controlling persons referred to in Section 10 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 9 and 10 hereof
shall survive the termination or cancellation of this Agreement.
Notices.
All communications hereunder will be in writing and effective only on
receipt, and, if sent
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to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
Salomon Brothers Inc at Seven World Trade Center, New York, New York 10048
Attention: ___________; if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 500 West Monroe Street, Chicago, Illinois
60661-3676, Attention: Treasurer; and if sent to GATC, will be mailed, delivered
or telegraphed and confirmed to it at 500 West Monroe Street, Chicago, Illinois
60661-3676, Attention: Secretary.
Persons Entitled to Benefit of Agreement.
This Agreement shall inure to the benefit of and be binding upon each
Underwriter, the Company, GATC and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
Persons, except that the representations, warranties, indemnities and agreements
of the Company and GATC contained in this Agreement shall also be deemed to be
for the benefit of the Person or Persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act. Nothing in this Agreement is
intended or shall be construed to give any Person, other than the Persons
referred to in this Section 14, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
15. Governing Law.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(b) Any legal action or proceeding relating in any way to this
Agreement, may be brought and enforced in the Federal courts of the United
States for the Southern District of New York, and each of the Company and
GATC accepts for itself and in respect of its property, generally,
irrevocably and unconditionally, the jurisdiction of each such court in
respect of any such action or proceeding but only such action or
proceeding; provided that, if for whatever reason the Federal courts of the
United States for the Southern District of New York will not or cannot hear
such action or proceeding, it may be brought and enforced in the courts of
the State of New York in The City of New York, Borough of Manhattan. Each
of the Company and GATC agrees that a judgment, after exhaustion of all
available appeals, in any such action or proceeding shall be conclusive and
binding upon, and may be enforced in any other jurisdiction by a suit upon
such judgment, a certified copy of which shall be conclusive evidence of
the judgment.
(c) Each of the Company and GATC irrevocably waives, to the
fullest extent permitted by applicable law, all immunity (whether on the
basis of sovereignty or otherwise) from jurisdiction, attachment (both
before and after judgment) and execution to which they might otherwise be
entitled in any action or proceeding relating in any way to this Agreement,
and, in the case of the Company, the Pass Through Trust Agreement, the
Securities or any other Company Document, in any case, in the courts of the
United States, of the State of New York or of any other country or
jurisdiction, and none of the Company or GATC shall raise a claim or cause
to be pleaded any such immunity at or in respect of any such action or
proceeding.
(d) Each of the Company and GATC hereby irrevocably waives any
objection that it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection
with this Agreement, the Pass Through Trust Agreement, the Securities or
any Company Document, or Operative Agreement to which it is a party brought
in the courts referred to in clause (b) above, and hereby further
irrevocably waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has been brought in
an inconvenient forum. TO THE EXTENT PERMITTED BY
20
<PAGE>
APPLICABLE LAW, EACH OF THE COMPANY AND GATC HEREBY IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
THIS AGREEMENT, THE PASS THROUGH TRUST AGREEMENT, THE SECURITIES OR ANY
COMPANY DOCUMENT OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Headings.
The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of,
this Agreement.
Counterparts.
This Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original but all such counterparts shall together constitute one
and the same instrument.
21
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, GATC and each Underwriter.
Very truly yours,
GENERAL AMERICAN RAILCAR CORPORATION II
By:
------------------------------
Name:
Title:
GENERAL AMERICAN TRANSPORTATION
CORPORATION
By:
------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON SMITH BARNEY INC.
By:
--------------------------
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:
--------------------------
Name:
Title:
22
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
PASS THROUGH AGGREGATE INTEREST FINAL
CERTIFICATE PRINCIPAL RATE DISTRIBUTION
DESIGNATION AMOUNT DATE
<S> <C> <C> <C>
1998-1 [$167,000,000] _______ _________, ____
</TABLE>
Closing Date, Time and Location: _______, 1998; 11:00 a.m. Chicago time;
Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Chicago, IL 60601-
1003.
Addresses for notices pursuant to Section 11: Salomon Smith Barney Inc. at
Seven World Trade Center, New York, New York 10048 Attention: Legal Department;
Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036-8293
Attention: _______________________________.
23
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
PASS THROUGH CERTIFICATES
UNDERWRITERS TO BE PURCHASED
- ------------ -------------------------
<S> <C>
Salomon Smith Barney Inc.
-------------------
Morgan Stanley & Co. Incorporated
-------------------
-------------------
TOTAL [$167,000,000]
-------------------
</TABLE>
24
<PAGE>
EXHIBIT 4.1
FORM OF
________________________________________________
PASS THROUGH TRUST AGREEMENT
Dated as of September 1, 1998
between
GENERAL AMERICAN RAILCAR CORPORATION II
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
Tank Cars and Covered Hopper Cars
________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
<S> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 6.03 Judicial Proceedings Instituted by Trustee.................................. 30
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
</TABLE>
ii
<PAGE>
ARTICLE X
<TABLE>
<CAPTION>
<S> <C>
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS........................................................... 48
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 September 1, 1998, by and
between General American Railcar Corporation II, a Delaware corporation, and
State Street Bank and Trust Company, a Massachusetts Trust Company, 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 for
<PAGE>
[Pass Through Trust Agreement]
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
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>
[Pass Through Trust Agreement]
"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>
[Pass Through Trust Agreement]
"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>
[Pass Through Trust Agreement]
"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, State Street Bank and Trust
Company, as Indenture Trustee, Wilmington Trust Company, 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>
[Pass Through Trust Agreement]
"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 Note
6
<PAGE>
[Pass Through Trust Agreement]
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 (1) requesting that the Trustee temporarily postpone purchase of
the related Equipment Notes to a
7
<PAGE>
[Pass Through Trust Agreement]
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 of the committee on trust matters, any vice-president, any second vice-
president, the secretary,
8
<PAGE>
[Pass Through Trust Agreement]
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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[Pass Through Trust Agreement]
"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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[Pass Through Trust Agreement]
(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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[Pass Through Trust Agreement]
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 no
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[Pass Through Trust Agreement]
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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[Pass Through Trust Agreement]
(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
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[Pass Through Trust Agreement]
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 Company shall deliver to the Trustee a Postponement Notice
relating to one or more Postponed
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<PAGE>
[Pass Through Trust Agreement]
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 Issuance Date to, but not including, such
Special Distribution Date and (ii) the Trustee shall transfer an
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[Pass Through Trust Agreement]
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).
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[Pass Through Trust Agreement]
ARTICLE
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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[Pass Through Trust Agreement]
(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
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[Pass Through Trust Agreement]
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
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[Pass Through Trust Agreement]
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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[Pass Through Trust Agreement]
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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[Pass Through Trust Agreement]
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
23
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[Pass Through Trust Agreement]
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
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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[Pass Through Trust Agreement]
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 Payments Account the
entire amount deposited therein on account of Special
25
<PAGE>
[Pass Through Trust Agreement]
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; the reason for the Special
Payment; and
(iii) 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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[Pass Through Trust Agreement]
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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[Pass Through Trust Agreement]
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 in accordance with the written
directions of the Company pending distribution of such Special Payment pursuant
to Section 4.02. In the event written investment directions are not received by
the Trustee, such money shall remain uninvested, pending receipt of such written
directions. 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
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
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
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[Pass Through Trust Agreement]
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
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[Pass Through Trust Agreement]
Basic Agreement and the related Trust Supplement or 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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[Pass Through Trust Agreement]
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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[Pass Through Trust Agreement]
(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
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. (a) 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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[Pass Through Trust Agreement]
in good faith determine that the withholding of such notice is in the interests
of the Certificateholders of the related series.
(b) The Trustee shall not be deemed to have knowledge of any Defaults
hereunder unless a Responsible Officer of the Trustee has received written
notice thereof; provided, however, the Trustee shall be deemed to have knowledge
of any failure to receive a scheduled payment hereunder.
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 reasonable fees
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[Pass Through Trust Agreement]
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.
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
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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.
(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
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[Pass Through Trust Agreement]
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 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
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[Pass Through Trust Agreement]
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 City of Boston in
the State of Massachusetts, 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 State
Street Bank and Trust Company, Two International Place, Boston, MA 02110,
Attention: Corporate Trust Servises Division. 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.
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(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.
(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.
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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.
Section 7.15 Representations and Warranties of Trustee. The Trustee
-----------------------------------------
hereby represents and warrants that:
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[Pass Through Trust Agreement]
(i) the Trustee is a state chartered trust company duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts;
(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 Massachusetts 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 charter documents 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
Massachusetts 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 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
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[Pass Through Trust Agreement]
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
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.
Section 8.03 Reports by Trustee. (a) Within 60 days after July 15 of
------------------
each year commencing with the year 1999, the Trustee shall transmit to the
Certificateholders of each
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[Pass Through Trust Agreement]
series, as provided in Section 313(c) of the Trust Indenture Act, a brief report
dated as of such July 15, if required by Section 313(a) of the Trust Indenture
Act.
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 compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Basic Agreement or any Trust Supplement.
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[Pass Through Trust Agreement]
ARTICLE
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, 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
46
<PAGE>
[Pass Through Trust Agreement]
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 Agreement or any Trust Supplement, the
Trustee may in its discretion decline to execute such document.
47
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[Pass Through Trust Agreement]
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
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
(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
48
<PAGE>
[Pass Through Trust Agreement]
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
TERMINATION OF TRUST
Section 10.11 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.
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
49
<PAGE>
[Pass Through Trust Agreement]
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: State Street Bank and Trust Company, Two International
Place, Boston MA 02110 Attention: Corporate Trust Services Division, or, in
each case, at such other 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
50
<PAGE>
[Pass Through Trust Agreement]
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
--------------
or Special Distribution Date relating to any Certificate of any series shall not
be a Business Day, 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.
51
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[Pass Through Trust Agreement]
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>
[Pass Through Trust Agreement]
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]
STATE STREET BANK AND
TRUST COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
[SEAL]
ATTEST:
Trust Officer
53
<PAGE>
[Pass Through Trust Agreement]
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
__________________
/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>
[Pass Through Trust Agreement]
Pass Through Certificate, Series___________
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 State Street Bank and Trust Company, 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
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<PAGE>
[Pass Through Trust Agreement]
Certificate is registered at the close of business on the 15th day preceding the
Regular 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
A-3
<PAGE>
[Pass Through Trust Agreement]
Certificateholders under the Agreement at any time by the Company and the
Trustee with the 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>
[Pass Through Trust Agreement]
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>
[Pass Through Trust Agreement]
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
GENERAL AMERICAN RAILCAR
CORPORATION II PASS THROUGH
TRUST _______
By: STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:____________________________________
Name:__________________________________
Title:_________________________________
Dated:___________________
A-6
<PAGE>
[Pass Through Trust Agreement]
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:________________________________
Name:______________________________
Title:_____________________________
A-7
<PAGE>
EXHIBIT 4.3
FORM OF
================================================================================
Trust Agreement (GARC II 98-A)
Dated as of September 1, 1998
between
[OWNER PARTICIPANT],
Owner Participant
and
WILMINGTON TRUST COMPANY,
Owner Trustee
Tank Cars and Covered Hopper Cars
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions................................................... 1
Section 1.2 Interpretation................................................ 1
ARTICLE II
AUTHORITY; DECLARATION OF TRUST
Section 2.1 Authority to Execute and Perform Various Documents............ 2
Section 2.2 Declaration of Trust.......................................... 2
ARTICLE III
DISTRIBUTIONS AND PAYMENTS
Section 3.1 Payments to the Indenture Trustee............................. 3
Section 3.2 Payments to the Owner Trustee; Other Parties.................. 3
Section 3.3 Certain Distributions to the Owner Participant................ 3
Section 3.4 Excepted Property............................................. 3
Section 3.5 Method of Payment............................................. 4
ARTICLE IV
CERTAIN DUTIES OF THE OWNER TRUSTEE
Section 4.1 Notice of Certain Events...................................... 4
Section 4.2 Action Upon Instructions...................................... 5
Section 4.3 Indemnification............................................... 5
Section 4.4 No Duties Except as Specified................................. 5
Section 4.5 No Action Except Under Specified Agreements or Instructions... 6
Section 4.6 Tax Returns; Records.......................................... 6
Section 4.7 Absence of Certain Duties..................................... 6
Section 4.8 Furnishing of Documents....................................... 7
ARTICLE V
THE OWNER TRUSTEE
Section 5.1 Acceptance of Trusts and Duties............................... 7
Section 5.2 No Representations or Warranties as to Equipment or Documents. 8
Section 5.3 No Segregation of Moneys; No Interest......................... 8
Section 5.4 Reliance; Advice of Counsel................................... 9
Section 5.5 Not Acting in Individual Capacity............................. 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[Trust Agreement (GARC II 98-A)]
<S> <C>
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Trust Company.............................. 9
Section 6.2 Expenses...................................................... 11
ARTICLE VII
TERMINATION OF TRUST AGREEMENT
Section 7.1 Termination of Trust Agreement................................ 11
Section 7.2 Termination at Option of the Owner Participant................ 12
Section 7.3 Bankruptcy of the Owner Participant........................... 12
ARTICLE VIII
SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
Section 8.1 Resignation of the Owner Trustee; Appointment of Successor.... 12
Section 8.2 Additional and Separate Trustees.............................. 14
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
Section 9.1 Supplements and Amendments.................................... 16
ARTICLE X
MISCELLANEOUS
Section 10.1 No Legal Title to Trust Estate in the Owner Participant....... 16
Section 10.2 Sale of Accepted Equipment by the Owner Trustee is Binding.... 16
Section 10.3 Notices....................................................... 16
Section 10.4 Severability.................................................. 16
Section 10.5 Separate Counterparts......................................... 17
Section 10.6 Waivers, Etc.................................................. 17
Section 10.7 Successors and Assigns........................................ 17
Section 10.8 Transfer of Owner Participant's Interest...................... 17
Section 10.9 Actions of the Owner Participants............................. 17
Section 10.10 Headings; Table of Contents................................... 17
Section 10.11 Governing Law................................................. 18
Section 10.12 Benefit....................................................... 18
Section 10.13 Performance by the Owner Participant.......................... 18
Section 10.14 Agency Relationship for Tax Purposes Only..................... 18
Section 10.15 Limitation on Owner Participant's Liability................... 18
Section 10.16 Identification of Trust....................................... 18
</TABLE>
ii
<PAGE>
TRUST AGREEMENT (GARC II 98-A)
This Trust Agreement (GARC II 98-A) is entered into as of September 1, 1998
between [Owner Participant], a [________________] (the "Owner Participant"), and
Wilmington Trust Company, a Delaware banking corporation (in its individual
capacity, "Trust Company", and otherwise not in its individual capacity but
solely as trustee hereunder, the "Owner Trustee"). In consideration of the
mutual agreements herein contained, the agreements contained in the other
Operative Agreements and the acceptance by Trust Company of the trusts hereby
created, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Unless otherwise defined herein or unless
otherwise required by the context, the capitalized terms used in this Trust
Agreement have the meanings given in Appendix A to the Equipment Lease Agreement
(GARC II 98-A) dated as of September 1, 1998 between the Owner Trustee, as
lessor and General American Railcar Corporation II, a Delaware corporation, as
lessee. For all purposes hereof, the following terms shall have the following
meanings:
"Accepted Equipment" means all of the Accepted Units.
"Accepted Unit" means each Unit that has been purchased by the Owner
Trustee pursuant to the Participation Agreement.
"Actual Knowledge" of Trust Company or the Owner Trustee means actual
knowledge of, including any written notices received by, a responsible officer
in the Corporate Trust Administration department of Trust Company.
Section 1.2 Interpretation. Unless otherwise indicated, references in this
Trust Agreement to Sections, subsections, paragraphs and Appendices are to
Sections, subsections, paragraphs and Appendices of this Trust Agreement. The
terms "hereof," "herein," "hereby," "hereto" and "hereunder" refer to this Trust
Agreement, taken as a whole. References to a given agreement or instrument are
references to such agreement or instrument as originally entered into, as
modified, amended, supplemented and restated through the date as of which such
reference is made.
<PAGE>
[Trust Agreement (GARC II 98-A)]
ARTICLE II
AUTHORITY; DECLARATION OF TRUST
Section 2.1 Authority to Execute and Perform Various Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, (i)
execute and deliver the Participation Agreement, (ii) on the Closing Date, upon
receipt of the confirmation by the Owner Participant pursuant to Section 2.4 of
the Participation Agreement, execute and deliver the Operative Agreements
contemplated by the Participation Agreement to be executed and delivered by the
Owner Trustee on the Closing Date, in the respective forms thereof in which
delivered by the Owner Participant to the Owner Trustee for execution and
delivery, and to take the other actions contemplated to be taken by the Owner
Trustee on the Closing Date in Section 2 of the Participation Agreement, (iii)
execute and deliver any other agreement, instrument or certificate contemplated
by the Operative Agreements as the Owner Participant from time to time may
direct in writing, (iv) subject to the terms of this Trust Agreement, exercise
the rights (upon written instructions received from the Owner Participant) and
perform the duties of the Owner Trustee under each of the documents, agreements,
instruments and certificates referred to in clauses (i) through (iii) of this
Section 2.1 as set forth in such documents, agreements, instruments and
certificates, (v) take any and all actions and make any and all filings as may
be required by the Delaware Business Trust Act, 12 Del. C. Section 3801, et.
seq. (the "Delaware Business Trust Act") and (vi) subject to the terms of this
Trust Agreement, take such other action in connection with the foregoing as the
Owner Participant may from time to time direct in writing.
Section 2.2 Declaration of Trust. Trust Company hereby declares that it
will hold as Owner Trustee all estate, right, title and interest of the Owner
Trustee in and to the Accepted Equipment and the Owner Trustee Agreements, and
any other property contributed by the Owner Participant pursuant to the terms of
any of the Operative Agreements, including without limitation all amounts of
Rent, insurance proceeds and requisition, indemnity or other payments of any
kind, but specifically excluding Excepted Property (collectively, the "Trust
Estate"), upon the trusts set forth herein and for the use and benefit of the
Owner Participant as sole beneficiary, subject, however, to the provisions of
and the Lien created by the Indenture. The parties hereto acknowledge that the
trust created hereunder is intended to be a Delaware Business Trust within the
meaning of the Delaware Business Trust Act, governed by, among other things, the
Delaware Business Trust Act, including, without limitation, Section 3803(a)
thereof which provides for the limited liability of the beneficial owners of a
business trust. Promptly after the execution hereof, Trust Company shall cause
the filing of a Certificate of Trust with the Delaware Secretary of State
pursuant to Section 3810(a) of the Delaware Business Trust Act.
2
<PAGE>
[Trust Agreement (GARC II 98-A)]
ARTICLE III
DISTRIBUTIONS AND PAYMENTS
Section 3.1 Payments to the Indenture Trustee. Until the Lien of the
Indenture shall have been discharged pursuant to the terms thereof, all Basic
Rent, Supplemental Rent, insurance proceeds and requisition or other payments of
any kind (other than payments constituting Excepted Property and other than
payments received from the Indenture Trustee) for or with respect to any
Accepted Unit payable to the Owner Trustee shall be payable directly to the
Indenture Trustee for distribution in accordance with the provisions of the
Indenture, and if any such amount or payment is received by the Owner Trustee,
such amount or payment upon receipt thereof shall be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind for distribution in
accordance with the provisions of the Indenture.
Section 3.2 Payments to the Owner Trustee; Other Parties. Any payment of
the type referred to in Section 3.1 (other than payments constituting Excepted
Property) received by the Owner Trustee after the Indenture shall have been
discharged pursuant to the terms thereof, any payment received from the
Indenture Trustee other than as specified in Section 3.4 and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made herein shall be distributed forthwith upon receipt by
the Owner Trustee in the following order of priority: first, so much of such
payment as shall be required to reimburse the Owner Trustee for any expenses not
otherwise reimbursed as to which the Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by the Owner
Trustee; second, so much of the remainder for which provision as to the
application thereof is contained in the Lease, any of the other Operative
Agreements or any of the other Owner Trustee Agreements shall be applied and
distributed in accordance with the terms of the Lease, such other Operative
Agreement or such other Owner Trustee Agreement, as the case may be; and third,
the balance, if any, shall be paid to the Owner Participant.
Section 3.3 Certain Distributions to the Owner Participant. All amounts
from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the terms of the Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant.
Section 3.4 Excepted Property. Notwithstanding anything to the contrary
contained in this Trust Agreement, any amounts or payments constituting Excepted
Property received by the Owner Trustee shall be paid promptly by the Owner
Trustee to the Person to whom such amounts or payments are payable pursuant to
the terms of the Operative Agreements.
3
<PAGE>
[Trust Agreement (GARC II 98-A)]
Section 3.5 Method of Payment.
(a) All amounts payable to the Owner Participant or to the Indenture
Trustee pursuant to this Trust Agreement shall be paid by the Owner Trustee, if
to the Owner Participant, by transferring such amount in immediately available
funds to the account of the Owner Participant specified in Schedule 2 to the
Participation Agreement or, if to the Indenture Trustee, in the manner specified
in the Indenture. The Owner Trustee shall pay such amounts on the day received
if received in immediately available funds, or on the next succeeding Business
Day following receipt of immediately available funds if the funds to be so paid
shall not have been received in immediately available funds by the Owner Trustee
by [1:00 p.m. Chicago, Illinois] time, provided that the Owner Trustee shall use
reasonable efforts to invest overnight in Specified Investments at the direction
and for the benefit of the Owner Participant all funds received by it at or
later than [1:00 p.m. Chicago, Illinois] time.
(b) Notwithstanding the foregoing, the Owner Trustee will pay, if so
requested by the Owner Participant in writing, any or all amounts in immediately
available funds payable by the Owner Trustee hereunder to the Owner Participant
either (i) by crediting such amount or amounts to an account or accounts
maintained by the Owner Participant with Trust Company, (ii) by payment to such
account at such financial institution as the Owner Participant may from time to
time direct in writing or (iii) by mailing an official bank check or checks in
such amount or amounts payable to the Owner Participant at such address as the
Owner Participant may from time to time designate in writing.
ARTICLE IV
CERTAIN DUTIES OF THE OWNER TRUSTEE
Section 4.1 Notice of Certain Events. In the event that the Owner Trustee
shall have Actual Knowledge of any Lease Default, Lease Event of Default,
Indenture Default, Indenture Event of Default or Event of Loss, the Owner
Trustee shall give prompt telephonic notice thereof (promptly confirmed in
writing) to the Owner Participant, the Lessee and the Indenture Trustee unless
such Lease Default, Lease Event of Default, Indenture Default, Indenture Event
of Default or Event of Loss, as the case may be, has been remedied before the
giving of such notice and the Owner Trustee has Actual Knowledge that such Lease
Default, Lease Event of Default, Indenture Default, Indenture Event of Default
or Event of Loss has been so remedied. Subject to the terms of Section 4.3, the
Owner Trustee shall take or refrain from taking such action with respect
thereto, not inconsistent with the provisions of the Operative Agreements, with
respect thereto as the Owner Trustee shall be instructed in writing by the Owner
Participant. If the Owner Trustee shall have given the Owner Participant notice
of any event and shall not have received written instructions as provided above
within 30 days after mailing notice of such event to the Owner Participant, the
Owner Trustee shall take no action in respect of such event until instructed by
the Owner Participant.
4
<PAGE>
[Trust Agreement (GARC II 98-A)]
Section 4.2 Action Upon Instructions. Subject to the terms of Sections 4.1
and 4.3, upon the written instructions at any time and from time to time of the
Owner Participant, the Owner Trustee will take such of the following actions as
may be specified in such instructions: (i) give such notice or direction or
exercise such right, remedy or power under the Owner Trustee Agreements with
respect thereto or to any Accepted Equipment, including, without limitation, the
right to transfer, assign or convey the Owner Trustee's interest in the Owner
Trustee Agreements or any Accepted Unit, or take such other action with respect
to the Owner Trustee Agreements or any Accepted Unit as shall be specified in
such instructions; and (ii) after the expiration or earlier termination of the
Lease with respect to any Accepted Unit, convey all of the Owner Trustee's
right, title and interest in and to such Accepted Unit to the Owner Participant
or for such amount, on such terms and to such purchaser or purchasers as shall
be designated in such instructions, or net lease such Accepted Unit as
designated in such instructions; provided, however, that if such instructions
have not been delivered to the Owner Trustee prior to the expiration of one year
following such expiration or earlier termination of the Lease, the Owner Trustee
shall transfer title to such right, title and interest to the Owner Participant.
Section 4.3 Indemnification. The Owner Trustee shall not be required to
take or refrain from taking any action under Section 4.1 or 4.2 (other than the
actions specified in the first sentence of Sections 3.1 and 4.1 and the last
sentence of Section 4.4) unless the Trust Company shall have been indemnified,
in manner and form reasonably satisfactory to the Trust Company, against any
liability, fee, cost or expense (including, without limitation, reasonable
attorneys' fees and expenses) which may be incurred or charged in connection
therewith, other than any such liability, fee, cost or expense which results
from the willful misconduct or gross negligence of the Trust Company. The Owner
Trustee shall not be required to take any action under any Operative Agreement
or any Owner Trustee Agreement (other than the actions specified in the first
sentence of Section 4.1) if the Owner Trustee reasonably shall determine, or
shall have been advised by counsel, that such action is likely to result in
unindemnified personal liability to the Trust Company or is contrary to the
terms hereof or of any documents contemplated hereby to which the Owner Trustee
is a party, or is otherwise contrary to law, and the Owner Trustee in such case
shall deliver promptly to the Owner Participant written notice of the basis of
its refusal to act.
Section 4.4 No Duties Except as Specified. The Owner Trustee shall not have
any duty or obligation to manage, control, use, make any payment in respect of,
register, record, insure, inspect, sell, dispose of or otherwise deal with any
Accepted Unit or any other part of the Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any Owner Trustee
Agreement or any of the other Operative Agreements, except as expressly provided
by the terms of this Trust Agreement, the Indenture or the Owner Trustee
Agreements or in written instructions from the Owner Participant received
pursuant to Section 4.1 or 4.2; and no implied duties or obligations shall be
read into this Trust Agreement against the Owner Trustee. Notwithstanding and
without limiting the foregoing, Trust Company agrees that it will promptly
(without any right to indemnification hereunder) take all action necessary to
discharge
5
<PAGE>
[Trust Agreement (GARC II 98-A)]
any Lessor's Lien attributable to Trust Company on any part of the Trust Estate
or Indenture Estate. Trust Company agrees to indemnify, protect, save and keep
harmless the Owner Participant for, from and against any loss, cost or expense
(including reasonable legal fees and expenses) incurred by the Owner Participant
as a result of the imposition or enforcement of any such Lessor's Lien against
the Accepted Units, any interest herein or on the Trust Estate or the Indenture
Estate resulting from any Lessor's Lien attributable to Trust Company.
Section 4.5 No Action Except Under Specified Agreements or Instructions.
The Owner Trustee shall have no right, power or authority to, and the Owner
Trustee agrees that it will not, manage, control, use, sell, dispose of or
otherwise deal with any Accepted Unit or any other part of the Trust Estate
except as (i) expressly provided by the terms of this Trust Agreement, (ii)
expressly required by the terms of any Owner Trustee Agreement or (iii)
expressly directed or authorized in written instructions from the Owner
Participant pursuant to Section 4.1 or 4.2.
Section 4.6 Tax Returns; Records. The Owner Trustee shall be responsible
for the keeping of all appropriate books and records relating to the receipt and
disbursement of all money which it may receive or be entitled to hereunder or
under any agreement contemplated hereby. The Owner Trustee agrees at the expense
of the Lessee to file an application with the Internal Revenue Service for a
taxpayer identification number with respect to the trust created by this Trust
Agreement. The Owner Participant shall be responsible for causing to be prepared
all income tax returns required to be filed by the Owner Participant. The Owner
Trustee shall be responsible for causing to be prepared, at the request of the
Owner Participant and the expense of the Lessee, all income tax returns required
to be filed with respect to the trusts created hereby and shall execute and file
such returns. The Owner Trustee and the Owner Participant, upon request, will
furnish each other with all such information as may be reasonably required in
connection with the preparation of such tax returns; provided that the Owner
Trustee shall send a completed copy of such return to the Owner Participant not
more than 60 nor less than 30 days prior to the due date of the return (provided
that the Owner Trustee shall have timely received all necessary information to
complete and deliver to the Owner Participant such return). The Owner Trustee
shall keep copies of all returns delivered to or filed by it.
Section 4.7 Absence of Certain Duties. Except in accordance with written
instructions furnished pursuant to Sections 4.1 and 4.2, and except as expressly
provided in clause (vi) of Section 2.1 or in any Owner Trustee Agreement, and
without limiting the generality of Section 4.4, the Owner Trustee shall not have
any duty to (i) file, record or deposit any Operative Agreement or Owner Trustee
Agreement, including, without limitation, this Trust Agreement, or any other
document, or to maintain any such filing, recording or deposit, or to refile,
re-record or redeposit any such document, except that the Owner Trustee shall,
upon written request by the Lessee or the Owner Participant, sign and file such
documents as Lessee or the Owner Participant prepares as necessary to maintain
the filing and recordation for the Lease, any Lease Supplement, the Indenture
and any Indenture Supplement in the name of the Owner Trustee with the STB
6
<PAGE>
[Trust Agreement (GARC II 98-A)]
pursuant to 49 U.S.C. (S)11301 of the Act or the Registrar General of Canada
pursuant to Section 90 of the Railway Act of Canada, or as otherwise required
under applicable law, and to the extent that such documents for that purpose are
supplied by the Lessee pursuant to any of the Operative Agreements, timely
submit any and all such documents and reports with respect to the Accepted Units
which may from time to time be required by the STB, the AAR, or any other
authority having jurisdiction, (ii) obtain insurance with respect to any
Accepted Unit or to effect or maintain any such insurance, other than to receive
and forward to the Owner Participant any notices, policies, certificates or
binders furnished to the Owner Trustee by the Lessee or its insurance brokers,
(iii) maintain or mark any Accepted Unit, (iv) pay or discharge any tax,
assessment or other governmental charge, or any Lien or encumbrance of any kind,
owing with respect to or assessed or levied against any part of the Trust
Estate, except as provided in Sections 4.4 or 5.1, and Section 6.3 of the
Participation Agreement (v) confirm, verify, investigate or inquire into the
failure to receive any reports or financial statements of the Lessee, (vi)
inspect the Accepted Equipment at any time, or ascertain or inquire as to the
performance or observance of any of the covenants of the Lessee or any other
Person under any Operative Agreement or Owner Trustee Agreement with respect to
any Accepted Unit or any other part of the Trust Estate or (vii) manage,
control, use, sell, dispose of or otherwise deal with any Accepted Unit or any
other part of the Trust Estate, or any part thereof, except as provided in
clauses (i), (ii) and (iii) of Section 4.5.
Section 4.8 Furnishing of Documents. The Owner Trustee will furnish to the
Owner Participant, promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, opinions, certificates, financial
statements and any other instruments furnished to the Owner Trustee under any
Operative Agreement or any Owner Trustee Agreement, unless the Owner Trustee
shall have determined that the same already has been furnished to the Owner
Participant.
ARTICLE V
THE OWNER TRUSTEE
Section 5.1 Acceptance of Trusts and Duties. Trust Company accepts the
trusts hereby created and agrees to perform the same on the terms of this Trust
Agreement. Trust Company also agrees to disburse all moneys actually received by
it constituting part of the Trust Estate pursuant to the terms of this Trust
Agreement. Trust Company shall not be answerable or accountable under any
circumstances except (i) for its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of the Owner
Trustee in violation of Section 4.5), (ii) in the case of the breach or
inaccuracy of any of its representations or warranties contained in any
Operative Agreement given expressly in its individual capacity and not in its
capacity as a trustee hereunder, (iii) as arising from its failure to perform
obligations expressly undertaken by it in the penultimate and last sentences of
Section 4.4 hereof or expressly undertaken by it in its individual capacity
under the Participation Agreement, (iv) for any Taxes based on or measured by
any fees, commissions or compensation
7
<PAGE>
[Trust Agreement (GARC II 98-A)]
received by it for acting as Owner Trustee in connection with any of the
transactions contemplated by the Operative Agreements or (v) for its failure to
disburse or invest funds actually received by it in accordance with the terms of
the Operative Agreements.
Section 5.2 No Representations or Warranties as to Equipment or Documents.
(a) NEITHER TRUST COMPANY NOR THE OWNER TRUSTEE MAKES ANY
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN,
OPERATION OR CONDITION OF ANY UNIT OR ANY PART THEREOF, THE MERCHANTABILITY
THEREOF OR THE FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO ANY UNIT OR
ANY PART THEREOF, THE QUALITY OF THE MATERIALS OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO SPECIFICATIONS, OR THE PRESENCE OR ABSENCE OF ANY LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, except that Trust Company hereby
represents and warrants that (i) on the Closing Date for such Accepted Unit, the
Owner Trustee shall have received whatever title thereto was conveyed to it by
the Lessee and (ii) while a part of the Trust Estate, such Accepted Unit shall
be free and clear of Lessor's Liens attributable to it.
(b) Neither Trust Company nor the Owner Trustee makes any
representation or warranty as to the validity or enforceability of any Operative
Agreement, or as to the correctness of any statement therein, except to the
extent that any such representation, warranty or statement is expressly made
therein or in any written certificate delivered pursuant thereto by the Owner
Trustee or Trust Company and except that Trust Company hereby represents and
warrants that this Trust Agreement has been duly executed and delivered by Trust
Company and each of the Owner Trustee Agreements has been or will be executed
and delivered by officers of the Owner Trustee who are or will be duly
authorized to execute and deliver documents on its behalf, and that each of this
Trust Agreement and each of the other Owner Trustee Agreements constitutes
(assuming the due authorization, execution, and delivery of this Trust Agreement
and each such other agreement by the other parties thereto) the legal, valid and
binding obligation of the Trust Company (to the extent entered into by it)
enforceable against it in accordance with its terms except as limited by
bankruptcy, insolvency, reorganization or other similar laws or equitable
principles of general application to or affecting the enforcement of creditors
rights generally from time to time in effect.
Section 5.3 No Segregation of Moneys; No Interest. Except as required by
Section 3.5 of the Lease or Section 2.4 of the Participation Agreement, moneys
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent required by law, and such moneys may be deposited under
such general conditions as may be prescribed by law, and the Owner Trustee shall
not be liable for any interest thereon.
Section 5.4 Reliance; Advice of Counsel. The Owner Trustee shall not incur
any liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent,
8
<PAGE>
[Trust Agreement (GARC II 98-A)]
order, certificate, report, opinion, bond or other document or paper reasonably
believed by it in good faith to be genuine and reasonably believed by it in good
faith to be signed by the proper party or parties. Any request, direction, order
or demand of the Owner Participant or the Lessee mentioned herein or in any
other Operative Agreement to which the Owner Trustee is a party shall be
sufficiently evidenced by an Officer's Certificate of the Owner Participant or
the Lessee, as the case may be. The Owner Trustee may accept in good faith a
certified copy of a resolution of the Board of Directors or other governing body
of any corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the manner of ascertainment of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on an
Officer's Certificate of the relevant party as to such fact or matter, and such
Officer's Certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
In the administration of the trusts hereunder, the Owner Trustee may execute any
of the trusts or powers hereof and perform its powers and duties hereunder
directly or through agents or attorneys, and may consult with counsel,
accountants and other skilled persons to be selected and employed by it (other
than persons regularly employed by it), and the Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the advice or opinion within the scope of the competence of any such
counsel, accountants or other skilled persons and not contrary to this Trust
Agreement, except for the use of due care in the appointment of counsel,
accountants or other skilled persons.
Section 5.5 Not Acting in Individual Capacity. Trust Company is entering
into this Trust Agreement and accepting the trust created hereby in its
individual capacity. Otherwise, except as provided in this Trust Agreement and
in the other Operative Agreements, Trust Company agrees to act solely as trustee
hereunder and not in its individual capacity; and all Persons having any claim
against the Owner Trustee by reason of the transactions contemplated by the
Operative Agreements or the Owner Trustee Agreements shall look only to the
Trust Estate (or a part thereof, as the case may be) for payment or satisfaction
thereof, except as specifically provided in this Trust Agreement and except to
the extent the Owner Trustee otherwise shall agree in any Owner Trustee
Agreement.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Trust Company. The Owner Participant agrees
to assume liability for, and to indemnify and hold harmless Trust Company
against and from any and all liabilities, obligations, losses, damages, taxes
(excluding any taxes, fees or other charges payable by Trust Company or measured
by any compensation received by Trust Company for its services hereunder),
penalties, claims, actions, suits, proceedings, costs, expenses and
disbursements of any kind and nature whatsoever, including, without limitation,
the reasonable fees and expenses of counsel (collectively, "Trust Expenses")
which may be imposed on, incurred by or asserted against Trust Company (whether
or not also indemnified by any other
9
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[Trust Agreement (GARC II 98-A)]
Person (provided, however, that to the extent Trust Company shall have actually
received any payment in the nature of an indemnity payment from any such other
Person relating to a claim hereunder, Trust Company shall not be entitled to the
amount of any such payment pursuant to this Section 6.1)) in any way relating to
or arising out of (i) the administration of the Trust Estate or the action or
inaction of Trust Company hereunder or under the other Operative Agreements,
(ii) any Accepted Equipment or any part thereof, (iii) the Operative Agreements
or any of them, or the enforcement by Trust Company of any of its rights under
the Operative Agreements, or (iv) the design, manufacture, financing,
refinancing, installation, acceptance, rejection, ownership, delivery,
nondelivery, lease, sublease, possession, control, use, operation, condition,
modification, servicing, maintenance, repair, improvement, replacement, sale,
return or other disposition of the Accepted Equipment, any Accepted Unit or any
part thereof including, without limitation, (A) any inadequacy or deficiency or
defect therein, including latent defects, whether or not discoverable or any
claim based on negligence or arising from any violation of law or for strict
liability in tort or any claim for patent, trademark or copyright tort or any
claim for patent, trademark or copyright infringement, and (B) any loss or
damage to property or the environment or injury or death to any Person; except
only that the Owner Participant shall not be required to indemnify Trust Company
for Trust Expenses arising or resulting from any of the matters described in
clauses (i) through (v) of the last sentence of Section 5.1; provided that the
Owner Participant shall be liable under this Section 6.1 only to the extent that
the Trust Company is indemnified by the Lessee pursuant to Section 7 of the
Participation Agreement (disregarding for purposes of this Section 6.1 the
limitations to Lessee's indemnification obligations set forth in Sections
7.2(d)(i), 7.2(d)(ii), 7.2(d)(iii) and (iv) (to the extent relating to any such
transfer by the Owner Participant or transfer by the Owner Trustee at the
direction of the Owner Participant), 7.1(c)(ii) (to the extent relating to any
return of the Equipment to the Owner Participant), 7.1(c)(iii) and (iv) (to the
extent relating to any such transfer by the Owner Participant or transfer by the
Owner Trustee at the direction of the Owner Participant), 7.1(c)(xii) (to the
extent any such failure is attributable to the Owner Participant), 7.1(c)(xiii),
7.1(c)(xx) (to the extent any such amendment, supplement, waiver or consent is
entered into by the Trust Company or the Owner Trustee at the request, or with
the consent of the Owner Participant) and 7.2(d)(vi) (when the Owner Trustee is
acting on instructions from the Owner Participant) of the Participation
Agreement); provided, further, that none of the foregoing limitations shall
relieve the Owner Participant of its obligations to indemnify the Trust Company
for any Trust Expenses which are attributable to any action or inaction of the
Owner Participant or any action or inaction of the Owner Trustee taken at the
direction of the Owner Participant); provided, further, that before asserting
its right to indemnification pursuant to this Section 6.1, the Trust Company
shall first demand its corresponding right to indemnification, if any, pursuant
to Section 7 of the Participation Agreement, and the Owner Participant shall
have the right to pursue any such remedies against the Lessee which are not
pursued by the Trust Company. The indemnities contained in this Section 6.1
shall survive the termination of this Trust Agreement. To secure the foregoing
indemnities, the Owner Trustee shall be entitled to apply any amount otherwise
distributable to the Owner Participant pursuant to Section 3.2 against any such
indemnity which has not been paid when due. The indemnities contained in this
Section 6.1 extend to Trust
10
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[Trust Agreement (GARC II 98-A)]
Company only and shall not be construed as indemnities of the Trust Estate. The
payor of any indemnity under this Section 6.1 shall be subrogated to any right
of the Person indemnified in respect of the matter as to which such indemnity
was paid.
Section 6.2 Expenses. The Owner Participant shall pay, or reimburse the
Owner Trustee for, all reasonable expenses of the Owner Trustee, including,
without limitation, the reasonable expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and duties under the
Operative Agreements, unless and to the extent that the Owner Trustee otherwise
receives payment or reimbursement pursuant to any Operative Agreement, whether
or not the transactions contemplated hereby are consummated; provided that the
Owner Participant shall have no obligation hereunder to the extent Lessee is not
obligated to pay such amounts pursuant to Section 2.5 of the Participation
Agreement. The Owner Trustee agrees to look first to the Lessee for such payment
pursuant to Section 2.5 of the Participation Agreement. Except as provided
herein, the Owner Trustee and Trust Company shall have no right to compensation
with respect to the transactions contemplated by the Operative Agreements.
ARTICLE VII
TERMINATION OF TRUST AGREEMENT
Section 7.1 Termination of Trust Agreement.
(a) Subject to the terms of the Participation Agreement, the Indenture
and Section 7.2, this Trust Agreement and the trusts created hereby shall
terminate and the Trust Estate shall be distributed to the Owner Participant,
and this Trust Agreement shall be of no further force or effect, upon the
earlier of (i) the sale or other final disposition by the Owner Trustee of all
property constituting part of the Trust Estate and the final distribution by the
Owner Trustee of all moneys or other property or proceeds constituting part of
the Trust Estate in accordance with the terms of Article III and (ii) twenty-one
(21) years less one day after the death of the last survivor of all of the
descendants living on the date of this Trust Agreement of Joseph P. Kennedy, the
late ambassador of the United States of America to Great Britain, but if any
rights, privileges or options hereunder shall be or become valid under
applicable law for a period subsequent to the twenty-first anniversary of the
death of such last survivor (or, without limiting the generality of the
foregoing, if legislation shall become effective providing for the validity or
permitting the effective grant of such rights, privileges and options for a
period in gross exceeding the period for which such rights, privileges and
options are hereinabove stated to extend and be valid), then such rights,
privileges or options shall not terminate as aforesaid but shall extend to and
continue in effect, but only if such nontermination and extension shall then be
valid under applicable law, until such time as the same shall cease to be valid
under applicable law.
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[Trust Agreement (GARC II 98-A)]
(b) Except as expressly provided in Section 7.2, the Owner Participant
shall not be entitled to revoke or terminate this Trust Agreement or the trust
created hereby. Except as otherwise provided herein, the Owner Participant may
not withdraw any of the Trust Estate until the Lien of the Indenture on the
Trust Estate shall have been discharged pursuant to the terms thereof.
Section 7.2 Termination at Option of the Owner Participant. The provisions
of Section 7.1 notwithstanding, this Trust Agreement and the trusts created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Trust Agreement shall be of no further force and effect,
upon the election of the Owner Participant by notice to the Owner Trustee to
revoke the trusts created hereby; provided that, in addition to the giving of
such notice, the Owner Participant, with the cooperation of the Owner Trustee,
shall execute and deliver such written agreements and instruments and take such
actions as shall be necessary in order to cause the succession of the Owner
Participant to all the rights, title, interests, duties and liabilities of the
Owner Trustee under the Operative Agreements (other than obligations
attributable to any gross negligence or willful misconduct of Trust Company or
any breach by the Owner Trustee of its obligations under the Operative
Agreements); provided, however, that until the Lien of the Indenture on the
Trust Estate shall have been discharged pursuant to the terms thereof, the Owner
Participant may not revoke such trusts without the consent of the Indenture
Trustee. The written agreements and instruments referred to in the preceding
sentence shall be reasonably satisfactory in form and substance to the Owner
Trustee and shall release the Owner Trustee from all further obligations of the
Owner Trustee hereunder and under the agreements and other instruments mentioned
in the preceding sentence.
Section 7.3 Bankruptcy of the Owner Participant. The bankruptcy, insolvency
or other similar incapacity of the Owner Participant shall not (i) operate to
terminate this Trust Agreement, (ii) entitle the Owner Participant's legal
representatives to claim an accounting or to take any action in any court for a
partition or winding up of the Trust Estate or (iii) otherwise affect the
rights, obligations and liabilities of the parties hereto.
ARTICLE VII
SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
AND SEPARATE OWNER TRUSTEES
Section 8.1 Resignation of the Owner Trustee; Appointment of Successor.
(a) The Owner Trustee may resign as the Owner Trustee at any time
without cause by giving at least sixty (60) days' prior written notice to the
Owner Participant, the Indenture Trustee and the Lessee, such resignation to be
effective on the acceptance of appointment by a successor to the Owner Trustee
under paragraph (b) of this Section 8.1. In addition, the Owner Participant at
any time may remove the Owner Trustee without cause by an instrument in writing
delivered to the Owner Trustee, the Indenture Trustee and the Lessee, such
12
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[Trust Agreement (GARC II 98-A)]
removal to be effective upon the acceptance of appointment by a successor to the
Owner Trustee under paragraph (b) of this Section 8.1. In case of the
resignation or removal of the Owner Trustee, the Owner Participant may appoint a
successor to the Owner Trustee by an instrument in writing, signed by the Owner
Participant. If a successor to the Owner Trustee shall not have been appointed
within sixty (60) days after the giving of written notice of such resignation or
the delivery of the written instrument with respect to such removal, the Owner
Trustee or the Owner Participant may apply to any court of competent
jurisdiction to appoint a successor to the Owner Trustee to act until such time,
if any, as a successor shall have been appointed as above provided in this
Section 8.1. Any successor to the Owner Trustee so appointed by such court shall
immediately and without further act be superseded by any successor to the Owner
Trustee appointed as above provided in this Section 8.1.
(b) Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee an instrument accepting such
appointment and shall give the Owner Participant, the Indenture Trustee and
Lessee written notice of such acceptance. Upon the execution and delivery of
such instrument, such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named a trustee herein; provided, however, that upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers,
duties and trusts of such predecessor trustee as the Owner Trustee hereunder,
and such predecessor trustee shall duly assign, transfer, deliver and pay over
to such successor Owner Trustee all moneys or other property then held by such
predecessor trustee as the Owner Trustee upon the trusts herein expressed. Upon
the appointment of any successor Owner Trustee hereunder, the predecessor Owner
Trustee, pursuant to written instructions of the Owner Participant, will execute
all documents and take all reasonable action within its control in order to
cause title to the Trust Estate to be transferred to the successor Owner
Trustee.
(c) Any successor Owner Trustee, however appointed, shall be a bank or
trust company incorporated and doing business within the United States of
America (and which bank or trust company shall satisfy any and all requirements
applicable to a "trustee" under the Delaware Business Trust Act) and having a
combined capital and surplus of at least $100,000,000, if there be such an
institution willing, able and legally qualified to perform the duties of the
Owner Trustee hereunder upon reasonable or customary terms.
(d) Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Owner Trustee shall be
a party, or any corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall be, subject to
compliance with the terms of paragraph (c) of this Section 8.1, the Owner
Trustee
13
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[Trust Agreement (GARC II 98-A)]
under this Trust Agreement without further act; provided, that such corporation
shall in no event be the Indenture Trustee or the Collateral Agent.
Section 8.2 Additional and Separate Trustees.
(a) If the Owner Trustee or the Owner Participant shall conclude that
it is necessary or prudent in order to conform to the law of any jurisdiction in
which all or any part of the Trust Estate shall be situated, or to make or
defend any claim or bring or defend any suit with respect to the Trust Estate or
any Operative Agreement, or pursuant to advice of counsel satisfactory to it, or
if the Owner Trustee shall have been instructed to do so by the Owner
Participant, the Owner Trustee shall appoint another Person to act as additional
or separate trustee for all or any part of the Trust Estate with such property,
title, right, power or duty of the Owner Trustee as the Owner Trustee and the
Owner Participant may determine. In case any such additional trustee or separate
trustee shall resign or be removed, all the assets, property, rights, powers or
duties of such additional trustee or separate trustee, as the case may be, so
far as permitted by any applicable law, shall vest in and be exercised by a new
successor to such additional trustee, appointed in the manner otherwise provided
in this Trust Agreement.
(b) In the event that either the Owner Participant or the Owner
Trustee shall determine to appoint another Person as additional or separate
trustee, the Owner Trustee and the Owner Participant shall execute and deliver
an agreement supplemental hereto, and all other instruments and agreements
necessary or proper to constitute another bank or trust company, or one or more
Persons approved by the Owner Trustee and the Owner Participant, either to act
as an additional trustee or trustees of all or any part of the Trust Estate,
jointly with the Owner Trustee, or to act as separate trustee or trustees of all
or any part of the Trust Estate, in any such case with such powers of the Owner
Trustee as may be provided in such agreement supplemental hereto, and to vest in
such bank, trust company or Person as such additional trustee or separate
trustee, as the case may be, any property, title, right or power of the Owner
Trustee deemed necessary or proper by the Owner Trustee or the Owner
Participant, subject to the remaining provisions of this Section 8.2. The Owner
Trustee may execute, deliver and perform any deed, conveyance, assignment or
other instrument in writing as may be required by an additional trustee or
separate trustee for more fully and certainly vesting in and confirming to such
Person any property, title, right or power which, by the terms of such agreement
supplemental hereto, are expressed to be conveyed or conferred to or upon such
additional trustee or separate trustee, and the Owner Participant shall, upon
the Owner Trustee's request, join therein and execute, acknowledge and deliver
the same.
(c) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed to act and the Owner Trustee shall
act, subject to the following provisions and conditions:
14
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[Trust Agreement (GARC II 98-A)]
(i) all powers, duties, obligations and rights conferred or
imposed upon the Owner Trustee in respect of the receipt, custody,
investment and payment of moneys, shall be exercised solely by the Owner
Trustee;
(ii) all other rights, powers, duties, and obligations conferred
or imposed upon the Owner Trustee shall be conferred or imposed upon and
exercised or performed by the Owner Trustee and such additional trustee or
trustees and separate trustee or trustees jointly, except to the extent
that under any law of the jurisdiction in which any particular act or acts
are to be performed by the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
Estate in any such jurisdiction) shall be exercised and performed by such
additional trustee or trustees or separate trustee or trustees;
(iii) no power hereby given to, or which may be exercised by, any
such additional trustee or separate trustee shall be exercised hereunder by
such additional trustee or separate trustee except jointly with, or with
the consent of, the Owner Trustee; and
(iv) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder.
(d) If at any time the Owner Trustee and the Owner Participant shall
deem it no longer necessary or prudent in order to conform to any applicable law
or shall be advised by its counsel that it is no longer necessary or prudent in
the interest of the Owner Trustee and the Owner Participant to maintain the
appointment of such additional or separate trustee as provided herein, the Owner
Trustee and the Owner Participant shall execute and deliver any agreement
supplemental hereto and all other instruments and agreements necessary or proper
to remove any such additional or separate trustee. The Owner Participant, at any
time, by an instrument in writing may remove any separate trustee or additional
trustee.
(e) Any additional trustee or separate trustee may at any time by an
instrument in writing constitute the Owner Trustee its agent or attorney-in-fact
with full power and authority, to the extent which may be authorized by
applicable law, to do all acts and things and exercise all discretion which it
is authorized or permitted to do or exercise, for and in its behalf and in its
name. In case any such additional trustee or separate trustee shall die, become
incapable of acting, resign or be removed, all the assets, property, rights,
powers, trusts, duties and obligations of such additional trustee or separate
trustee, as the case may be, so far as permitted by law, shall vest in and be
exercised by the Owner Trustee without necessity of any act by any party and
without the appointment of a new successor to such additional or separate
trustee, unless and until a successor is appointed in the manner provided in
this Section 8.2.
15
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[Trust Agreement (GARC II 98-A)]
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
Section 9.1 Supplements and Amendments. Subject to Section 9.5 of the
Indenture, at the written request of the Owner Participant (and subject to the
provisions of Sections 6.5 and 6.6 of the Participation Agreement), this Trust
Agreement and each other Owner Trustee Agreement shall be amended by a written
instrument signed by Trust Company and the Owner Participant; provided, however,
if in the reasonable opinion of Trust Company any instrument required to be so
executed adversely affects any right, duty or liability of, or immunity or
indemnity in favor of, Trust Company under this Trust Agreement or any of the
documents contemplated hereby to which it is a party, or would cause or result
in any conflict with or breach of any term, condition or provision of, or
default under, its charter documents or by-laws, Trust Company in its reasonable
discretion may decline to execute such instrument, unless the Trust Company is
indemnified therefor under Section 4.3, as determined by the Trust Company in
its reasonable discretion.
ARTICLE X
MISCELLANEOUS
Section 10.1 No Legal Title to Trust Estate in the Owner Participant. The
Owner Participant shall not have legal title to any part of the Trust Estate. No
transfer, by operation of law or otherwise, of any right, title and interest of
the Owner Participant in and to the Trust Estate or hereunder, or insolvency,
dissolution or other termination of the Owner Participant, shall operate to
terminate this Trust Agreement or the trusts created hereby or entitle any
successor or transferee to an accounting or to the transfer to it of legal title
to any part of the Trust Estate.
Section 10.2 Sale of Accepted Equipment by the Owner Trustee is Binding.
Any sale, transfer or other conveyance of any Accepted Unit or part thereof by
the Owner Trustee made pursuant to the terms of this Trust Agreement or the
Lease shall bind the Owner Participant and shall be effective to transfer or
convey all right, title and interest of the Owner Trustee and the Owner
Participant in and to such Accepted Unit or part thereof, as the case may be. No
purchaser or other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such sale or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
Section 10.3 Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all notices hereunder shall be given as provided in Section
10.4 of the Participation Agreement.
Section 10.4 Severability. If any term or provision of this Trust Agreement
is invalid or unenforceable in any jurisdiction, such term or provision shall be
ineffective to the extent of such
16
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[Trust Agreement (GARC II 98-A)]
invalidity or unenforceability without invalidating or rendering unenforceable
any remaining terms and provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.5 Separate Counterparts. This Trust Agreement may be executed by
the parties hereto in any number of counterparts and by the parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, and all of which shall together constitute but one and the same
instrument.
Section 10.6 Waivers, Etc. No term or provision hereof may be changed,
waived, discharged or terminated orally, but may be changed, waived, discharged
or terminated by an instrument in writing, and any waiver of the terms hereof
shall be effective only in the specific instance and for the specific purpose
given.
Section 10.7 Successors and Assigns. This Trust Agreement, including the
terms and provisions hereof, shall be binding upon the Owner Participant and
Trust Company or the Owner Trustee, whichever is applicable pursuant to the
terms hereof, and their respective successors and assigns, and inure to the
benefit of the Owner Participant and Trust Company or the Owner Trustee,
whichever is applicable pursuant to the terms hereof, and their respective
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by the Owner
Participant shall bind the successors and assigns of the Owner Participant.
Section 10.8 Transfer of Owner Participant's Interest. All provisions of
Section 6.1 of the Participation Agreement shall (with the same force and effect
as if set forth in full, mutatis mutandis, in this Section 10.8) be applicable
to any assignment, conveyance or other transfer by the Owner Participant of any
of its right, title or interest in and to the Trust Estate or this Trust
Agreement or any other Operative Agreement.
Section 10.9 Actions of the Owner Participants. If at any time prior to the
termination of this Trust Agreement there is more than one Owner Participant,
then during such time, if any action is required to be taken by the Owner
Participant, such action shall be taken by or on behalf of all Owner
Participants and whenever any direction, authorization, approval, consent,
instruction or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon such percentage agreement of
the Owner Participants as all Owner Participants may instruct the Owner Trustee.
Section 10.10 Headings; Table of Contents. The division of this Trust
Agreement into sections, the provision of a table of contents and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.
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[Trust Agreement (GARC II 98-A)]
Section 10.11 Governing Law. The terms of this Trust Agreement and the
rights and obligations of the parties hereto shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such State without reference to any
choice-of-law or conflicts-of-laws rules which might lead to the application of
the laws of any other jurisdiction.
Section 10.12 Benefit. Nothing herein, whether express or implied, shall be
construed to give any Person other than the Owner Trustee, the Indenture Trustee
and the Owner Participant any legal or equitable right, remedy or claim under or
in respect of this Trust Agreement.
Section 10.13 Performance by the Owner Participant. Any obligation of Trust
Company or the Owner Trustee hereunder or under any other Operative Agreement or
other document contemplated hereby, may be performed by the Owner Participant
and any such performance shall not be construed as a revocation of the trusts
created hereby.
Section 10.14 Agency Relationship for Tax Purposes Only. The Owner
Participant and the Owner Trustee acknowledge and agree that the purpose of the
trust created hereunder is to vest legal title to the Trust Estate in the Owner
Trustee and, that, subject to the provisions of this Trust Agreement and the
other Operative Agreements, the Owner Trustee shall act only at the direction of
the Owner Participant. As a result, the Owner Participant and the Owner Trustee
agree that for federal tax purposes, the Owner Trustee shall be considered to be
the Owner Participant's agent.
Section 10.15 Limitation on Owner Participant's Liability. The Owner
Participant shall not have any liability for the performance of this Trust
Agreement, except as expressly set forth herein.
Section 10.16 Identification of Trust. The trust created hereunder may be
referred to for convenience as GARC II 98-A Railcar Trust.
* * *
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[Trust Agreement (GARC II 98-A)]
IN WITNESS WHEREOF, the parties hereto have each caused this Trust
Agreement to be duly executed and delivered as of the day and year first above
written.
WILMINGTON TRUST COMPANY
By:_______________________________
Name:__________________________
Title:_________________________
[OWNER PARTICIPANT]
By:_______________________________
Name:__________________________
Title:_________________________
19
<PAGE>
EXHIBIT 4.4
FORM OF
________________________________________________
TRUST INDENTURE AND SECURITY AGREEMENT
(GARC II 98-A)
Dated as of September 1, 1998
between
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company,
not in its individual capacity, except as expressly provided herein,
but solely as Owner Trustee
and
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
Tank Cars and Covered Hopper Cars
________________________________________________
<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................................................... 12
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.............................................................. 18
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...................................... 22
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............................................................ 28
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
</TABLE>
i
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<TABLE>
<S> <C>
Section 5.3. Indemnification............................................................. 30
Section 5.4. No Duties Except as Specified in Indenture or Instructions.................. 31
Section 5.5. No Action Except under Lease, Indenture or Instructions..................... 31
Section 5.6. Disposition of Units........................................................ 31
Section 5.7. Indenture Supplements for Replacements...................................... 31
Section 5.8. Effect of Replacements...................................................... 32
Section 5.9. Withholding Taxes........................................................... 32
Section 5.10. Lessee's Right of Quiet Enjoyment........................................... 32
Section 5.11. Certain Rights of Owner Trustee and Owner Participant....................... 32
ARTICLE VI. THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
Section 6.1. Acceptance of Trusts and Duties............................................. 34
Section 6.2. Absence of Duties........................................................... 35
Section 6.3. No Representations or Warranties as to the Equipment or Documents........... 35
Section 6.4. No Segregation of Moneys; No Interest; Investments.......................... 35
Section 6.5. Reliance; Agents; Advice of Counsel......................................... 36
Section 6.6. Not Acting in Individual Capacity........................................... 37
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........................................... 37
Section 8.2. Resignation of Indenture Trustee; Appointment of Successor.................. 38
ARTICLE IX. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER
DOCUMENTS
Section 9.1. Supplemental Indentures without Consent of Holders.......................... 39
Section 9.2. Indenture Trustee Protected................................................. 41
Section 9.3. Request of Substance, Not Form.............................................. 41
Section 9.4. Documents Mailed to Holders................................................. 41
Section 9.5. Amendments, Waivers, Etc. of Other Documents................................ 41
ARTICLE X. MISCELLANEOUS
Section 10.1. Termination of Indenture.................................................... 44
Section 10.2. No Legal Title to Indenture Estate in Holders............................... 44
Section 10.3. Sale of Equipment by Indenture Trustee is Binding........................... 44
Section 10.4. Remedies Cumulative......................................................... 44
Section 10.5. Discontinuance of Proceedings............................................... 45
Section 10.6. Indenture and Equipment Notes for Benefit of Owner Trustee, Indenture
Trustee, Owner Participant and Holders Only................................. 45
Section 10.7. Notices..................................................................... 45
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.8. Severability................................................................ 47
Section 10.9. Separate Counterparts....................................................... 47
Section 10.10. Successors and Assigns...................................................... 47
Section 10.11. Headings.................................................................... 47
Section 10.12. Governing Law............................................................... 47
Section 10.13. Normal Commercial Relations................................................. 47
Section 10.14. No Recourse Against Others.................................................. 48
Section 10.15. Intercreditor Agreement..................................................... 48
</TABLE>
APPENDICES, EXHIBITS AND ANNEXES
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
(GARC II 98-A)
This TRUST INDENTURE AND SECURITY AGREEMENT (GARC II 98-A) dated as of
September 1, 1998 (this "Indenture"), is by and between GARC II 98-A Railcar
Trust, by Wilmington Trust Company, 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 State Street Bank and Trust Company, 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
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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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 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
2
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
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
3
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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 the Equipment Lease Agreement (GARC II 98-A) dated as of
September 1, 1998 (the "Lease") between the Owner Trustee and General American
Railcar Corporation II, a Delaware corporation. 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>
Trust Indenture and Security Agreement (GARC II 98-A)
_____% EQUIPMENT NOTE
(GARC II 98-A)
(Secured by, among others, Lease Obligations of
General American Railcar Corporation II)
Issued in Connection with certain Railroad Rolling Stock
No. ______ Chicago, Illinois
$_____________ ____________________, 1998
GARC II 98-A Railcar Trust, by Wilmington Trust Company, not in its
individual capacity, but solely as owner trustee (herein in such capacity called
the "Owner Trustee") under that certain Trust Agreement (GARC II 98-A), dated as
of September 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 (GARC II 98-A),
dated as of September 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 State Street Bank and Trust Company, 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 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
5
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
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
6
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
GARC II 98-A RAILCAR TRUST, by Wilmington
Trust Company, not in its individual capacity, 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.
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
By:_______________________________________
Authorized Officer
8
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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>
Trust Indenture and Security Agreement (GARC II 98-A)
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%. 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 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
10
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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 Boston, Massachusetts
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 $1,000,000 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 $1,000,000) 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 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
11
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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 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.
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Trust Indenture and Security Agreement (GARC II 98-A)
Section 2.10. 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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 but not 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), (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).
(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.
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Trust Indenture and Security Agreement (GARC II 98-A)
(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:
first, to the holders of the Equipment Notes, an amount equal to all
-----
Regular Interest accrued and unpaid on the Equipment Notes as of such date,
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,
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Trust Indenture and Security Agreement (GARC II 98-A)
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 Default Interest on past
due principal referred to in clause second above and accrued and unpaid
------
Regular Interest (but not any Late Payment Premium or interest thereon),
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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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.
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Trust Indenture and Security Agreement (GARC II 98-A)
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;
(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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 definitions, 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;
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.
Neither Lessee nor any other Person may assume obligations under the
Notes except pursuant to and in accordance with the provisions of this Section
3.6. Lessee shall pay all reasonable costs and expenses (including counsel's
fees and disbursements, and Taxes payable pursuant to Section 7.1 of the
Participation Agreement) of Owner Trustee, Owner Participant, Indenture Trustee
and the holders of the Equipment Notes in connection with the consummation of
the transactions contemplated by this Section 3.6.
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Trust Indenture and Security Agreement (GARC II 98-A)
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
not a part of Excepted Property 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 Regular Interest (other
than interest on overdue principal and interest) on, any Equipment Note or
Equipment Notes, and the continuance of such default unremedied for ten 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 or Late Payment Premium or interest thereon) 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 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 as
Owner Trustee and not in its individual capacity or the Owner Participant under
the Participation Agreement, or by the Owner Trustee hereunder, or by any
representative of the Owner Trustee or
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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. The Indenture Trustee, after the occurrence of any
Indenture Event of Default, shall give the Owner Participant and the Owner
Trustee 10 Business Days' (or such shorter period as practical) prior notice of
the date before which the Indenture Trustee shall not exercise any remedy which
would result in the exclusion of the Owner Trustee from the Indenture Estate or
any part thereof other than pursuant to Section 4.3(b).
(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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 270-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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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.
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Trust Indenture and Security Agreement (GARC II 98-A)
(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 20 calendar days (a
"20-Day Period") after receiving written notice of such Indenture Event of
Default from the Indenture Trustee (prior to the expiration of which 20-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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
parties by the Lessee pursuant to this clause (y) exceeds in the aggregate
$20,000,000, 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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 270 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 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 270
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,
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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 20 calendar days after the same shall have become due,
unless the 20-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 20
calendar 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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, 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.
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Trust Indenture and Security Agreement (GARC II 98-A)
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.
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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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, 12 or
22 of the Lease, or of 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 the rights of the Owner Trustee to give
any notices of default under Section 15 of the Lease and declare the Lease in
default;
(d) unless an Indenture Event of Default has occurred and is
continuing (which has not been caused by a Lease Default), the Owner Trustee
shall have the right, together
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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) and (B) 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
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Trust Indenture and Security Agreement (GARC II 98-A)
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 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 WTC 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 WTC as set
forth in Section 3.1 of the Participation Agreement), except that WTC and the
Indenture Trustee 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. No 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.
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Trust Indenture and Security Agreement (GARC II 98-A)
(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
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
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Trust Indenture and Security Agreement (GARC II 98-A)
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).
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 VIII. 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.
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Trust Indenture and Security Agreement (GARC II 98-A)
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.
(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
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Trust Indenture and Security Agreement (GARC II 98-A)
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.
ARTICLE IX. SUPPLEMENTS AND AMENDMENTS
TO THIS INDENTURE AND OTHER DOCUMENTS
Section 9.1. Supplemental Indentures without Consent of Holders. (a) The
--------------------------------------------------
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
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Trust Indenture and Security Agreement (GARC II 98-A)
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.
------------------------------------------------------------
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 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.
40
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Trust Indenture and Security Agreement (GARC II 98-A)
Section 9.2. Indenture Trustee Protected. If in the opinion of the
---------------------------
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 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.
Section 9.4. Documents Mailed to Holders. Promptly after the execution by
---------------------------
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)
--------------------------------------------
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
41
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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, 22.1, 24, 25.1,
25.4, 25.6, 25.10, and any definition of terms used in the Lease, 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, 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
42
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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 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.
43
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
ARTICLE X. MISCELLANEOUS
Section 10.1. Termination of Indenture. 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 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
-------------------------------------------------
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.
44
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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).
Section 10.6. Indenture and Equipment Notes for Benefit of Owner Trustee,
-----------------------------------------------------------
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: c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Fax No.: (302) 651-8882
Confirmation No.: (302) 651-1000
with copies to Owner Participant.
If to Owner Participant: Owner Participant
___________________
___________________
Attention: _________________
Fax No.: ___________________
Confirmation No.: __________
45
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
If to the Indenture Trustee: State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attention: Corporate Trust Services Division
Fax No.: (617) 664-5372
Confirmation No.: (617) 664-5667
If to Lessee: General American Railcar Corporation II
c/o General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
Re: GARC II 98-A
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.
46
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
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
47
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
* * *
48
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company,
not in its individual capacity except as set forth
in Section 6.3 hereof, but solely as Owner Trustee
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
49
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
EXHIBIT A
TRUST INDENTURE SUPPLEMENT NO._
(GARC II 98-A)
This Indenture Supplement No. ___ (GARC II 98-A), dated ____________ (this
"Indenture Supplement"), of GARC II 98-A Railcar Trust, by Wilmington Trust
Company, not in its individual capacity but solely as trustee (the "Owner
Trustee") under the Trust Agreement (GARC II 98-A), dated as of September 1,
1998 (the "Trust Agreement"), between Wilmington Trust Company and Owner
Participant, as Owner Participant;
WITNESSETH:
WHEREAS, the Trust Indenture and Security Agreement (GARC II 98-A) dated as
of September 1, 1998 (the "Indenture"), between the Owner Trustee and State
Street Bank and Trust Company, 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 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.
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
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>
Trust Indenture and Security Agreement (GARC II 98-A)
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.
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner Trustee
By:_______________________________________________
Name:_____________________________________________
Title_____________________________________________
A-3
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
EXHIBIT B
TERMS OF EQUIPMENT NOTE
Principal Amount Interest Rate Rated Maturity Date
- ---------------- ------------- -------------------
$_______________ ________% ____________ ____, 20___
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
EXHIBIT C
LOAN PARTICIPANT
Percentage of
Loan Participant Principal Amount
---------------- ----------------
Equipment Note State Street Bank and Trust 100%
Company, as Trustee under
the Pass Through Trust
Agreement
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
ANNEX A
RATED AMORTIZATION SCHEDULE
[to come]
C-2
<PAGE>
Trust Indenture and Security Agreement (GARC II 98-A)
ANNEX B
SCHEDULED AMORTIZATION SCHEDULE
[to come]
C-3
<PAGE>
EXHIBIT 4.6
FORM OF
_____________________________________________
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
Dated as of September 1, 1998
among
General American Railcar Corporation II,
as Company,
The First National Bank of Chicago,
as Collateral Agent,
GARC II 98-A Railcar Trust
By: Wilmington Trust Company, not in its individual capacity
but solely as trustee under the Trust Agreement (GARC II 98-A)
as Initial Owner Trustee (GARC II 98-A),
GARC II 98-B Railcar Trust
By: Wilmington Trust Company, not in its individual capacity
but solely as trustee under the Trust Agreement (GARC II 98-B)
as Initial Owner Trustee (GARC II 98-B),
GARC II 98-C Railcar Trust
By: Wilmington Trust Company, not in its individual capacity
but solely as trustee under the Trust Agreement (GARC II 98-C)
as Initial Owner Trustee (GARC II 98-C),
State Street Bank and Trust Company,
as Initial Indenture Trustee (GARC II 98-A),
State Street Bank and Trust Company,
as Initial Indenture Trustee (GARC II 98-B),
State Street Bank and Trust Company,
as Initial Indenture Trustee (GARC II 98-C),
General American Transportation Corporation,
as Manager
and
General American Transportation Corporation,
as Insurance Manager
_____________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1.
DEFINITIONS........................................................................................ 2
SECTION 2.
THE COLLATERAL..................................................................................... 19
Section 2.1. Security Interest and Collateral Assignment.................................... 19
Section 2.2. Priority....................................................................... 20
Section 2.3. Continuance of Security........................................................ 20
Section 2.4. No Transfer of Duties.......................................................... 21
Section 2.5. Maintenance of Collateral...................................................... 21
Section 2.6. Releases....................................................................... 22
Section 2.7. Termination and Release of Rights.............................................. 22
SECTION 3.
THE ACCOUNTS....................................................................................... 23
Section 3.1. Establishment of Accounts...................................................... 23
Section 3.2. Deposits to the Collection Account and Non-Shared Payments
Account.................................................................... 24
Section 3.3. Application of Amounts on Deposit in the Non-Shared Payments
Account.................................................................... 24
Section 3.4. Application of Amounts on Deposit in the Collection
Account.................................................................... 24
Section 3.5. Application of Amounts in the Stipulated Loss Value
Deficiency Account......................................................... 29
Section 3.6. Application of Amounts in the Liquidity Reserve Account........................ 30
Section 3.7. Application of Amounts in the Special Reserves Account and
Special Insurance Reserves Account......................................... 30
Section 3.8. Release of Amounts in Cash Trapping Account.................................... 30
Section 3.9. Application of Amounts in Excess Cash Account................................. 31
Section 3.10. Security Interest in Accounts.................................................. 31
Section 3.11. Notice of Amounts Owed......................................................... 31
Section 3.12. Investment of Funds in the Accounts............................................ 32
Section 3.13. Disposition of Accounts Upon Retirement of Secured
Obligations................................................................ 32
Section 3.14. Account Balance Statements..................................................... 33
SECTION 4.
CERTAIN AGREEMENTS AMONG THE SECURED PARTIES....................................................... 33
Section 4.1. Priority of Security Interests................................................. 33
Section 4.2. Exercise of Rights............................................................. 33
Section 4.3. Actions Upon a Lease Event of Default.......................................... 34
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.4. Exercise of Remedies and Application of Proceeds............................... 35
Section 4.5. Receipt of Money or Proceeds................................................... 35
Section 4.6. Additional Beneficiaries...................................................... 35
SECTION 5.
THE COLLATERAL AGENT.............................................................................. 36
Section 5.1. Appointment and Duties of Collateral Agent.................................... 36
Section 5.2. Rights of Collateral Agent; Limitation of Liability........................... 36
Section 5.3. Lack of Reliance on the Collateral Agent...................................... 38
Section 5.4. Indemnification; Bankruptcy................................................... 38
Section 5.5. Resignation or Removal of the Collateral Agent................................ 39
Section 5.6. Relationships with Collateral Agent........................................... 39
SECTION 6.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY................................................................................... 40
Section 6.1. Representations and Warranties................................................ 40
Section 6.2. General Covenants............................................................. 42
Section 6.3. Covenants..................................................................... 46
Section 6.4. Operation of Units; Leases.................................................... 47
SECTION 7.
REPRESENTATIONS AND WARRANTIES
OF THE BENEFICIARIES.............................................................................. 48
Section 7.1. Representations and Warranties................................................ 48
SECTION 8.
MISCELLANEOUS..................................................................................... 49
Section 8.1. Agreement for Benefit of Parties Hereto....................................... 49
Section 8.2. Severability.................................................................. 49
Section 8.3. Notices....................................................................... 49
Section 8.4. Successors and Assigns........................................................ 51
Section 8.5. Counterparts.................................................................. 51
Section 8.6. Governing Law................................................................. 51
Section 8.7. Consent To Jurisdiction....................................................... 51
Section 8.8. Waiver of Jury Trial.......................................................... 52
Section 8.9. Amendment; Waiver............................................................. 52
Section 8.10. Headings...................................................................... 52
Section 8.11. Termination................................................................... 52
Section 8.12. Entire Agreement.............................................................. 52
Section 8.13. Limitation of Liability....................................................... 53
</TABLE>
ii
<PAGE>
[Intercreditor Agreement]
<TABLE>
<S> <C>
Section 8.14. Conflict With Other Agreements............................................... 53
Section 8.15. Consequential Damages........................................................ 53
Section 8.16. No Petition in Bankruptcy.................................................... 53
Section 8.17. No Partnership Created....................................................... 53
</TABLE>
ANNEXES
Annex A - Form of Designation Letter
iii
<PAGE>
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT (this "Agreement")
dated as of September 1, 1998, among General American Railcar Corporation II, a
Delaware corporation (the "Company" or the "Lessee"), State Street Bank and
Trust Company, acting in its capacity as the trustee under the Trust Indenture
and Security Agreement (GARC II 98-A) (the "Initial Indenture Trustee (GARC II
98-A)"), State Street Bank and Trust Company, acting in its capacity as the
trustee under the Trust Indenture and Security Agreement (GARC II 98-B) (the
"Initial Indenture Trustee (GARC II 98-B)"), State Street Bank and Trust
Company, acting in its capacity as the trustee under the Trust Indenture and
Security Agreement (GARC II 98-C) (the "Initial Indenture Trustee (GARC II 98-
C)"), GARC II 98-A Railcar Trust, by Wilmington Trust Company, not in its
individual capacity but solely as trustee under the Trust Agreement (GARC II 98-
A) (the "Initial Owner Trustee (GARC II 98-A)"), GARC II 98-B Railcar Trust, by
Wilmington Trust Company, not in its individual capacity but solely as trustee
under the Trust Agreement (GARC II 98-B) (the "Initial Owner Trustee (GARC II
98-B)"), GARC II 98-C Railcar Trust, by Wilmington Trust Company, not in its
individual capacity but solely as trustee under the Trust Agreements (GARC II
98-C) (the "Initial Owner Trustee (GARC II 98-C)"), General American
Transportation Corporation acting in its capacity as Manager (the "Manager")
under the Management Agreement, and 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 Lessee Parent
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 Car Service Contracts;
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.
<PAGE>
[Intercreditor Agreement]
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:
SECTION 1.
DEFINITIONS
Section 1.1. Definitions. Capitalized terms not otherwise defined herein
-----------
shall have the respective meanings assigned thereto in the Leases. In addition,
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, the Special Insurance Reserves Account, the Post Lease Term Reserve
Account and the Excess Cash Account.
2
<PAGE>
[Intercreditor Agreement]
"Administrative Services Agreement" means the Administrative Services
---------------------------------
Agreement (GARC II) dated as of September 1, 1998, between Lessee Parent and the
Company.
"Administrator" shall have the meaning assigned thereto in the
-------------
Administrative Services Agreement.
"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(c),
------------
shall have been assumed by the Company in connection with Section 22.1 of any
Lease or Section 6.9 of a Participation Agreement.
"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 (1), (2), (3), (5) and (6) 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" with respect to each Lease, has the meaning set forth in such
----------
Lease.
"Basic Term" with respect to each Lease, has the meaning set forth in
----------
Section 3.1 of such Lease.
"Beneficiaries" means each Lessor, the Manager, the Administrator and the
-------------
Insurance Manager and any other Person that becomes a Beneficiary hereunder
pursuant to a Designation Letter.
"Calculation Date" means the last Business Day of each calendar month.
----------------
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital of the Management Agreement.
"Cash Trapping Account" means the account of that name established pursuant
---------------------
to Section 3.1.
"Cash Trapping Event" means as of any Calculation Date, or as of any
-------------------
Monthly Transfer Date if for the immediately preceding Calculation Date, the
occurrence of any of the following:
3
<PAGE>
[Intercreditor Agreement]
(a) The Monthly Average Lease Rate as of such Calculation Date: (i)
shall have decreased by 10.00% or more as compared to the Monthly Average Lease
Rate calculated as of the Calculation Date for the same month of any of the
immediately preceding five years, and (ii) is less than $536.00 (which is the
Monthly Average Lease Rate as of the Closing Date); or
(b) The Monthly Utilization Rate for the immediately preceding
calendar month shall have been 86.00% or less; or
(c) (i) any Coverage Ratio shall be less than 1.1500:1 (a "Level 1
Cash Trapping Event"), or (ii) any Coverage Ratio shall be less than 1.1000:1 (a
"Level 2 Cash Trapping Event").
"Cash Trapping Hold" means, following the occurrence of a Cash Trapping
------------------
Event, as of any Calculation Date, or as of any Monthly Transfer Date if for
the immediately preceding Calculation Date, 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
$536.00 (which is 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 on such Calculation Date is less than 90.00%,
or
(c) if such Cash Trapping Event is related to any Coverage Ratio (i)
any Coverage Ratio on such Calculation Date is less than 1.1650:1 (a "Level 1
Cash Trapping Hold"), or (ii) any Coverage Ratio on such Calculation Date is
equal to or less than 1.1400:1 (a "Level 2 Cash Trapping Hold").
For the avoidance of doubt, if with respect to a particular Cash Trapping
Event the related Cash Trapping Hold shall not apply as of a Calculation Date
succeeding such Cash Trapping Event, thereafter the related Cash Trapping Hold
shall not apply with respect to such Cash Trapping Event (it being intended that
once the conditions of the Cash Trapping Hold are exceeded, such Cash Trapping
Hold shall not subsequently apply again (e.g., if a Cash Trapping Event occurs
where the Monthly Utilization Rate is 86.00% or less and thereafter the Monthly
Utilization Rate is 90.00%, no Cash Trapping Hold shall exist thereafter with
respect to such Cash Trapping Event unless a new Cash Trapping Event shall
occur).
"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 or any other
Person 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 or any other Person in respect of indemnities
contained in Section 7 of each Participation Agreement.
4
<PAGE>
[Intercreditor 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 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, Stipulated Loss Value, Termination Value, principal, interest and
other amounts included in Category 1 Supplemental Expenses or Category 2
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 $1,500,000
from the Company.
"Collections" for any period means, without duplication, (i) all amounts
-----------
paid to the Collection Account in respect of the Car Service Contracts,
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 Units
to each Lessor pursuant to the applicable Participation Agreement on the Closing
Date.
"Combined Exposure" means, as of any date of determination, the sum
-----------------
(calculated without duplication) of all of the Transaction Exposures in respect
of the Leases as of such date.
"Company" or "Lessee" has the meaning specified in the first paragraph of
------- ------
this Agreement.
"Company Documents" means each Car Service Contract, the Insurance
-----------------
Agreement, the Management Agreement, the Administrative Services Agreement and
the Transfer and Assignment 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 a third party beneficiary or otherwise.
"Company Fleet" means, collectively, all Equipment owned or leased by the
-------------
Company.
"Coverage Ratio" means the Historical Coverage Ratio or the Projected
--------------
Coverage Ratio.
5
<PAGE>
[Intercreditor Agreement]
"Customer" shall have the meaning assigned thereto in the first recital of
--------
the Management Agreement.
"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" or "Units" means, 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 item thereof which become the property
of an Owner Trustee pursuant to the terms of a Bill of Sale or a Lease, or
individually each such item.
"Equipment Cost" with respect to any Unit, has the meaning set forth in the
--------------
related Lease.
"Equipment Notes" means, collectively, the Equipment Notes issued pursuant
---------------
to the Indentures.
"Equity Portion of Basic Rent" with respect to each Lease, has the meaning
----------------------------
set forth in such Lease.
"Event of Loss", with respect to any 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.
"Final Termination Date" means the last to occur of the Termination Dates
----------------------
with respect to each of the Beneficiaries.
"Forecasting Error" means the occurrence of either of the following: (i)
-----------------
the certification by the Manager of a Projected Coverage Ratio equal to or
greater than 1.1500:1 for which the Historical Coverage Ratio for the same
period is below 1.1500:1, or (ii) the certification by the Manager of a
Projected Coverage Ratio equal to or greater than 1.1000:1 for which the
Historical Coverage Ratio for the same period is below 1.1000:1. Once a
Forecasting Error is in effect, it shall remain in effect until such time as the
Projected Coverage Ratios certified by the Manager have been equaled or exceeded
by the Historical Coverage Ratios for the same periods over a period of 6
consecutive Calculation Dates.
"GATC" means General American Transportation Corporation, a New York
----
corporation.
"GATC Fleet" means all railcars owned, leased or managed by Lessee Parent
----------
in the United States.
6
<PAGE>
[Intercreditor Agreement]
"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 under
the Leases and principal and interest on the Assumed Debt that was scheduled to
be paid on the six consecutive Rent Payment Dates (or corresponding dates in
respect of the Assumed Debt) which occurred or occur immediately after the
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.
"Income Tax" shall have the meaning assigned thereto in Section 7.1(j) of
----------
the Participation Agreements.
"Indemnified Expenses" shall have the meaning assigned thereto in the
--------------------
Administrative Services Agreement.
"Indemnified Party" has the meaning specified in Section 5.4 of this
-----------------
Agreement.
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreements.
"Indenture" or "Trust 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.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Initial Indenture" means any of (a) the Trust Indenture and Security
-----------------
Agreement (GARC II 98-A), dated as of September 1, 1998, between the Initial
Owner Trustee (GARC II 98-A) and the Initial Indenture Trustee (GARC II 98-A),
(b) the Trust Indenture and Security Agreement (GARC II 98-B), dated as of
September 1, 1998, between the Initial Owner Trustee (GARC II 98-B) and the
Initial Indenture Trustee (GARC II 98-B) and (c) the Trust Indenture and
Security Agreement (GARC II 98-C), dated as of September 1, 1998, between the
Initial Owner Trustee (GARC II 98-C) and the Initial Indenture Trustee (GARC II
98-C).
7
<PAGE>
[Intercreditor Agreement]
"Initial Indenture Trustee" means any of (a) the Initial Indenture Trustee
-------------------------
(GARC II 98-A), (b) the Initial Indenture Trustee (GARC II 98-B) and (c) the
Initial Indenture Trustee (GARC II 98-C).
"Initial Lease" means any of (a) the Equipment Lease Agreement (GARC II 98-
-------------
A) dated as of September 1, 1998, between the Initial Owner Trustee (GARC II 98-
A), as lessor, and the Company, as lessee, (b) the Equipment Lease Agreement
(GARC II 98-B) dated as of September 1, 1998, between the Initial Owner Trustee
(GARC II 98-B), as lessor, and the Company, as lessee and (c) the Equipment
Lease Agreement (GARC II 98-C) dated as of September 1, 1998, between the
Initial Owner Trustee (GARC II 98-C), as lessor, and the Company, as lessee.
"Initial Owner Trustee" means any of (a) GARC II 98-A Railcar Trust, by
---------------------
Wilmington Trust Company, as trustee pursuant to the Initial Trust Agreement
(GARC II 98-A), (b) GARC II 98-B Railcar Trust, by Wilmington Trust Company, as
owner trustee pursuant to the Initial Trust Agreement (GARC II 98-B) and (c)
GARC II 98-C Railcar Trust, by Wilmington Trust Company, as owner trustee
pursuant to the Initial Trust Agreement (GARC II 98-C).
"Initial Participation Agreement" means any of (a) the Participation
-------------------------------
Agreement (GARC II 98-A), dated as of September 1, 1998, among the Company, the
Manager, the Lessee Parent, the Initial Owner Trustee (GARC II 98-A), the
related Owner Participant, the Initial Indenture Trustee (GARC II 98-A) and the
Initial Pass Through Trustee, (b) the Participation Agreement (GARC II 98-B),
dated as of September 1, 1998, among the Company, the Manager, the Lessee
Parent, the Initial Owner Trustee (GARC II 98-B), the related Owner Participant,
the Initial Indenture Trustee (GARC II 98-B) and the Initial Pass Through
Trustee and (c) the Participation Agreement (GARC II 98-C), dated as of
September 1, 1998, among the Company, the Manager, the Lessee Parent, the
Initial Owner Trustee (GARC II 98-C), the related Owner Participant, the Initial
Indenture Trustee (GARC II 98-C) and the Initial Pass Through Trustee.
"Initial Pass Through Trust Agreement" means the Pass Through Trust
------------------------------------
Agreement dated as of September 1, 1998 between the Company and the Initial Pass
Through Trustee.
"Initial Pass Through Trustee" means State Street Bank and Trust Company 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
-----------------------
September 1, 1998, between the related Owner Participant and the Initial Owner
Trustee (GARC II 98-A), (b) the Trust Agreement dated as of September 1, 1998,
between the related Owner Participant and the Initial Owner Trustee (GARC II 98-
B), and (c) the Trust Agreement dated as of September 1, 1998, between the
related Owner Participant and the Initial Owner Trustee (GARC II 98-C).
"Insurance Agreement" means the Insurance Agreement (GARC II) dated as of
-------------------
September 1, 1998 between Lessee Parent and the Company.
8
<PAGE>
[Intercreditor Agreement]
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Insurance Services Standard" shall have the meaning assigned thereto in
---------------------------
the Insurance Agreement.
"Intercreditor Event of Default" means a "Manager Default" as specified
------------------------------
under Section 8.2 of the Management Agreement or an "Insurance Manager Default"
as specified under Section 6.2 of the Insurance Agreement, in each case after
the giving of any required notice thereunder and/or the expiration of any
applicable cure period provided therein.
"Late Rent Premium" means the sum of (x) with respect to any Lease and on
-----------------
any Monthly Transfer Date, any Supplemental Rent in respect of the amounts
described in the definition of Late Payment Interest (other than clause (iii)
thereof) which shall remain outstanding and unpaid (or deemed unpaid) as of such
date, 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 Loan Documentation and (ii) the default rate interest,
if any, due on any defaulted principal or interest in respect of any 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 Units between a Lessor and the Company as each
such lease agreement may from time to time be amended or supplemented.
"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" has the meaning set forth in the related Lease or,
----------------------
if applicable, the Loan Documentation related to the issuance of the related
Assumed Debt.
"Lease Supplement" with respect to any Lease, has the meaning specified in
----------------
such Lease.
"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
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.
9
<PAGE>
[Intercreditor Agreement]
"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 Unit leased to the Company pursuant to such Lease.
"Lessee" or "Company" has the meaning specified in the first paragraph of
------ -------
this Agreement.
"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,
------------
provided that, so long as any Equipment Notes of such Lessor are issued and
outstanding, "Lessor Agent" shall be 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.
"Level 1 Cash Trapping Event" shall have the meaning specified in clause
---------------------------
(c)(i) of the definition of Cash Trapping Event.
"Level 2 Cash Trapping Event" shall have the meaning specified in clause
---------------------------
(c)(ii) of the definition of Cash Trapping Event.
"Level 1 Cash Trapping Hold" shall have the meaning specified in clause
--------------------------
(c)(i) of the definition of Cash Trapping Hold.
"Level 2 Cash Trapping Hold" shall have the meaning specified in clause
--------------------------
(c)(ii) of the definition of Cash Trapping Hold.
"Liquidity Reserve Account" means the account of that name established
-------------------------
pursuant to Section 3.1.
"Loan Documentation" means the documentation evidencing the Assumed Debt.
------------------
"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 Lessee Parent,
-----------------
as Trustee for itself, individually, General American Railcar Corporation,
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.
10
<PAGE>
[Intercreditor Agreement]
"LockBox Change Notice" means the notice attached as Annex A to the letter
---------------------
agreement dated September __, 1998 among Lessee Parent, 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 (GARC II), dated as of September 1, 1998 between Lessee
Parent and the Company.
"Management Fee" shall have the meaning set forth in Section 5.1 of the
--------------
Management Agreement.
"Manager" means Lessee Parent, 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 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" means the GATC Fleet if Lessee Parent 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.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Monthly Average Lease Rate" means for any calendar month, the aggregate
--------------------------
monthly rental rates with respect to the Total Managed Fleet for such calendar
month divided by the number of railcars in the Total Managed Fleet which are
subject to a lease or a sublease with respect to which the Manager, the Company
or any Affiliate thereof is lessor or sublessor (as applicable) on the last day
of such calendar month.
"Monthly Report" means the monthly report prepared by the Manager 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 20th 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.
11
<PAGE>
[Intercreditor Agreement]
"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 with respect to which the
Manager, the Company or any Affiliate thereof is lessor or sublessor (as
applicable) 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 Lessee
-------------------
Parent to the Company subsequent to the Closing Date, made expressly for the
purpose of paying the Stipulated Loss Value, Termination Value, Early Purchase
Price, Basic Term Purchase Price or other purchase price or termination sum of
or relating to any Unit pursuant to a Lease or Loan Documentation, (b) prior to
the payment of Stipulated Loss Value, Termination Value, Early Purchase Price,
Basic Term Purchase Price or other purchase price or termination sum with
respect to any Equipment, awards, insurance or other proceeds or damages
received with respect to any loss or damage to any Equipment, (c) prior to the
payment of Stipulated Loss Value, Termination Value, Early Purchase Price, Basic
Term Purchase Price or other purchase price or termination sum with respect to
any Equipment, proceeds of the sale of the Equipment or (d) excess cash
available to the Company pursuant to clause (14) 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, Termination Value,
Early Purchase Price, Basic Term Purchase Price or other purchase price or
termination sum pursuant to a Lease or Loan Documentation.
"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
Unit, (f) the payment of Stipulated Loss Value or the cost of replacement
Equipment in connection with any Event of 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 and, if
with respect to the Company generally, means all Operative Agreements.
12
<PAGE>
[Intercreditor 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.
"Parent" shall mean GATX Corporation, a New York corporation.
------
"Participants" shall mean the Loan Participant and the Owner Participants.
------------
"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.
"Pass Through Certificates" or "Certificates" means, in respect of each
------------------------- ------------
Indenture, the Pass Through Certificates issued pursuant to the Pass Through
Trust Supplement and the Pass Through Trust Agreement related thereto.
"Permitted Investments" means any of (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 (other than commercial paper issued by the Company or GATC or any
Affiliate thereof) having remaining maturities of no more than the number of
days to the Business Day next preceding the next Monthly Transfer Date, and
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 money market
funds rated in the highest investment category by each Rating Agency, (vi)
repurchase agreements and similar short term instruments, (vii) so long as (A)
no Cash Trapping Event is in effect, (B) GATC maintains at least a rating of
BBB-from S&P and Baa3 from Moody's, and (C) GATC is not on credit watch with
negative implications if its rating is BBB- from S&P or Baa3 from Moody's, then,
with respect to no more than $3,000,000 of amounts on deposit in the Cash
Trapping Account which are in excess of $3,000,000, Permitted Investments will
include securities or obligations of GATC which are priced and documented on an
arm's length basis (which is hereby deemed to include notes issued by GATC
priced with references to GATC's commercial paper) and have a rating of A2/P2 or
better; provided further that if a Cash Trapping Event has occurred and is
continuing, such investments as they mature shall not be reinvested in GATC
securities or obligations until such Cash Trapping Event shall no longer be
continuing and all amounts in excess of those required to be on deposit in the
Cash Trapping Account in excess of those specified in clause (i) of the
definition of Required Cash Trapping Amount shall have been released, and (viii)
if any amounts shall be held in the Special Insurance Reserves Account [or the
Post Lease Term Reserve Account], then with respect to the amounts on deposit
therein,
13
<PAGE>
[Intercreditor Agreement]
Permitted Investments shall include securities and obligations of GATC which are
priced and documented on an arm's length basis (which is hereby deemed to
include notes issued by GATC priced with references to GATC's commercial paper)
(without regard to any rating of GATC or GATC's financial condition). For
purposes of clause (vii) of this definition, in the event that either S&P or
Moody's shall cease to provide a credit rating for GATC the conditions involving
credit rating in clause (vii) shall be determined solely by reference to the
remaining Rating Agency which is providing a credit rating.
"Person" means an individual, a corporation, a partnership, a trust, an
------
unincorporated organization, a limited liability company, or a government or
political subdivision thereof.
"Post Lease Term Reserve Account" means the Account of that name
-------------------------------
established pursuant to Section 3.1 of this Agreement.
"Premium Amount" means the premium, if any, due upon the prepayment of any
--------------
Lender Loan pursuant to the related Lender Document.
"Programmatic Optional Modification" means any optional modification (other
----------------------------------
than a Required Modification) to one or more Units in the Company Fleet the
aggregate cost of implementation for which in any 12-month period 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 any 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,
----------
that portion of the accrued and unpaid Basic Rent and Supplemental Rent which
equals the Rated Obligations Due thereunder.
"Rated Security" means the Pass Through Trust Certificates issued by State
--------------
Street Bank and Trust Company as Pass Through Trustee for General American
Railcar Corporation II 1998-1 Pass Through Trust, pursuant to the Pass Through
Trust Agreement dated September 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.
14
<PAGE>
[Intercreditor Agreement]
"Renewal Rent" with respect to any Lease, means the Basic Rent payable
------------
during the applicable Renewal Term as specified in such Lease.
"Renewal Term" with respect to any Lease, has the meaning specified in such
------------
Lease.
"Rent Payment Date" with respect to any Lease, has the meaning set forth in
-----------------
such Lease.
"Required Beneficiaries" means, at any time, Beneficiaries (excluding the
----------------------
Manager, the Administrator and the Insurance Manager and any Affiliate thereof)
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 or, following a Cash Trapping Event,
no Cash Trapping Hold exists with respect to such Monthly Transfer Date, an
amount equal to $109,100 as of the first Monthly Transfer Date following
the Closing Date and thereafter increasing by $109,100 on each succeeding
Monthly Transfer Date until such time as such amount shall equal or exceed
$6,000,000 and thereafter $6,000,000; or
(ii) if for such Monthly Transfer Date a Cash Trapping Event exists,
an amount equal to $10,500,000, provided that in the event that a Level 2
Cash Trapping Event exists such amount shall equal $15,000,000; provided
further that if a Forecasting Error exists as of such Monthly Calculation
Date, the amount will be increased to $11,500,000 (for a Level 1 Cash
Trapping Event) or $16,000,000 (for a Level 2 Cash Trapping Event); or
(iii) if, following a Cash Trapping Event, such Cash Trapping Event
ceases to exist but a Cash Trapping Hold exists with respect to such
Monthly Transfer Date, the amount then on deposit in the Cash Trapping
Account at the time such Cash Trapping Event ceased to exist (but in no
event less than the amounts required pursuant to clause (i) above);
provided further, the amounts referred to in this clause (iii) in excess of
the amount referred to in clause (i) shall be subject to release from the
Cash Trapping Account only in accordance with Sections 3.4 or 3.8 of this
Agreement.
"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" means, with respect to any Unit, the definition of
---------------------
such term in the related Lease.
"Required Special Insurance Reserves Amount" means the sum of: (i) the
------------------------------------------
amount (not to exceed $90,000,000) by which the general and excess liability
limits of public liability insurance maintained by or on behalf of the Company
pursuant to Section 12.1(b) of the Leases, in respect
15
<PAGE>
[Intercreditor Agreement]
of the current or any prior period (which prior periods shall not include any
period for which the statute of limitations for making claims has expired),
falls below $100,000,000 per occurrence or in the aggregate, and (ii) the amount
by which the deductible for such public liability exceeds $10,000,000, in each
case for which the Lessee shall, pursuant to Section 12.3(c) of each of the
Leases, have received a waiver by the respective Lessor in respect of the public
liability insurance coverage required thereunder. Notwithstanding the foregoing,
the Required Special Insurance Reserves Amount shall be zero if consented to by
each of the Owner Participants in writing.
"Required Special Reserves Amount" means the sum of:
--------------------------------
(i) if the Company is required to make any Required
Modifications to any Equipment, an amount with respect to each
Required Modification such that one-third of the total remaining 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 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 (in accordance with the Insurance Services
Standard) that there exists a reasonable likelihood that the Company
will be required to pay any claim not covered by existing insurance or
expenses not covered as a result of any insurance deductible, an
amount (to be payable in level installments commencing with the first
Monthly Transfer Date after the Insurance Manager shall have
determined (in accordance with the Insurance Services Standard) that
there exists a reasonable likelihood that such claim will be required
to be paid) that will result in (A) 100% of the applicable insurance
deductible or (B) such other amount (including legal costs) as the
Insurance Manager deems sufficient (in accordance with the Insurance
Services Standard) being on deposit in the Special Reserves Account by
the earliest date such claim or amount may be required to be paid (but
not later than the Final Termination Date).
"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.
"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.
16
<PAGE>
[Intercreditor Agreement]
"Scheduled Rent" means, as of any Rent Payment Date with respect to any
--------------
Lease, that portion of the accrued and unpaid Basic Rent which equals the
Scheduled Obligations Due (as defined in such Lease) thereunder.
"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.
"Services Standard" shall have the meaning assigned thereto in Section 3.1
-----------------
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 as amended and
restated as of September 1, 1998.
"Special Insurance Reserves Account" means the Account of that name
----------------------------------
established pursuant to Section 3.1 of 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 together with all other
amounts referred to in Section 11.2(ii) of such Lease (without duplication of
any amounts held in the Non-Shared Payments Account relating to such Event of
Loss) which will become due and payable with respect to such Event of Loss.
"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 usage
charges, delivery costs reimbursed by Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the
17
<PAGE>
[Intercreditor Agreement]
Customer as reimbursement, indemnity, fees or commissions, or on account of
assumed financial responsibility or liability or otherwise.
"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.
"Supplemental Rent" with respect to each Lease, has the meaning set forth
-----------------
in such Lease.
"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 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 any Lease Event of Default or Intercreditor Event of
-------------
Default.
"Trust Agreements" shall mean those three certain Trust Agreements (GARC II
----------------
98-A), (GARC II 98-B) and (GARC II 98-C), each dated as of September 1, 1998,
between the related Owner Participant and Wilmington Trust Company.
"Trust Indenture" or "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.
"Units" or "Equipment" means, 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 item thereof which become the property
of an Owner Trustee pursuant to the terms of a Bill of Sale or a Lease, or
individually each such item.
18
<PAGE>
[Intercreditor Agreement]
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
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 (but with
respect to any Non-Shared Payment, only for the applicable Beneficiary to whom
such Non-Shared Payment relates), (b) the Accounts, including, without
limitation, any securities purchased with funds on deposit therein, and all
income from the investment of funds therein (but (i) excluding the Special
Insurance Reserves Account and the Post Lease Term Reserve Account and (ii) with
respect to any sub-account of the Non-Shared Payments Account or Stipulated Loss
Value Deficiency Account, only for the applicable Beneficiary to whom such sub-
account relates, and (iii) with respect to the Special Insurance Reserves
Account, only for the Owner Participants to secure amounts payable pursuant to
Section 3.7(b) hereof) 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 to the Beneficiaries 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 duties created hereby in accordance with the provisions hereof and
agrees to hold and administer all Collateral 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 Car Service
Contracts 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
Collateral Agent by this Agreement or any law relating to the creation and
perfection of liens on, and security interests in, the Collateral.
19
<PAGE>
[Intercreditor Agreement]
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 Sections
3.13 and 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
(provided the Collateral Agent shall not be deemed to have knowledge of same
absent written notice received by a Responsible Officer of 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 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 on advice of
20
<PAGE>
[Intercreditor Agreement]
counsel 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 record
keeping. 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 Car Service Contracts will be maintained by the Manager on behalf of the
Collateral Agent.
(b) 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 Company may direct, upon being requested to do so by the
Company, that the relevant Collateral is no longer subject to the Security
Interests. Any
21
<PAGE>
[Intercreditor Agreement]
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.
Section 2.7. Termination and Release of Rights. (a) On the Termination
---------------------------------
Date with respect to any Beneficiary, but subject to Section 3.13 hereof, 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, but subject to Section 3.13
hereof, the rights, remedies, powers, duties, authority and obligations
conferred upon the Collateral Agent (except its rights pursuant to Sections
5.2(e) and 5.4) 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,
but subject to Section 3.13 hereof, 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 Collateral to the Company and to issue confirmation, to
such Persons as the Company may direct, 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 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;
(h) Special Insurance Reserves Account;
(i) Non-Shared Payments Account; and
(j) Post Lease Term Reserve Account.
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[Intercreditor Agreement]
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) 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.
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 not less than two Business
Days before the applicable Payment Date on which any Non-Shared Payment is to be
distributed in accordance with the Operative Agreement pursuant to which it is
to be received. Such notice shall set out (i) the total amount in respect of
which such Non-Shared Payment is being distributed, 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 Loan
Documentation or Lease shall be recalculated following such distribution to
reflect the Basic Rent payments then payable over the remaining term of the
applicable Lease or Assumed Debt.
23
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[Intercreditor Agreement]
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, relying
solely on 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 Car Service Contracts 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 (1), 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 Lease Event of Default shall have occurred and be continuing
during any time when Lessee Parent is the Manager, then the Base Component
of the fee payable pursuant to the Management Agreement shall be paid
pursuant to clause (13) 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 (2), 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
(2);
(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 Loan Documentation, 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 or are not
then being satisfied from the Special Reserves Account and (b) any amounts
that have been previously requested pursuant to this clause (3) and not
paid, less amounts, if any, then on deposit in the Special Reserves Account
and being applied 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 (3),
the Collateral Agent shall make up such insufficiency first by withdrawing
an amount equal to such
24
<PAGE>
[Intercreditor Agreement]
insufficiency from the Cash Trapping Account and then from the Liquidity
Reserve Account, if necessary, and transferring such amount pursuant to
this clause (3); provided, further, that if the aggregate of all amounts
available for transfer pursuant to this clause (3) shall continue to be
insufficient to make all transfers required pursuant to this clause (3),
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 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 Lessor 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 Loan Documentation 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 a Lease Event of Default with respect to such
Assumed Debt), and (c) without duplication of amounts specified above in
this clause (4), to each Lessor Agent and each Lender Agent any amounts
pursuant to this clause (4) 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
(4), 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 (4), provided, further, that if the
aggregate amount available for transfer pursuant to this clause (4) shall
continue to be insufficient to make all transfers required pursuant to this
clause (4), 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 amount due pursuant to this clause
(4) related to each Agent bears to the total amount due under this clause
(4) to all such Agents on such Monthly Transfer 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 (5), 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
25
<PAGE>
[Intercreditor Agreement]
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 insufficiency by withdrawing from the Liquidity Reserve
Account, an amount which, after making the other transfers required
pursuant to this clause (5), 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 (6), 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
any Scheduled Rent 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, (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 (4)(b) above) and (c) without duplication of amounts
specified above in this clause (7), to each Lessor Agent and Lender Agent
any amounts pursuant to this clause (7) 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 (7), 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 (7); provided, further, that if the aggregate
amount available for transfer pursuant to this clause (7) shall continue to
be insufficient to make all transfers required pursuant to this clause (7),
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 amount due pursuant to this clause (7) related to each
Agent bears to the total amount due under this clause (7) to all such
Agents on such Monthly Transfer Date;
(8) (a) to each Lessor Agent an amount sufficient to pay
the Accumulated Equity Deficiency Amount under 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 the
Accumulated Equity Deficiency Amount
26
<PAGE>
[Intercreditor Agreement]
due or to become due pursuant to its related Lease on or before such
Monthly Transfer Date, and (b) without duplication of amounts specified in
this clause (8), to each Lessor Agent any amounts pursuant to this clause
(8) 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 (8), 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 (8), provided,
further, that if the aggregate amount available for transfer pursuant to
this clause (8) shall continue to be insufficient to make all transfers
required pursuant to this clause (8), then the Collateral Agent shall
transfer the amounts then available for transfer pro rata among the Lessor
Agents in the same proportion that the amount due pursuant to this clause
(8) related to each Lessor Agent bears to the total amount due under this
clause (8) to all such Lessor Agents on such Monthly Transfer 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 (9), 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 Lender Documents, Lease or Loan
Documentation 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 (10), 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;
(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
27
<PAGE>
[Intercreditor Agreement]
to pay (a) Category 3 Supplemental Expenses due or to become due pursuant
to any Company Document or any 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 (12), 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) unless a "Manager Default" (as defined in the
Management Agreement) has occurred and is continuing, 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 (2) of this Section
3.4 as a result of a Lease Default or Lease Event of Default having
occurred and continuing during a time when Lessee Parent 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 Base
Component or Incentive Component of the Management Fee previously certified
and not paid;
(14) to the Special Insurance 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 Insurance Reserves Amount; and
(15) 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, the Special
Insurance 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, the Required Special
Insurance Reserves Amount and the Required Cash Trapping Amount,
respectively and (b) no Lease Default described in Section 14(a), 14(b),
14(g) or 14(h) of the Lease or Lease Event of Default shall have occurred
and be continuing, to the Excess Cash Account any remaining amounts on
deposit in the Collection Account; provided that if any Lease Default
described in Section 14(a), 14(b), 14(g) or 14(h) of the Lease or Lease
Event of Default 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 or
- ------------------
Loan Documentation 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 Amount under such Lease if by the 120th day following
28
<PAGE>
[Intercreditor Agreement]
the occurrence of such Event of Loss the Stipulated Loss Value applicable to
such Event of Loss and all other amounts referred to in Section 11.2(ii) of the
applicable Lease 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 and all
other amounts referred to in Section 11.2(ii) of the applicable Lease 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, provided that following the payment in full of the
aggregate outstanding principal of and accrued interest on and other amounts, if
any, due in respect of, the Equipment Notes and the release of the Indentures,
amounts in the Liquidity Reserve Account may on each Monthly Transfer Date and
following application pursuant to Section 3.4, be applied to satisfy any
shortfall under clauses (8) through (10), inclusive, and clause (12) of Section
3.4, based upon the order of priorities specified therein.
Section 3.7. Application of Amounts in the Special Reserves Account and
----------------------------------------------------------
Special Insurance Reserves Account. (a) 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 claims not covered
by existing insurance or expenses not covered as a result of any insurance
deductibles pursuant to the Company's insurance policies upon certification by
an Authorized Representative of the Company; and
(b) Amounts on deposit in the Special Insurance Reserves Account shall
upon certification by an Authorized Representative of the Company be made
available to the relevant Owner Participant in respect of any Claim of such
Owner Participant under Section 7.2 of the related Participation Agreement
(after giving effect to any contest rights contained therein) which (after
application of any other amounts held in any other Account in respect of such
Claim) remains unpaid for a period of 30 days following notice of such Claim to
the Company but only to the extent the unpaid portion of such Claim would, but
for any reduction in the required insurance coverages pursuant to the provisions
of Section 12.3(c) of the related Lease, have been covered by the insurances
required to be maintained by the Company pursuant to Section 12 of such Lease
pursuant to the Company's insurance policies. Notwithstanding anything in this
Agreement to the contrary, on each Monthly Transfer Date the Company shall have
the right to withdraw any amounts on deposit in the Special Insurance Reserves
Account to the extent such amount exceeds the Required Special Insurance
Reserves Amount, if any, free and clear of any Security Interests.
Section 3.8. Release of Amounts in Cash Trapping Account. On each
-------------------------------------------
Monthly Transfer Date, amounts on deposit in the Cash Trapping Account shall be
applied as provided in
29
<PAGE>
[Intercreditor Agreement]
Section 3.4. In addition, provided that no Cash Trapping Event or Cash Trapping
Hold shall exist on such Calculation Date, on the first Calculation Date
following a Cash Trapping Event where there exists amounts on deposit in the
Cash Trapping Account in excess of the amount which is the then applicable
Required Cash Trapping Amount, such excess shall be released from the Cash
Trapping Account in 12 equal installments commencing on such Calculation Date,
and on each of the next 11 succeeding Calculation Dates (each such installment
shall be transferred by the Collateral Agent to the Collection Account for
application on the next succeeding Monthly Transfer Date); provided, however
that: (i) if on one of the 11 succeeding Calculation Dates a Cash Trapping Event
shall exist, such releases shall cease and shall not be resumed until the
conditions of this sentence prior to this proviso are satisfied (and when such
conditions are satisfied the releases shall resume based upon a new schedule of
12 equal installments), and (ii) if on any such Monthly Transfer Date other
amounts are applied from the Cash Trapping Account in accordance with Section
3.4, such other amounts applied shall reduce the amounts that would otherwise be
released hereunder (and to the extent such applied amounts exceed the amount to
be currently released shall be applied to reduce future releases as and when
such amounts would otherwise be released). After the payment in full of the
aggregate outstanding principal of and accrued interest on the Equipment Notes
and the release of the Indentures, amounts in the Cash Trapping Account may on
each Monthly Transfer Date and following application in accordance with Section
3.4, be applied (in addition to the existing clauses under Section 3.4 for which
such amounts may be applied) to satisfy any shortfall under clauses (10) and
(12) of Section 3.4 (but solely in respect of amounts owing to the Owner
Participants), based upon the order of priorities specified therein.
Section 3.9. Application of Amounts in Excess Cash Account. So long as
----------------------------------------------
no Lease Default described in Section 14(a), (b), (f) or (g) of the Lease or
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
-----------------------------
shall be held 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 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 later than the fifth Business
----------------------
Day of each month before, an Authorized Representative of each Lender Agent and
Lessor Agent shall certify
30
<PAGE>
[Intercreditor Agreement]
to the Collateral Agent in writing, the amounts owed pursuant to each clause of
Section 3.4, other than amounts which are reported in the Monthly Report based
upon the Manager's knowledge of amounts due and owing, 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 the
Pegasus U.S. Government Cash Management 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 any 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. Notwithstanding the payment in full of all amounts then due in
- -----------
respect of all Secured Obligations, the Collateral Agent shall, following the
later to occur of the date of such payment and the return of all of the Units to
be returned under any Lease, in accordance with the terms thereof, deposit in
the Post Lease Term Reserve Account funds in the amount of $8,000,000, which
deposit shall be funded by transferring amounts from the Accounts (other than
the Special Reserves Account and the Special Insurance Reserves Account), such
funds to be held as collateral security solely for the benefit of each Lessor
and Owner Participant to secure any and all obligations of Lessee to such
parties which may arise or become known during the period, all of which shall be
deemed to be "Secured Obligations" hereunder. Such amount shall be held
hereunder (except as expressly provided herein) under the same terms and
conditions as shall be applicable to the Liquidity Reserve Account, and shall be
released by the Collateral Agent only upon certification to the Collateral Agent
by an Authorized Representative of any Owner Participant that an amount secured
thereby is owing and unpaid. With respect to (a) the initial funding of the Post
Lease Term Reserve Account, all amounts remaining in any Account (other than the
Post Lease Term Reserve Account, the Special Reserves Account and the Special
Insurance Reserves Account) established in Section 3.1, and (b) the expiration
of 36 months after the initial funding of the Post Lease Term Reserve Account,
all amounts remaining in the Post Lease Term Reserve Account; the amounts
referred to in (a) and (b) shall, at such time and after the payment in full of
all other amounts due and owing by the Company, at the written direction of the
Company be paid by the Collateral Agent to or upon the order of the Company;
provided that, if a Responsible Officer (as defined in each Lease) of the
Company or the Manager has actual knowledge of any occurrence, event or claim
which would give rise to an obligation on the
31
<PAGE>
[Intercreditor Agreement]
part of the Company to pay any amounts pursuant to the Leases or Section 7 of
the Participation Agreements, then only such amounts as are in excess of the
amounts reasonably expected to be required to satisfy such obligations (such
amounts to be agreed to by the applicable Owner Participants acting in good
faith and after taking into account any amounts on deposit in the Special
Reserves Account which are being held for such purpose) shall be released;
provided further that the Company may, following the initial funding of the Post
Lease Term Reserve Account, in lieu of maintaining the amounts in the Post Lease
Term Reserve Account, provide an indemnity in favor of each Lessor and Owner
Participant (such indemnity to be reasonably satisfactory in form and scope to
the Owner Participants and at least as extensive as Lessee's indemnities set
forth in Section 7 of the Participation Agreements) from Lessee Parent, covering
the ongoing obligations of the Company under the Leases and Section 7 of the
Participation Agreements whereupon all amounts remaining in any Account shall be
paid to the order of the Company as aforesaid Amounts, if any, in the Special
Reserve Account shall remain on deposit therein and be applied as provided in
Section 3.7(a).
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.
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, (i) until a Lease Event of Default
shall have occurred, the Collateral Agent shall administer the Collateral in the
manner contemplated by this Agreement, including, in particular, Article 3
hereof, and (ii) upon the occurrence and continu-
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[Intercreditor Agreement]
uance of a Lease Event of Default, the Collateral Agent shall exercise such
rights and remedies with respect to the Collateral as are granted to it under
this Agreement and applicable law 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.
(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 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 or Loan Documentation and any other information that the
Collateral Agent may reasonably request.
Section 4.3. Actions Upon a Lease Event of Default. 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 any Lease Event of
Default (and, in the case of the Manager and the Insurance Manager, any Lease
Default) and of the occurrence of the termination of such Beneficiary's related
Lease or Loan Document 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 or Loan 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. Except in the case of the Manager and the Insurance Manager, no
Beneficiary shall be deemed to have knowledge or notice of the occurrence of any
Lease Event of Default until such Beneficiary has received a written notice of
such Lease Event of Default from the Company or any other Person, if any, for
whom such Beneficiary is acting as agent or trustee.
33
<PAGE>
[Intercreditor Agreement]
(b) The Company hereby agrees that if a Lease Event of Default shall
have occurred and is continuing, the Collateral Agent and any agent described in
Section 5.2 hereof is hereby 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 Lease Event of Default 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.
(b) If a Lease Event of Default 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 Lease Event of Default relating to a default by the Manager
under the Management Agreement shall have occurred and is continuing, and Lessee
Parent 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
34
<PAGE>
[Intercreditor Agreement]
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 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 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 Lease Event of
Default, 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
35
<PAGE>
[Intercreditor Agreement]
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 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 its obligations hereunder or thereunder. The Collateral Agent shall not
be under any obligation to any Beneficiary or any other Person 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 in good faith, 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 to have been signed, sent or made
by the proper Person or Persons and upon any opinion, 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, in the reasonable opinion of the Collateral Agent, would 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, and it shall not have received such advice or concurrence of the
Required Beneficiaries as it deems appropriate or (iii) if, in connection with
the taking of any such action, 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
Lease Event of Default unless and until a Responsible Officer of the Collateral
Agent has received a written notice or a certificate from a Beneficiary stating
that a Lease Event of Default 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
36
<PAGE>
[Intercreditor Agreement]
inquire whether a Lease Event of Default 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 Lease Event of Default,
the Collateral Agent shall give notice thereof to the Beneficiaries. Subject to
this Section 5.2, the Collateral Agent shall take such action with respect to
such Lease Event of Default 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 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
37
<PAGE>
[Intercreditor Agreement]
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, including this
Agreement, 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 this Agreement or the
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 and Section 5.2(e) above, the former Collateral Agent's rights,
powers and duties as Collateral Agent shall be terminated, without any other 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
38
<PAGE>
[Intercreditor Agreement]
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 Units 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
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
39
<PAGE>
[Intercreditor Agreement]
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) All filings, recordings, registrations and other actions have been
made, obtained and taken in all relevant jurisdictions in the United States that
are necessary to create and perfect the Liens in all right, title, estate and
interest of the Company in the Collateral (other than the Car Service
Contracts), 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 Car Service Contracts. On or before October 12,
1998, all obligors of the Collateral will have been duly instructed by invoice
or otherwise to make payments only to the 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:
40
<PAGE>
[Intercreditor Agreement]
(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 Car Service Contracts 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 GARC II SUBI Certificate (as defined in the
Servicing Agreement) evidencing an undivided 100% interest in the GARC II SUBI
Portfolio of General American 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 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
forthwith give notice in writing to the Collateral Agent of any breach by the
Company 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
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<PAGE>
[Intercreditor Agreement]
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 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 (excluding the Car Service Contracts). The Company will
execute such further documents and do all acts and things as the Collateral
Agent may reasonably require at any time or times to give effect to the Company
Documents.
(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 (excluding the Car Service Contracts) unless r
(i) 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.
(j) 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 (excluding the Car
Service Contracts) 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.
(k) Subsidiaries. Except with the consent of the Required
------------
Beneficiaries, the Company will not have or establish any subsidiaries.
(l) 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, in each case except out of funds available to the
Company pursuant to Section 3.9.
(m) Business Restrictions. The Company shall not engage in any
---------------------
business activity other than leasing and subleasing the Units pursuant to the
Leases and the Car Service Contracts, maintaining the insurance provided for in
the Insurance Agreement relating to the
42
<PAGE>
[Intercreditor Agreement]
Units, 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.
(n) 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, (iii) advances as may be made in the ordinary course of
business in favor of Sublessees under the Car Service Contracts, and (iv)
investments of funds as provided in Section 3.12.
(o) 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 Car Service
Contract) 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.
(p) 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.
(q) Dealings with Stock. The Company shall not issue, deliver or sell
-------------------
any additional shares or other capital stock of the Company, except to Lessee
Parent.
(r) Constituent Documents. The Company shall not amend, modify or
---------------------
supplement its By-laws and Certificate of Incorporation without the consent of
the Required Beneficiaries.
(s) Directors' Remuneration. The Company shall not pay any fees to
-----------------------
its directors other than its independent directors.
(t) 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.
(u) 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
43
<PAGE>
[Intercreditor Agreement]
necessary, take any steps required of it in connection with the appointment of
any Successor Insurance Manager thereunder.
(v) 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.
(w) 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 and other than investments permitted
under the definition of Permitted Investments, 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.
(x) 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 Units, the Car Service Contracts 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 Car Service Contracts, to
enter into new or additional Car Service Contracts and to release Sublessees
from all or any part of their obligations under Car Service Contracts, 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 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.
44
<PAGE>
[Intercreditor Agreement]
(d) pay its own expenses and liabilities and pay the salaries of its
own employees, if any, from its own funds.
(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 (subject to Section 6.2(b) of
the Management Agreement) 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 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 Accounts.
(p) conduct its business in its own name.
45
<PAGE>
[Intercreditor Agreement]
Section 6.4. Operation of Units; Leases. The Company covenants with the
--------------------------
Collateral Agent and the Beneficiaries as follows with respect to the operation
of each 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 Units 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 Units, or (ii) materially adversely
affect the rights or interests of any Lessor or Indenture Trustee in their
respective Units or under their respective Leases, (iii) otherwise expose any
Lessor, Indenture Trustee or their respective Participant to criminal sanctions
or (iv) release the Company from the obligation to return the Units in
compliance with the applicable provisions of any Lease.
(b) 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 Intercreditor 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,
and all other amounts payable under such Lease in connection therewith shall be
available to the Company from (a) the proceeds from the sale of such Units, (b)
insurance proceeds (c) a capital contribution from Lessee Parent, or (c) monies
available to the Company from the Excess Cash Account.
(c) 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
Lessee Parent.
(d) Additional Leases. The Company shall not enter into any lease or
-----------------
related documents other than the Leases, the Operative Agreements, the Company
Documents and the Car Service Contracts 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
46
<PAGE>
[Intercreditor Agreement]
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.
(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.
47
<PAGE>
[Intercreditor Agreement]
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.
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
48
<PAGE>
[Intercreditor Agreement]
If to the Company:
General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
Fax No.: (312) 621-6270
Confirmation No.: (312) 621-6451
If to any Initial Indenture Trustee:
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attention: Corporate Trust Services Division
Fax No.: (617) 664-____
Confirmation No.: (617) 664-____
If to any Initial Owner Trustee:
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Fax No.: (302) 651-8882
Confirmation No.: (302) 651-1000
If to the Manager:
General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Re: GARC II
Fax No.: (312) 621-6645
Confirmation No.: (312) 621-6200
If to the Insurance Manager:
General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Re: GARC II
49
<PAGE>
[Intercreditor Agreement]
Fax No.: (312) 621-6645
Confirmation No.: (312) 621-6200
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. 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 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 Operative Agreement or
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.
50
<PAGE>
[Intercreditor Agreement]
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
(provided, however, that the execution of any such amendment or waiver by the
Company, the Manager and the Insurance Manager shall be required only if such
amendment or waiver is adverse to such party or to any of its rights or
interests under any of the Operative Agreements), which consents from all such
par ties 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 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 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
51
<PAGE>
[Intercreditor Agreement]
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 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.
* * *
52
<PAGE>
[Intercreditor Agreement]
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:___________________________________
STATE STREET BANK AND TRUST COMPANY,
as the Initial Indenture Trustee (GARC II 98-A)
By:______________________________________
Name:____________________________________
Title:___________________________________
53
<PAGE>
[Intercreditor Agreement]
GARC II 98-A RAILCAR TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as trustee
as the Initial Owner Trustee (GARC II 98-A)
By:______________________________________
Name:____________________________________
Title:___________________________________
STATE STREET BANK AND TRUST COMPANY,
as the Initial Indenture Trustee (GARC II 98-B)
By:______________________________________
Name:____________________________________
Title:___________________________________
GARC II 98-B RAILCAR TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as trustee
as the Initial Owner Trustee (GARC II 98-B)
By:______________________________________
Name:____________________________________
Title:___________________________________
STATE STREET BANK AND TRUST COMPANY,
as the Initial Indenture Trustee (GARC II 98-C)
By:______________________________________
Name:____________________________________
Title:___________________________________
54
<PAGE>
[Intercreditor Agreement]
GARC II 98-C RAILCAR TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as trustee
as the Initial Owner Trustee (GARC II 98-C)
By:______________________________________
Name:____________________________________
Title:___________________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as the Collateral Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
55
<PAGE>
[Intercreditor Agreement]
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 September 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.
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
1
<PAGE>
[Intercreditor Agreement]
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>
[Intercreditor Agreement]
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>
[Intercreditor Agreement]
Annex B
[FORM OF LOCKBOX CHANGE NOTICE]
[To Come]
4
<PAGE>
[Intercreditor Agreement]
Schedule 1
GATC Affiliates Whose Railcars are Excluded from
Definition of GATC Fleet
1
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF VEDDER PRICE]
September 21, 1998
General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Re: Registration Statement on Form S-3
Pass Through Certificates, Series 1998-1
Equipment Notes, Series 98-A, 98-B and 98-C
Ladies and Gentlemen:
We have acted as special counsel to General American Railcar Corporation
II, a Delaware corporation (the "Company"), in connection with the preparation
and filing with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), of a Registration Statement
on Form S-3 (Registration No. 333-58731), as amended by Amendment Nos. 1 and 2
thereto (the "Registration Statement"). The Registration Statement relates to
up to $167,000,000 aggregate principal amount of Pass Through Certificates (the
"Pass Through Certificates) and up to $160,000,000 aggregate principal amount
of Equipment Notes to be issued under three separate indentures (the "Equipment
Notes"). The Pass Through Certificates will be issued under a Pass Through
Trust Agreement to be entered into by and between the Company and State Street
Bank and Trust Company, as Trustee (the "Trustee"), substantially in the form
filed as Exhibit 4.1 to the Registration Statement as supplemented by a Trust
Supplement relating to the Pass Through Certificates (as supplemented, the
"Agreement"). The Equipment Notes will be issued under three separate Trust
Indenture and Security Agreements, each relating to a separate Owner Trust, to
be dated as of September 1, 1998, in each case by and between Wilmington Trust
Company, a Delaware banking corporation, not in its individual capacity but
solely as owner trustee (an "Owner Trustee"), and State Street Bank and Trust
Company, as indenture trust (an "Indenture Trustee"), substantially in the form
of Exhibit 4.4 (each such indenture, a "Trust Indenture"). All capitalized
terms used herein and not otherwise defined have the meanings specified in such
Exhibits 4.1 and 4.4, as the case may be.
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
documents, certificates and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion
<PAGE>
Vedder Price
General American Railcar Corporation II
September 21, 1998
Page 2
expressed below. Moreover, as to certain facts material to the opinions
expressed herein, we have relied upon representations and warranties contained
in the documents referred to in this paragraph.
Based upon the foregoing, and subject to the assumptions, exceptions and
qualifications set forth below, we are of the following opinion with respect to
Pass Through Certificates and Equipment Notes:
1. The execution and delivery by the Company of the Agreement has been
duly authorized by the Company. Assuming the due execution and
delivery by the Company of the Agreement and the due authorization,
execution, issuance, authentication and delivery of the Pass Through
Certificates by the Trustee in accordance with the terms of the
Agreement and assuming the due authorization, execution and delivery
of the Agreement by the Trustee, the Pass Through Certificates, when
issued and sold in accordance with the terms of the Prospectus which
constitutes part of the Registration Statement, will constitute valid
and binding obligations of the Trustee entitling the holders thereof
to the benefits of the Agreement.
2. Assuming due authorization, execution, and delivery by each Owner
Trustee and the related Owner Participant of the related Trust
Indenture, and assuming satisfaction of all conditions required under
the Trust Indenture, the issuance, execution and delivery by the
applicable Owner Trustee of the Equipment Notes of each series will be
duly authorized.
3. The Equipment Notes of each series will, when duly executed and
delivered by the related Owner Trustee, duly authenticated by the
related Indenture Trustee and issued and sold as described in the
Prospectus which constitutes part of the Registration Statement,
constitute valid and legally binding obligations of the Owner Trustee
entitling the holders thereof to the benefits of the related Trust
Indenture.
In rendering the foregoing opinion with respect to the Pass Through
Certificates, we have relied on the opinion of Bingham Dana LLP, counsel to the
Trustee, filed as Exhibit 5.2 to the Registration Statement, with respect to all
matters opined to therein, and our opinion is subject to all the assumptions
contained in such opinion. In addition, in regard to the interpretation and
enforceability of each Agreement we have assumed that the substantive laws of
the State of New York, which are the applicable governing laws for the
Agreements, are the same as the laws of the State of Illinois. The foregoing
opinions in paragraphs (1) and (3) regarding enforceability
<PAGE>
Vedder Price
General American Railcar Corporation II
September 21, 1998
Page 3
are subject to (i) applicable bankruptcy, insolvency, moratorium,
reorganization, receivership, fraudulent conveyance and similar laws relating
to or affecting the rights and remedies of creditors generally, and (ii)
principles of equity (regardless of whether such enforceability is considered
and applied in a proceeding in equity or at law). No opinion is expressed as
to the perfection or priority of any security interests or as to title to any
part of the Indenture Estate.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, the use of our name in the third paragraph under the
caption "Federal Income Tax Considerations" in the Prospectus relating to the
Pass Through Certificates which constitutes part of the Registration
Statement, under the caption "Certain Illinois Taxes" and under the caption
"Legal Matters" in such Prospectus. In giving such consent, we do not hereby
concede that we are within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ VEDDER, PRICE, KAUFMAN &
KAMMHOLZ
<PAGE>
Exhibit 5.2
September 21, 1998
General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Re: Registration Statement on Form S-3
Pass Through Certificates, Series 1998-1
Ladies and Gentlemen:
We are acting as special counsel to State Street Bank and Trust Company,
individually ("SSB"), and as Pass Through Trustee (the "Pass Through Trustee")
under the Pass Through Trust Agreement, dated as of _______________, 1998 (the
"Agreement"), between General American Railcar Corporation II (the "Company")
and the Pass Through Trustee. Pursuant to the Agreement and one or more
supplemental agreements to be entered into from time to time between the Company
and the Pass Through Trustee, the Pass Through Trustee will execute,
authenticate and deliver, upon the Company's request, Pass Through Certificates
in one or more series in an aggregate principal amount of up to $167,000,000.00
("Pass Through Certificates"), to be registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act"), under
the Company's Registration Statement on Form S-3 (File No. 333-58731) (the
"Registration Statement"). Except as otherwise defined herein, terms used
herein shall have the meanings set forth in the Agreement.
Our representation of the Pass Through Trustee has been as special counsel
for the purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied entirely upon (i) the representations of
the parties set forth in the Operative Agreements and (ii) certificates
delivered to us by the management of SSB and have assumed, without independent
inquiry, the accuracy of those representations and certificates.
We have examined the Agreement, the Pass Through Certificates, the
Certificate of the Massachusetts Commissioner of Banks as to SSB, and originals,
or copies certified or otherwise identified to our satisfaction, of other such
records, documents, certificates, or other instruments as we have deemed
necessary or advisable for the purposes of this opinion.
<PAGE>
Page 2
We have assumed the genuineness of all signatures (other than those on
behalf of SSB and the Pass Through Trustee), the conformity to the originals of
all documents reviewed by us as copies, the authenticity and completeness of all
original documents reviewed by us in original or copy form and the legal
competence of each individual executing any document (other than on behalf of
SSB and the Pass Through Trustee).
Each opinion set forth below relating to the enforceability of any
agreement or instrument against the Pass Through Trustee, is subject to the
following general qualifications:
(i) as to any agreement to which the Pass Through Trustee, as applicable,
is a party, we assume that such agreement is the legal, valid and binding
obligation of each other party (other than the Pass Through Trustee) thereto;
(ii) the enforceability of any obligation of the Pass Through Trustee may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, marshalling and other similar laws and rules of law affecting the
enforcement generally of creditors' rights and remedies (including such as may
deny giving effect to waivers of debtors' or guarantors' rights); and
(iii) the enforcement of any rights and the availability of any specific
or equitable relief of any kind may in all cases be subject to an implied duty
of good faith and to general principles of equity (regardless of whether such
enforceability or relief is considered in a proceeding at law or in equity).
Subject to the limitation set forth below, we have made such examination of
law as we have deemed necessary for the purposes of this opinion. The opinions
set forth in paragraphs 1 and 2 below are based on and limited to the Federal
laws of the United States and the internal substantive laws of the Commonwealth
of Massachusetts and the opinion set forth in paragraph 3 below is based on and
limited to the internal substantive laws of the Commonwealth of Massachusetts.
No opinion is expressed herein as to the application or effect of federal
securities laws or as to the securities or so-called "Blue Sky" laws of any
state or other jurisdiction. In addition, no opinion is expressed as to matters
governed by any law, statute, rule or regulation of the United States relating
to the acquisition, ownership, registration, use, operation, maintenance,
repair, replacement or sale of or the nature of the Equipment.
<PAGE>
Page 3
With your permission, with respect to paragraph 2 below in connection with
our opinion relating to the legality, validity and binding effect of the
documents there referred to, to the extent that the laws of the Commonwealth of
Massachusetts do not govern such documents, we have assumed that the laws of the
jurisdictions whose laws govern such documents are not materially different from
the internal substantive laws of the Commonwealth of Massachusetts.
Based on and subject to the foregoing, we are of the opinion that:
1. State Street Bank is a Massachusetts trust company duly organized and
validly existing in good standing with the Massachusetts Commissioner of Banks
under the laws of the Commonwealth of Massachusetts with the power and authority
to execute, deliver and carry out, individually or as Pass Through Trustee, as
the case may be, the terms of the Agreement, the supplements contemplated
thereby and the Pass Through Certificates.
2. With respect to the Pass Through Certificates, when (a) supplemental
agreements contemplated by the Agreement shall have been prepared in accordance
with the terms of the Agreement, (b) the Agreement and such supplemental
agreements shall have been duly authorized, executed and delivered by the
Company and the Pass Through Trustee in accordance with the terms and conditions
of the Agreement, and (c) the Pass Through Certificates shall have been duly
executed, authenticated, issued and delivered by the Pass Through Trustee and
sold as contemplated by each of the Registration Statement, the Prospectus and
the Agreement as so supplemented, assuming that the terms of the Pass Through
Certificates are in compliance with then applicable law, (i) the Agreement, as
so supplemented will constitute a valid and binding obligation of the Pass
Through Trustee enforceable against the Pass Through Trustee in accordance with
its terms, and (ii) the Pass Through Certificates will be validly issued and
will be entitled to the benefits of the Agreement as so supplemented.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to us under the captions "Legal
Matters" in the prospectus and in any subsequently filed prospectus supplements.
In giving this consent, we do not thereby admit that we are in the category of
person whose consent is required under Section 7 of the 1933 Act or the Rules
and Regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ Bingham Dana LLP
--------------------
BINGHAM DANA LLP
<PAGE>
EXHIBIT 10.1
FORM OF
-------------------------
OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT (GARC II)
Dated as of September 1, 1998
between
GENERAL AMERICAN RAILCAR CORPORATION II
and
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager
Tank Cars and Covered Hopper Cars
-------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1.
DEFINITIONS
SECTION 2.
APPOINTMENTS AND DUTIES OF MANAGER
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............................... 8
Section 3.3. Event of Loss; Replacement Units.................... 8
Section 3.4. Similar Services.................................... 9
Section 3.5. Custody of Documents................................ 9
Section 3.6. No Greater Standards................................ 9
SECTION 4.
MODIFICATIONS
Section 4.1. Required Modifications.............................. 9
Section 4.2. Optional Modifications.............................. 10
SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
Section 5.1. Compensation of the Manager......................... 11
Section 5.2. Base Component...................................... 11
Section 5.3. Incentive Component................................. 12
Section 5.4. Reimbursable Services............................... 12
SECTION 6.
PAYMENTS
Section 6.1. Receipt of Payments................................. 13
Section 6.2. Lockboxes; Payments................................. 13
Section 6.3. Successor Lockbox Trustee........................... 15
Section 6.4. Mileage Credits..................................... 16
ii
<PAGE>
SECTION 7.
REPORTS AND INFORMATION
Section 7.1. Monthly Reports..................................... 17
Section 7.2. Annual Reports...................................... 17
Section 7.3. Equipment Reports................................... 17
Section 7.4. Compliance Information.............................. 17
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................................................ 19
Section 8.2. Termination of Manager for Default.................. 19
Section 8.3. Remedies Upon Default............................... 20
Section 8.4. Replacement of the Manager.......................... 21
Section 8.5. Merger or Sale...................................... 21
SECTION 9.
INDEMNIFICATION
Section 9.1. Indemnification by Manager.......................... 22
Section 9.2. Indemnification by Company.......................... 22
Section 9.3. Claims Excluded..................................... 22
Section 9.4. Third Party Claims.................................. 23
Section 9.5. Cooperation......................................... 23
Section 9.6. Survival............................................ 24
SECTION 10.
REPRESENTATIONS AND WARRANTIES
Section 10.1. Representations of Company.......................... 24
Section 10.2. Representations of Manager.......................... 25
SECTION 11.
MISCELLANEOUS
Section 11.1. Table of Contents and Headings...................... 26
Section 11.2. The Manager as Independent Contractor............... 26
Section 11.3. Relations Among Parties............................. 26
Section 11.4. Governing Law....................................... 26
Section 11.5. Notices............................................. 26
iii
<PAGE>
Section 11.6. Entire Agreement; Amendment; Waivers............... 27
Section 11.7. Assignment......................................... 27
Section 11.8. Further Assurances................................. 28
Section 11.9. Third Party Beneficiary............................ 28
Section 11.10. Counterparts....................................... 28
Section 11.11. Severability....................................... 28
Section 11.12. No Petition in Bankruptcy.......................... 29
APPENDICES AND SCHEDULES
Schedule 1 -- Description of Equipment
Schedule 5.4 -- Average Tax per Unit Adjustment Factor
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
iv
<PAGE>
OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT (GARC II)
THIS OPERATION, MAINTENANCE, SERVICING AND REMARKETING AGREEMENT (GARC II)
(this "Agreement"), dated as of September 1, 1998, is made and entered into
between General American Transportation Corporation, a New York corporation,
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 ("Lessee Parent"), (i) certain railroad tank
cars and covered hopper cars, as such railcars are more fully described in
Schedule 1 to this Agreement, and (ii) all of Lessee Parent's right, title and
interest in and to the lease agreements respecting such railcars in which Lessee
Parent is the lessor, such lease agreements being with customers of Lessee
Parent (such lease agreements and future lease agreements entered into by the
Manager on behalf of the Company respecting the Equipment (as hereinafter
defined) pursuant to this Agreement are hereinafter referred to as "Car Service
Contracts" and such customers and future customers under Car Service Contracts
at any given time are hereinafter referred to as "Customers").
B. The Company has sold the Equipment to Business Trust, Business Trust
and Business Trust, in each case by Wilmington Trust Company, as Owner Trustee
under three separate Trust Agreements, each dated as of September 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 September 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 defined
in each Lease), the Manager and the Insurance Manager have entered into a
Collateral Agency and Intercreditor Agreement dated as of September 1, 1998 (the
"Intercreditor Agreement") providing, among other things, for the distribution
of Collections (as defined in the Intercreditor Agreement) and the exercise of
certain rights of the Company under the Company Documents (as defined in each
Lease).
D. The Manager is engaged in the business of owning, leasing and managing
railcars for itself and others, and the Company desires to retain the Manager,
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 the Intercreditor 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 such Unit
becomes property of any Lessor 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 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 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.
2
<PAGE>
(b) Maintain the Equipment in all material respects (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 with manufacturer's warranties and all
applicable insurance policies; and (v) in compliance 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.
(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,
3
<PAGE>
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 applicable Lessor's right, title and interest in and to
such Unit, its rights under the related Lease and the rights of the applicable
Indenture Trustee.
(h) If a Unit 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 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 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.
4
<PAGE>
(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 in 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
applicable Lease.
(l) 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.
(m) 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.
(n) 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 Company, take the necessary action on behalf of the Company thereunder
in connection with any such renewal.
(o) Comply with the return provisions of any Lease with respect to
any Units which are being returned to the Lessor thereunder.
(p) Take such actions as the Manager shall deem necessary or
appropriate or as the Company shall request so that the Company shall be 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
5
<PAGE>
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.
(q) 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.
(r) 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.
(s) To the extent not otherwise specifically set forth above, take
such actions as the Manager shall deem necessary or appropriate or as the
Company shall request so that the Company shall be in compliance with its
obligations under any Lease, Participation Agreement, Car Service Contract or
other Operative Agreement or Company Document.
(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 at a level of
care and diligence as shall be required (i) in order for the Company to perform
its obligations under the Leases and the other Operative Agreements and (ii) in
any event consistent with customary commercial practice as would be used by a
prudent Person in the railcar leasing industry and the level of care and
diligence utilized by the Manager in its business and in the management of the
Manager's Fleet (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 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.
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(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 or managed by the Manager.
(d) 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 the payment of Basic Rent) 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.
(e) 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.
(f) The Manager shall not create or permit to exist any Lien on any
Unit other than a Permitted Lien.
7
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(g) 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.
(h) 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 expiration dates, Customers, credit quality, location, Customer
indemnities, Car Service Contract terms 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 and, except as expressly
permitted hereunder, shall not have characteristics which are not substantially
equivalent to those with respect to 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.
(i) 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 or adverse.
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
8
<PAGE>
the Manager receives in respect of such Event of Loss from such sources. The
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
9
<PAGE>
Company in a timely manner; provided, however, that the Manager may, on behalf
of the 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, on a non-discriminatory basis,
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.
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.
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
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<PAGE>
(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
(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
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<PAGE>
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 a certification by Manager that any
increase in the Unit Monthly Fee reflects increases in costs which are also
being incurred in respect of all similar railcars in Manager's Fleet and
such costs are being similarly charged to others whose railcars are being
managed by Manager under agreements pursuant to which the Manager provides
substantially similar services utilizing substantially similar payment
terms. The reasonableness of the amount of such cost increase (without
regard to whether its incurrence is appropriate) will, at an Owner
Trustee's request, be verified by a third party consultant or railcar
manager selected by the Owner Trustees and reasonably satisfactory to the
Manager.
(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 per Unit determined
for each calendar month, commencing January 1, 2000, which is equal to the
product of (x) .000238%, 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. Gross Sublease revenues shall be net of any write-offs and 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 either (i) 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), or (ii) where the Manager has established
a standard cost system used by the Manager for charging all or
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<PAGE>
substantially all of the third parties for whom it provides maintenance and
repair services described in this Section 5.4(a), such standard cost rate.
(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 Managed 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 services similar to any of the foregoing 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,
General American Railcar Corporation, and General American Railcar
13
<PAGE>
Corporation II" and such title may include other Persons for whom the Manager
manages railcars ("Additional Lockbox Parties"). The 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 (i)
amounts owing 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"), and (ii) 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
14
<PAGE>
identified as belonging to the Company or GATC. Such pro rata allocation will be
based on the original amounts billed to each such Customer with respect to the
Equipment and its railcars in the Total Managed 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 Additional Lockbox
Parties, 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
GATC will separately submit 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
15
<PAGE>
and to the extent that such deduction exceeds the amount due to GATC, any such
excess 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.
16
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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 substantially in the form
attached hereto as Schedule 7.2.
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 Total Managed 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 of
such quarter, setting forth in comparative form the figures for the
corresponding periods of the
17
<PAGE>
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 Lease Default (except as specified), and if
a Lease Default shall exist, specifying such Lease 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
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.
18
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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 all obligations of the Company
under any Operative Agreement have been satisfied or waived or assumed by the
Manager under an agreement in form and substance satisfactory to each of the
Owner Participants and the Indenture Trustees.
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 (each,
a "Manager Default"):
(a) If the Manager fails to perform any of its obligations under this
Agreement which failure materially and adversely affects the rights of the Owner
Trustees, the Owner Participants or the holders of any Equipment Notes (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 becomes aware of such failure,
including as a result of written notice from any Owner Trustee, Owner
Participant or the 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;
(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
19
<PAGE>
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, other than pursuant to this Agreement, the Manager shall
cease to be actively involved in the railcar management or maintenance
businesses;
(f) 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 ; 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 30 days after
receipt of notice from the Company or any Owner Trustee, Owner Participant or
Indenture Trustee 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 remediable or remedied only after all adverse
consequences thereof, if any, can be and have been remedied as applicable.
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
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 attorneys' 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.
20
<PAGE>
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 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 that such corporation meets the criteria applicable to a successor
manager set forth in Section 8.4. Any successor corporation resulting from such
merger or consolidation shall deliver to the Company, the Owner Trustees, the
Owner Participants and the Indenture Trustees an agreement, in form and
substance reasonable satisfactory to the Company, the Owner Trustees, the Owner
Participants and the Indenture Trustees, which is a legal, valid, binding and
enforceable assumption by such successor corporation, of the due and punctual
performance and observance of each covenant and condition of Manager under this
Agreement.
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;
21
<PAGE>
(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 or in any
other Operative 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 to the extent occurring or arising at a
time when the Company and the Manager are not Affiliates:
(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,
gross negligence, recklessness or willful misconduct of such indemnified Person.
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) which notice acknowledges
22
<PAGE>
that the indemnifying party is in fact liable in respect of such Claim;
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 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.
23
<PAGE>
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 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:
24
<PAGE>
(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 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.
25
<PAGE>
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 received, if 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
Re: GARC II
Facsimile No.: (312) 621-6270
Confirmation No.: (312) 621-6451
26
<PAGE>
If to the Manager: General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Re: GARC II
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, 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.
27
<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.
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.
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
28
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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.
* * *
29
<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:__________________________________
30
<PAGE>
Schedule 1
Description of Equipment
------------------------
<PAGE>
Schedule 5.4
Average Tax per Unit Adjustment Factor
--------------------------------------
<PAGE>
Schedule 6.2
Form of Lockbox Agreement with Lockbox Bank
-------------------------------------------
<PAGE>
Schedule 6.4
List of Marks
-------------
Type of
Mark Railcar
---- -------
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
<PAGE>
Schedule 7.1
Monthly Report Form
-------------------
<PAGE>
Schedule 7.2
Annual Report Form
------------------
<PAGE>
EXHIBIT 10.2
FORM OF
---------------------------------
ADMINISTRATIVE SERVICES AGREEMENT (GARC II)
Dated as of September 1, 1998
between
GENERAL AMERICAN RAILCAR CORPORATION II
and
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager
Tank Cars and Covered Hopper Cars
---------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Administrative Services....................................... 2
Section 2. Compensation of the Administrator............................. 3
Section 3. Term of Agreement............................................. 4
Section 4. The Administrator's Liability................................. 4
Section 5. Miscellaneous................................................. 4
</TABLE>
i
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT (GARC II)
THIS ADMINISTRATIVE SERVICES AGREEMENT (GARC II) (this "Agreement"), dated
as of September 1, 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
assigned thereto in that certain Collateral Agency and Intercreditor Agreement
dated as of September 1, 1998 among the Company, The First National Bank of
Chicago, as Collateral Agent, [BUSINESS TRUST], by Wilmington Trust Company, not
in its individual capacity but solely as trustee under the Trust Agreement (GARC
II 98-A), as Initial Owner Trustee (GARC II 98-A), [BUSINESS TRUST], by
Wilmington Trust Company, not in its individual capacity but solely as trustee
under the Trust Agreement (GARC II 98-B), as Initial Owner Trustee (GARC II
98-B), [BUSINESS TRUST], by Wilmington Trust Company, not in its individual
capacity but solely as trustee under the Trust Agreement (GARC II 98-C), as
Initial Owner Trustee (GARC II 98-C), The First National Bank of Chicago, as
Initial Indenture Trustee (GARC II 98-A), The First National Bank of Chicago, as
Initial Indenture Trustee (GARC II 98-B), The First National Bank of Chicago, as
Initial Indenture Trustee (GARC II 98-C), General American Transportation
Corporation, as Manager and General American Transportation Corporation, as
Insurance Manager (the "Intercreditor 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 ("Lessee Parent"), (i) certain railroad tank
cars and covered hopper cars, and (ii) all of Lessee Parent's right, title and
interest in and to the lease agreements respecting such railcars in which Lessee
Parent is the lessor, such lease agreements being with customers of Lessee
Parent;
WHEREAS, the Company has sold the Equipment to [Business Trust], [Business
Trust] and [Business Trust], in each case by Wilmington Trust Company, as Owner
Trustee under three separate Trust Agreements, each dated as of September 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 September 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;
<PAGE>
[Administrative Services Agreement (GARC II)]
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:
(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:
2
<PAGE>
[Administrative Services Agreement (GARC II)]
(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
(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 shall be necessary or appropriate
to permit or enable the Company to comply with its obligations under the Leases
and the other Operative Agreements and 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
3
<PAGE>
[Administrative Services Agreement (GARC II)]
mutually acceptable compensation arrangement based on the then current market
rate for such services. In addition to the foregoing, the Company agrees to
reimburse the Administrator for any out-of-pocket costs incurred in connection
with any financial audit of the Company.
Section 3. Term of Agreement
This Agreement shall commence on September 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).
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 or its or their failure to comply with the Services Standard. The
indemnities set forth in the preceding sentence shall survive the termination of
this Agreement.
Section 5. Miscellaneous
4
<PAGE>
[Administrative Services Agreement (GARC II)]
(a) Table of Contents and Headings. The table of contents and
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) The Administrator as Independent Contractor. 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) Relations Among Parties. 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 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) 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.
(e) 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 received, 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
Re: GARC II
Facsimile: (312) 621-6645
Conf. No.: (312) 621-6200
If to the Administrator: General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Re: GARC II
Facsimile: (312) 621-6645
Conf. No.: (312) 621-6200
5
<PAGE>
[Administrative Services Agreement (GARC II)]
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) 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 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) Assignment. (i) 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 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.
(ii) The Administrator 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 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.
(h) 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.
6
<PAGE>
[Administrative Services Agreement (GARC II)]
(i) 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.
(j) 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 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.
(k) No Petition in Bankruptcy. 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.
* * *
7
<PAGE>
[Administrative Services Agreement (GARC II)]
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: _______________________________________
Name: _____________________________________
Title: ____________________________________
GENERAL AMERICAN TRANSPORTATION CORPORATION
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
8
<PAGE>
EXHIBIT 10.3
FORM OF
- --------------------------------------------------------------------------------
INSURANCE AGREEMENT (GARC II)
Dated as of September 1, 1998
between
GENERAL AMERICAN RAILCAR CORPORATION II
and
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Insurance Manager
Tank Cars and Covered Hopper Cars
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions..................................................... 2
Section 2. Appointment and Duties of Insurance Manager..................... 2
Section 2.1. Appointment........................................ 2
Section 2.2. Duties of the Insurance Manager.................... 2
Section 2.3. Certain Insurance Covenants........................ 3
Section 3. Insurance Manager's Standard of Performance..................... 4
Section 3.1. Standards.......................................... 4
Section 3.2. Similar Services................................... 4
Section 4. Reimbursement and Compensation of the Insurance Manager......... 4
Section 4.1. Reimbursement...................................... 4
Section 4.2. Payment............................................ 5
Section 4.3. Compensation....................................... 5
Section 5. Reports and Information......................................... 5
Section 5.1. Annual Certificate................................. 5
Section 5.2. Rights of Inspection............................... 5
Section 6. Term of Agreement; Termination................................. 6
Section 6.1. Term............................................... 6
Section 6.2. Termination of Insurance Manager................... 6
Section 6.3. Replacement of the Insurance Manager............... 7
Section 6.4. Merger or Sale..................................... 7
Section 7. Indemnification................................................. 8
Section 7.1. Indemnification by Insurance Manager............... 8
Section 7.2. Indemnification by Company......................... 8
Section 7.3. Claims Excluded.................................... 8
Section 7.4. Third Party Claims................................. 8
Section 7.5. Cooperation........................................ 9
Section 8. Miscellaneous................................................... 9
Section 8.1. Table of Contents and Headings..................... 9
Section 8.2. The Insurance Manager as Independent Contractor.... 10
Section 8.3. Relations Among Parties............................ 10
Section 8.4. Governing Law...................................... 10
Section 8.5. Notices............................................ 10
Section 8.6. Entire Agreement; Amendment; Waivers............... 11
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 8.7. Assignment....................................... 11
Section 8.8. Further Assurances............................... 12
Section 8.9. Third Party Beneficiary.......................... 12
Section 8.10. Counterparts..................................... 12
Section 8.11. Severability..................................... 12
Section 8.12. No Petition in Bankruptcy....................... 12
</TABLE>
iii
<PAGE>
INSURANCE AGREEMENT (GARC II)
-----------------------------
This Agreement, dated as of September 1, 1998, is made and entered into
between General American Transportation Corporation, a New York corporation,
together with any successor manager, 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 ("Lessee Parent"), (i) certain railroad tank
cars and covered hopper cars, as such railcars are more fully described in
Schedule 1 to the respective Participation Agreements, and (ii) all of Lessee
Parent's right, title and interest in and to any and all lease agreements
respecting such railcars in which Lessee Parent is the lessor, such lease
agreements being with customers of Lessee Parent (such lease agreements and
future lease agreements entered into by the Manager (as hereinafter defined) on
behalf of the Company respecting the Equipment (as hereinafter defined) 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 [Business Trust], [Business Trust]
and [Business Trust], in each case by Wilmington Trust Company, as Owner Trustee
under three separate Trust Agreements, each dated as of September 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 September 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 September 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 hereinafter defined).
D. 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>
[Insurance Agreement (GARC II)]
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 that certain Collateral
Agency and Intercreditor Agreement dated as of September 1, 1998 among the
Company, The First National Bank of Chicago, as Collateral Agent, [BUSINESS
TRUST], by Wilmington Trust Company, not in its individual capacity but solely
as trustee under the Trust Agreement (GARC II 98-A), as Initial Owner Trustee
(GARC II 98-A), [BUSINESS TRUST], by Wilmington Trust Company, not in its
individual capacity but solely as trustee under the Trust Agreement (GARC II 98-
B), as Initial Owner Trustee (GARC II 98-B), [BUSINESS TRUST], by Wilmington
Trust Company, not in its individual capacity but solely as trustee under the
Trust Agreement (GARC II 98-C), as Initial Owner Trustee (GARC II 98-C), State
Street Bank and Trust Company, as Initial Indenture Trustee (GARC II 98-A),
State Street Bank and Trust Company, as Initial Indenture Trustee (GARC II 98-
B), State Street Bank and Trust Company, as Initial Indenture Trustee (GARC II
98-C), General American Transportation Corporation, as Manager, and the
Insurance Manager.
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 so as to comply 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, 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
2
<PAGE>
[Insurance Agreement (GARC II)]
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.
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 each 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.
3
<PAGE>
[Insurance Agreement (GARC II)]
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 with reasonable care and diligence as shall be required (i) in order for
the Company to perform its obligations under the Leases and the other Operative
Agreements and (ii) in any event, consistent with customary practice as would be
used by a prudent Person in the railcar leasing industry and the level of care
and diligence utilized by the Insurance Manager in its business and in the
management of its fleet (the "Insurance Services Standard").
(b) 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.
(c) 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.
4
<PAGE>
[Insurance Agreement (GARC II)]
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.
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 Collateral 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.
5
<PAGE>
[Insurance Agreement (GARC II)]
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; provided further, that, notwithstanding the foregoing,
such obligation shall not terminate prior to the termination of all of Lessee's
obligations in respect of insurance set forth in any Lease.
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 (an "Insurance Manager Default"):
(a) 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 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 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; or
(c) 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.
6
<PAGE>
[Insurance Agreement (GARC II)]
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. Any successor corporation resulting from such merger or consolidation shall
deliver to the Company, the Owner Trustees, the Owner Participants and the
Indenture Trustees an agreement, in form and substance reasonably satisfactory
to the Company, the Owner Trustees, the Owner Participants and the Indenture
Trustees which is a legal, valid, binding and enforceable assumption by such
successor corporation of the due and punctual performance and observance of each
covenant and condition of the Insurance Manager under this Agreement.
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 perform any covenant or
obligation of the Insurance Manager set out or contemplated in this Agreement or
in
7
<PAGE>
[Insurance Agreement (GARC II)]
any other Operative 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, to the extent occurring or arising at a time when the
Company and the Insurance Manager are not Affiliates (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, gross 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 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 which notice acknowledges that the
indemnifying party is in fact liable in respect of such Claim); 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
8
<PAGE>
[Insurance Agreement (GARC II)]
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 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.
9
<PAGE>
[Insurance Agreement (GARC II)]
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 received, 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
Re: GARC II
Facsimile: (312) 621-6645
Conf. No.: (312) 621-6200
If the Insurance Manager: General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Re: GARC II
Facsimile: (312) 621-6645
Conf. 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 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.
10
<PAGE>
[Insurance Agreement (GARC II)]
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 6.3, the Insurance Manager will not,
without the prior written consent of the Lessors and the Indenture Trustees,
assign any of its rights hereunder, except as provided herein and in the
Participation Agreements; provided that the Insurance Manager may assign any or
all of its rights and/or obligations hereunder without any such consent to (i)
(subject to Section 6.4 hereof) 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 Participants and the Indenture Trustees
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 Lessors, the Owner Participants and the Indenture Trustees,
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 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.
11
<PAGE>
[Insurance Agreement (GARC II)]
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.
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.
* * *
12
<PAGE>
[Insurance Agreement (GARC II)]
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:___________________________
Name:_________________________
Title:________________________
GENERAL AMERICAN
TRANSPORTATION CORPORATION
By:___________________________
Name:_________________________
Title:________________________
13
<PAGE>
EXHIBIT 10.4
FORM OF
-------------------------
EQUIPMENT LEASE AGREEMENT
(GARC II 98-A)
Dated as of September 1, 1998
between
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company,
not in its individual capacity except as
expressly provided herein but solely as Owner Trustee,
Lessor
and
GENERAL AMERICAN RAILCAR CORPORATION II,
Lessee
Tank Cars and Covered Hopper Cars
-------------------------
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS LEASE,
THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE
BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST
IN FAVOR OF, STATE STREET BANK AND TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT
(GARC II 98-A), DATED AS OF SEPTEMBER 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.................. 4
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............................. 8
SECTION 7. Liens............................................................... 9
SECTION 8. Maintenance; Possession; Compliance with Laws....................... 9
Section 8.1. Maintenance and Operation.......................... 9
Section 8.2. Possession and Use................................. 10
Section 8.3. Sublease........................................... 11
SECTION 9. Modifications....................................................... 12
Section 9.1. Required Modifications............................. 12
Section 9.2. Optional Modifications............................. 13
Section 9.3. Removal of Property; Replacements.................. 13
SECTION 10. Voluntary Termination............................................... 14
Section 10.1. Right of Termination............................... 14
Section 10.2. Sale of Equipment.................................. 15
Section 10.3. Retention of Equipment by Lessor................... 16
Section 10.4. Termination of Lease............................... 17
Section 10.5. Funding of Accounts on Termination................. 17
</TABLE>
<PAGE>
TABLE OF CONTENTS (cont'd)
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11. Loss, Destruction, Requisition, Etc..................................... 17
Section 11.1. Event of Loss.......................................... 17
Section 11.2. Replacement or Payment upon Event of Loss.............. 18
Section 11.3. Rent Termination....................................... 19
Section 11.4. Disposition of Equipment; Replacement of Unit.......... 20
Section 11.5. Eminent Domain......................................... 21
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................................... 26
Section 12.6. Post Lease Term Insurance.............................. 26
SECTION 13. Reports; Inspection..................................................... 27
Section 13.1. Duty of Lessee to Furnish.............................. 27
Section 13.2. Lessor's Inspection Rights............................. 27
SECTION 14. Lease Events of Default................................................. 28
SECTION 15. Remedies................................................................ 30
Section 15.1. Remedies............................................... 30
Section 15.2. Cumulative Remedies.................................... 33
Section 15.3. No Waiver.............................................. 33
Section 15.4. Notice of Lease Default................................ 33
Section 15.5. Lessee's Duty to Return Equipment Upon Default......... 33
Section 15.6. Specific Performance; Lessor Appointed Lessee's Agent.. 34
SECTION 16. Filings; Further Assurances............................................. 35
Section 16.1. Filings................................................ 35
Section 16.2. Further Assurances..................................... 35
Section 16.4. Expenses............................................... 35
SECTION 17. Lessor's Right to Perform............................................... 36
SECTION 18. Assignment.............................................................. 36
Section 18.1. Assignment by Lessor................................... 36
Section 18.2. Assignment by Lessee................................... 36
Section 18.3. Sublessee's or Others Performance and Rights........... 36
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS (cont'd)
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 19. Net Lease, etc............................................................. 37
SECTION 20. Notices.................................................................... 38
SECTION 21. Concerning the Indenture Trustee........................................... 39
Section 21.1. Limitation of the Indenture Trustee's Liabilities......... 39
Section 21.2. Right, Title and Interest of the Indenture Trustee Under
Lease..................................................... 39
SECTION 22. Purchase Options; Renewal Options; and Deemed Renewals..................... 40
Section 22.1. Early Purchase Option..................................... 40
Section 22.2. Election to Retain or Return Equipment at End of Basic or
Renewal Term.............................................. 41
Section 22.3. Purchase Option........................................... 42
Section 22.4. Renewal Option............................................ 42
Section 22.5. Rent; Appraisal; Outside Renewal Date..................... 43
Section 22.6. Stipulated Loss Value and Termination Value During
Renewal Term.............................................. 44
Section 22.7. Deemed Renewals........................................... 44
Section 22.8. Funding of Accounts on Purchase........................... 44
SECTION 23. Limitation of Lessor's Liability........................................... 44
SECTION 24. Investment of Security Funds............................................... 45
SECTION 25. Miscellaneous.............................................................. 45
Section 25.1. Governing Law; Severability............................... 45
Section 25.2. Execution in Counterparts................................. 45
Section 25.3. Headings and Table of Contents; Section References........ 45
Section 25.4. Successors and Assigns.................................... 45
Section 25.5. True Lease................................................ 46
Section 25.6. Amendments and Waivers.................................... 46
Section 25.7. Survival.................................................. 46
Section 25.8. Business Days............................................. 46
Section 25.9. Directly or Indirectly; Performance by Managers........... 46
Section 25.10. Incorporation by Reference................................ 47
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS (cont'd)
-----------------
<TABLE>
<CAPTION>
Page
----
APPENDICES AND EXHIBITS
<S> <C>
Exhibit A -- Form of Lease Supplement............................................. A-1
Appendix A -- Definitions
</TABLE>
iv
<PAGE>
EQUIPMENT LEASE AGREEMENT
(GARC II 98-A)
This Equipment Lease Agreement (GARC II 98-A), dated as of September 1,
1998 (this "Lease"), is by and between GARC II 98-A Railcar Trust by Wilmington
Trust Company, not in its individual capacity except as expressly provided
herein (in its individual capacity referred to as "WTC"), but solely as 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 Basic Rent
----------
for each Unit throughout the Basic Term applicable thereto 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)(2)(ii).
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) as and when due in accordance with the Trust Indenture or the Participation
Agreement, any Make-Whole Amount payable with respect to any Equipment Note,
including, without limitation, amounts of Make-Whole Amount due in the case of
the termination of this Lease with respect to any Unit pursuant to Section 10,
in the case of the purchase of any Unit pursuant to Section 22.1 or Section 6.9
of the Participation Agreement, and in the case of any refinancing of the
Equipment Notes pursuant to Section 10.2 of the Participation Agreement and
(iii) an amount equal to any other amount payable by Lessor on the Equipment
Notes in excess of
2
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the principal and interest payments due thereunder. 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, the Early
Purchase Price and Basic Term Purchase Price shall be adjusted to the extent
provided in Section 2.6 of the Participation Agreement, subject in all cases to
the limitation set forth in the second paragraph of Section 3.2.
Section 3.5 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:
[_______________], 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 Two International Place, Boston, Massachusetts 02110,
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. All Rent shall be paid by Lessee to
the recipient not later than ______ __m. Chicago, Illinois on the date of such
payment in funds consisting of lawful currency of the United States of America,
which shall be immediately available. Notwithstanding anything contained in this
Lease to the contrary, any amounts received pursuant to distribution from any of
the Accounts (as such term is defined in the Intercreditor Agreement) shall for
all purposes hereof be deemed payment in satisfaction of the related obligation
hereunder to which such distribution relates and any failure by the Lessor, the
Indenture Trustee or any Indemnified Party to receive from the Collateral Agent
the full amount of any such distribution measured by reference to Basic Rent,
Supplemental Rent or any component thereof shall be deemed a failure by Lessee
to pay such Basic Rent or Supplemental Rent hereunder, as the case may be.
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.
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Section 4.2 Duty to Number and Mark Equipment. With respect to the
---------------------------------
Units to be delivered on the Closing Date, Lessee represents that Lessee Parent
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, 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 of 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 Sublessee 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 Sublessee to use the
Equipment pursuant to a Permitted Sublease.
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. 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,
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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, if Lessee has elected
to return the Units under Section 22.2, Lessee will provide Lessor with a list
of not less than ten (10) alternative storage locations ("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) with respect to all such Units
being so delivered, there shall be no more than ten (10) locations (each of
which shall be located within the Contiguous United States and shall have
adequate storage capacities), 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 for such Unit (the "Storage Period
Commencement Date") and ending not more than 60 days thereafter. 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 Storage
Locations provided by Lessee pursuant to Section 6.1(a). Any storage
provided by Lessee during the Storage Period shall be at the sole risk and
expense of Lessee, and Lessee shall maintain the insurance required by
Section 12.1 with respect to all stored Units. During the Storage Period,
Lessee will permit Lessor or any 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
indemnified by Lessor
6
<PAGE>
against any loss or damage incurred by it in connection with any such
inspection or restenciling by such Person and (z) Lessee (except in the
case of Lessee's gross negligence or wilful misconduct) shall not be liable
for any injury to, or the death of, any person exercising, either on behalf
of Lessor or any prospective purchaser or user, the rights of inspection
and restenciling granted pursuant hereto. Lessee shall not be required to
store the Equipment after the Storage Period. If Lessee does store any Unit
after the expiration of the Storage Period, such storage shall be at the
sole risk and expense of Lessor.
(ii) Upon the request and direction of Lessor (and at Lessor's
sole risk and expense), on not more than one occasion with respect to each
stored Unit and upon not less than 15 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 on any railroad lines or to any
connecting carrier for shipment (with appropriate instructions to cause
such Units to be transported to such locations in the Contiguous United
States as Lessor shall direct), 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 as it shall choose 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 Units to any railroad
interchange point or points within the Contiguous United States on any
railroad lines or to any connecting carrier for shipment (with appropriate
instructions to cause such Units to be transported to such locations
(provided that such Units shall be transported to no more than ten (10)
locations, each having adequate storage capacity) designated by Lessor upon
not less than 15 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 the Manager normally stores
similar units of railroad equipment owned or managed by it.
7
<PAGE>
(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) In the event any Unit is not (i) returned to Lessor in accordance
with the provisions of Section 6.1(b) 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, or (ii) deemed automatically renewed in
accordance with the provisions of Section 22.7, the Lease with respect to such
Unit shall continue in effect and Lessee shall pay to Lessor for each such day
from the scheduled 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 (the
"Holdover Period"), 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.
Notwithstanding the foregoing, nothing in this Section 6.1(e) shall be construed
as permitting or authorizing Lessee to fail to meet, or be construed as Lessor
consenting to or waiving any failure by Lessee to perform, Lessee's obligation
to return the Units in accordance with the requirements of this Lease. Nothing
herein shall be in abrogation of Lessor's right to terminate this Lease under
Section 15 as a result of such failure or to have such Unit returned to it for
possession or storage.
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 with allowance for normal wear and tear, (ii) suitable for
continued commercial use in the commodity last carried immediately prior to such
return, (iii) suitable for use in interchange in accordance with then applicable
Federal regulations, the Field Manual of the AAR, the Interchange Rules and FRA
rules and regulations, (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
8
<PAGE>
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
the original inspection of such Unit and 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
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.
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 and in all material respects, 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 in all material respects
consistent with maintenance practices used by the Manager in respect of railcars
owned or managed by the Manager 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 from time to time in
effect, 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,
so long as the Manager is similarly contesting such law or regulation with
respect to all other similar equipment owned or operated by Manager, 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
9
<PAGE>
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; provided
further, that Lessee shall promptly notify Lessor and Indenture Trustee in
reasonable detail of any such contest. In no event shall Lessee discriminate in
any material respect 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 the Manager owns or manages. Lessee will
maintain in all material respects 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 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) 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.
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Section 8.3 Sublease. 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, Lessee Parent or any Affiliate of Lessee Parent) 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 or manages) (other than railroad
companies, Lessee Parent, Affiliates of Lessee Parent or Credit Bankrupts) for
use in their business or (iii) wholly-owned Subsidiaries of Lessee Parent
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
------------------- -------- -------
(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 Units subleased to Mexican Sublessees exceeds the lesser of (i) 9%
(or, with written confirmation from the Rating Agencies that, after giving
effect to the increase, no lowering or withdrawal of the then current ratings on
the Certificates will occur, 20%), or (ii) the percentage of railcars leased or
subleased to Mexican Sublessees in the Total Managed Fleet, and (B) sublease
more than 50 Equipment Units to any single Mexican Sublessee (other than (x)
with written confirmation from the Rating Agencies that, after giving effect to
such Sublease to such Mexican Affiliate, no lowering or withdrawal of the then
current ratings on the Certificates will occur, a Mexican Affiliate or (y) a
Mexican Sublessee with a credit rating of at least BBB and Baa2 as determined by
S&P and Moody's, respectively (or, in the event that either S&P or Moody's shall
not or cease to provide a credit rating for such entity, a credit rating of at
least BBB or Baa2 by S&P or Moody's, as the case may be)), provided, further
--------- -------
that the Lessee shall not at any time sublease more than 15% (or, with written
confirmation from the Rating Agencies that, after giving effect to the increase,
no lowering or withdrawal of the then current ratings on the Certificates will
occur, 30%) of the Equipment in the aggregate to Canadian Affiliates and,
provided, further, that any Unit subleased to a Canadian Affiliate or a Mexican
- -------- -------
Affiliate shall be sub-subleased to Persons of the type described in clause (i)
or (ii) of this sentence pursuant to a sub-sublease containing terms and
conditions similar in all material respects to the applicable sublease between
the Lessee and the applicable Canadian Affiliate or Mexican Affiliate. 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
sublessee 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
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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 shall not permit any sub-sub-subleasing, and (iii) without
regard to the payment of Basic Rent or the Lease Term, shall not include any
term or provision which is inconsistent with the terms and conditions of this
Lease or which could reasonably be expected to result in material adverse
consequences to Lessor, any Participant or the Indenture Trustee. Any such
sublease shall constitute a "Sublease" forming part of the "Collateral" (as such
terms are defined in the Intercreditor Agreement). No sublease entered into by
Lessee hereunder shall relieve Lessee of any liability or obligation hereunder,
which shall be and remain those of a principal and not a surety. Nothing in this
Section 8.3 shall be deemed to constitute permission to any Person in possession
of any Unit pursuant to any such sublease to take any action inconsistent with
the terms and provisions of this Lease or any of the other Operative Agreements.
SECTION 9. Modifications.
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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, rule, regulation or requirement
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; provided, further, that the Manager is similarly contesting such
law, regulation, requirement or rule with respect to all other similar equipment
owned or operated by the Manager. Title to any Required Modification shall
immediately vest in Lessor. Notwithstanding anything herein to the contrary, if
Lessee, on a non-discriminatory basis, 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 and the Manager certifies that it has
made a similar determination with respect to similar railcars in similar
circumstances which are part of the Manager's Fleet, 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(ii), 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
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the greater of the Fair Market Sales Value or Stipulated Loss Value of such
Unit; provided 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.
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,
residual value 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 more than a de minimis
respect, assuming such Unit was then at least in the condition required to be
maintained by the terms of this Lease. 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 the return of such Unit pursuant to Section
6.1, 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 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. 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
with respect to any or all of the Units (provided that, if such termination is
for less than all Units in a Functional Group across the Company Fleet, Lessee
shall exercise such termination hereunder and under the comparable provisions
contained in the Other Leases (i) with respect to at least 50 railcars in the
aggregate of the type included in such Functional Group, (ii) no fewer than 25
railcars of the type included in such Functional Group shall in the aggregate
remain subject to this Lease and the Other Leases, (iii) such termination shall
be made hereunder and under the Other Leases pro rata in accordance with the
number of units in such Functional Group subject to each such lease, and (iv)
the determination as to which Units are subject to termination shall otherwise
be made by Lessee on a random basis 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 and the Chief
Financial Officer of the Manager) 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 may not exercise its right to withdraw a termination notice
more than once annually or more than four times during the Basic Term
(irrespective of which Units are covered thereby). Lessee agrees
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that whether or not 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 with such termination or
proposed termination.
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 non-
exclusive 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 nor 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 (D) all other Rent then due and payable hereunder (which
shall include, without limitation, the amounts necessary such that after
application thereof in accordance with Section 3.4 of the Intercreditor
Agreement, all Rent owing hereunder in respect of such Terminated Units shall be
satisfied, including the Accumulated Equity Deficiency Amount and Late Payment
Interest related thereto), so that, after receipt and application of all such
payments, but without any withdrawal from any Reserve Account, the Owner
Participant shall be entitled under the terms of the Intercreditor Agreement to
receive, and does receive, in respect of all such Units, the sum of the
Accumulated Equity Deficiency Amount and Late Payment Interest related thereto
and any other amounts then due to Owner Participant. If no sale shall have
occurred, whether as a result of
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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. The Owner Participant shall
have the right, but not the obligation, 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), so that, after receipt and
application of all such payments, but without any withdrawal from any Reserve
Account, the Owner Participant shall be entitled under the terms of the
Intercreditor Agreement to receive, and does receive, in respect of all such
Units, the sum of the Accumulated Equity Deficiency Amount and Late Payment
Interest related thereto and any other amounts then due to Owner Participant.
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 an
amount equal to the product obtained by multiplying the unpaid principal amount
of the Equipment Notes outstanding on such date (after deducting therefrom the
principal installment, if any, to be paid on such date of arrears Basic Rent) by
a fraction, the numerator of which shall be the Equipment Cost of the
Terminated Units and the denominator of which shall be the aggregate Equipment
Costs of all Units then subject to this Lease. Upon payment by the Lessor of
the foregoing, Lessee shall pay to the Lessor 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
together with all Basic Rent and Supplemental Rent due and owing; 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 after
giving the notice referred to above Lessor shall fail to pay the amounts
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required pursuant to the second sentence of 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 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 and Lessee of their
respective 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 10.5. Funding of Accounts on Termination. Lessee will not
----------------------------------
exercise a termination option under this Section 10 with respect to all of the
Units unless either (a) the full amount required to fund the Post Lease Term
Reserve Account is (upon consummation of such purchase and distribution of all
amounts required to be distributed by the Collateral Agent under the
Intercreditor Agreement) and will be then available to the Collateral Agent to
fund such Post Lease Term Reserve Account, or (b) an indemnity pursuant to
Section 3.13 of the Intercreditor Agreement has been provided.
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
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instrumentality of Mexico or any state thereof in which case such period shall
be the lesser of the period as aforesaid or 365 days) (any such occurrence being
hereinafter called an "Event of Loss"), Lessee, in accordance with the terms of
-------------
Section 11.2, shall promptly and fully inform Lessor and the Indenture Trustee
of such Event of Loss.
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 or an election to replace pursuant to Section 8.1(b),
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 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 ("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 Permitted Subleases, and in clauses (iv) and (vii) of the
definition thereof) and to have a fair market value, utility, 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) and to be (as of the date of
conveyance) then subject to a currently effective Permitted Sublease having
a remaining term of not less than 6 months; provided, that, if only
railcars of newer age or greater value are available for such replacement,
the Lessee may on one occasion re-substitute a railcar with a value closer
to or equal to that of the Unit which originally suffered the Event of Loss
or was replaced (which re-substitution shall occur within twenty-four
months of the original replacement (but in no event within the three year
period immediately preceding the Basic Term Expiration Date) and shall
comply with this Section 11 as if an Event of Loss had occurred); provided
also 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
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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 or re-substitution under this clause (i) if, at the
time of the notice of the Event of Loss under Section 11.2 above or at the
time such replacement or re-substitution is to occur, either (A), a Lease
Default pursuant to Section 14(a), 14(b), 14(g) or 14(h) or a Lease Event
of Default shall have occurred and be continuing or (B) sufficient cash
amounts shall not have been made available to the Collateral Agent such
that all amounts then required to be applied under Section 3.4 of the
Intercreditor Agreement in order to satisfy the amounts referred to in
clauses (1) through (11) thereof, inclusive shall have been distributed as
specified thereby; or
(ii) on the Rent Payment Date which is not less than 25 days nor
more than 60 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 (d) all other Rent
then due and payable hereunder (including, without limitation, the amounts
necessary such that after application thereof in accordance with Section
3.4 of the Intercreditor Agreement, all Rent owing hereunder in respect of
such Unit shall be satisfied, including the Accumulated Equity Deficiency
Amount and Late Payment Interest related thereto) so that, after receipt
and application of all such payments but without any withdrawal from any
Reserve Account, the Owner Participant shall be entitled under the terms of
the Intercreditor Agreement to receive, and does receive in respect of such
Unit, the sum of the Accumulated Equity Deficiency Amount and Late Payment
Interest related thereto and any other amounts then due to Owner
Participant, 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.
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
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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
(subject to any insurer's right of subrogation, if any) 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 up to the Stipulated Loss Value attributable
thereto and any remainder shall be divided between Lessee and Lessor, as their
respective interests may appear.
(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 to the
Replacement Unit has been delivered to Lessor, and (y) describing all filings
and recordings required pursuant to Section 16 with respect to the Replacement
Units, (E) furnish to Owner Participant an agreement of Lessee Parent 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,
condition, model year and remaining useful life required under clause (i) of
Section 11.2,
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(G) furnish to Lessor and the Indenture Trustee an Officer's Certificate
certifying that the Replacement Unit has a fair market value, utility, 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 Permitted
Subleases, and in clauses (iv) and (vii) of the definition thereof), (H) furnish
Lessor with an opinion from independent tax counsel reasonably acceptable to the
Owner Participant to the effect that there is substantial authority for the
position that Owner Participant will not suffer any adverse consequence as a
result of such replacement, (I) furnish Lessor with an opinion of independent
transportation counsel or in-house counsel for Lessee Parent as to the absence
of Liens of record with the STB and as to the completion of all necessary STB
filings and deposits with the Registrar General of Canada described in Section
16.1 hereof with respect to such Replacement Unit, 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.
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
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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 with insurers of
recognized responsibility with a rating of at least A- by A.M. Best Company (or
a comparable rating by a nationally or internationally recognized rating group
of comparable stature) or by other insurers approved in writing by the Lessor,
which approval shall not be unreasonably withheld, in amounts and against risks
and with deductibles and terms and conditions not less than the insurance, if
any, maintained by Lessee or the Lessee Parent 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, WTC, 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 $100,000,000 per occurrence or in the
aggregate, provided that such coverage may provide for deductible amounts not
exceeding the lesser of (w) $10,000,000 or (x) the difference (not less than
zero (0)) between (i) the level of the then current deductible maintained by
Lessee Parent for the GATC Fleet (or if Lessee Parent, 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 Lessee Parent for an
additional incremental annual premium payable by the Lessee in the aggregate in
respect of the entire Company Fleet of up to $100,000 as adjusted by the
Inflation Factor; provided, further, that such policies which are carried on a
"claims made" basis shall provide for a retroactive date not more recent than
either (y) the Closing Date, or (z) a date seven years prior to the effective
date of the policy.
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(c) It is understood and agreed that the insurance required under this
Section 12.1 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.
(d) If Lessee or the Insurance Manager shall maintain any liability
coverages for the benefit of Lessee in excess of the coverages required
hereunder (whether or not such excess coverage complies with the requirements
under this Section 12), Lessee will cause all such coverages to name the Owner
Participant, the Lessor, WTC, 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 or the Equipment), provided, however, that,
the requirements of this Section 12 shall not otherwise apply to such coverages.
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, make all proofs of loss and/or 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 for such
amounts and against such risks as shall be consented to by Lessor and the
Indenture Trustee, which consent shall be based upon reasonable practices then
in effect in the railcar leasing and insurance industries and upon the financial
condition of the Lessee taking into account the Lessee's capital structure and
that the Lessee is a special purpose corporation.
(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 this Lease, and
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(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.
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
deductibles or retentions 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, WTC and the Indenture Trustee, (iii) provide that neither
Owner Participant, Lessor, WTC, 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, WTC, the Indenture Trustee or Loan Participant.
(b) Lessee shall use its reasonable efforts to obtain public liability
insurance policies which stipulate 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) by any act
or neglect of the Lessee, or any breach or violation by the Lessee of any
warranties, declarations or conditions contained in such policies, 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
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<PAGE>
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 the basis of the Total Managed Fleet) of
liability insurance premiums for the coverage required by Section 12.1(b) for
the immediately preceding fiscal year; and in the event that any such
certificate is not received by Lessor within such 15-day period, any such waiver
shall be deemed revoked. At any time after the granting of such waiver, but not
more often than once a year, Lessor may make a written request for a
supplemental report (in form reasonably acceptable to Lessor) from such
insurance advisor(s) updating the prior report and reaffirming the conclusions
set forth therein. Lessee shall provide any such required supplemental report
within 60 days after receipt of the written request therefor. Any such waiver
shall be effective for only as long as such insurance is not reasonably
available to Lessee in the commercial markets in which Lessee normally purchases
its insurance at commercially reasonable rates, it being understood that the
failure of Lessee to furnish timely any such supplemental report shall be
conclusive evidence that such condition no longer exists. If such supplemental
report shows that such coverage is available, Lessee shall within 90 days of
such report obtain such insurance coverage. During any period with respect to
which such waiver has been granted and remains in effect under this Section
12.3(c), Lessee shall obtain public liability insurance as set forth in Section
12.1(b) from such carriers, in such amounts and with coverage limits and
deductibles as may be reasonable in its judgment under the circumstances, but in
any event no less than prudent industry standards, but in any event in an amount
that may be purchased for a premium equal to 200% of Lessee's cost (on a fleet-
wide basis) of public liability insurance premiums for the coverage on a fleet-
wide basis required by Section 12.1(b) for the final year immediately preceding
the fiscal year in which such waiver first was granted.
Section 12.4. Certificate of Insurance. (a) 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 (or, in the case of (iii) below, use
reasonable efforts to furnish) Lessor, the Indenture Trustee, the Owner
Participant and the Loan Participant with a certificate signed by the insurer or
an independent insurance broker (i) showing the insurance then maintained by
Lessee pursuant to Section 12.1, (ii) stating that, except as noted in such
certificate, such insurance complies with the requirements contained in Exhibit
B-1 (as to general liability insurance) and/or B-2 (as to physical/damage
insurance) to the Participation Agreement, (iii) stating that, except as noted
in such certificate, such insurance complies with the requirements contained in
this Section 12 and (iv) to the extent that any provision that Lessee is
required to use reasonable efforts to obtain is not contained in such insurance,
such certificate shall so state and shall confirm that, in such broker's
opinion, such provision is not reasonably obtainable. Lessor shall be entitled
at its expense to review copies of all applicable insurance policies. 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
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<PAGE>
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.
(b) Lessee agrees to use reasonable efforts to cause its independent
insurance broker to agree that, with respect to any policy of insurance
maintained pursuant to Section 12.1, such broker will provide not less than 30
days' prior written notice to Lessor, the Indenture Trustee, Loan Participant
and Owner Participant of any non-renewal or material adverse change with respect
to such policy. For purposes of this Section 12.1, "material adverse change"
shall mean a material adverse change in policy limits, exclusions or deductibles
or any material adverse change in policy coverage inconsistent with the
requirements of Section 12.1(b).
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 maintained by Lessor
pursuant to the previous sentence shall be retained by Lessor without reducing
or otherwise affecting Lessee's obligations hereunder, other than with respect
to Unit(s) with respect to which such payments have been made.
Section 12.6. Post Lease Term Insurance. Lessee agrees that upon the
-------------------------
expiration or earlier termination of the Lease Term, Lessee will, with respect
to the public liability insurance otherwise required to be carried under this
Section 12, either: (A) purchase a seven year extended reporting period for the
Owner Participant, Lessor and Owner Trustee, or (B) carry or cause to be carried
for such seven year period public liability insurance which satisfies the
requirements of this Section 12 and which names the Owner Participant, Lessor
and Owner Trustee as additional insureds.
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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, the interchange
rules of the Field Manual of the AAR as they apply to the maintenance and
operation of the Equipment in interchange and any other requirements hereunder.
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 gross 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 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.
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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 or be deemed by virtue of the last
sentence of Section 3.5 hereof to fail to have made 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 so long as any Equipment Notes remain
outstanding, failure to make (or be deemed to have made) an entire payment of
Basic Rent on any Rent Payment Date shall not be a Lease Event of Default so
long as the amounts applied under Section 3.4, clause (4), of the Intercreditor
Agreement are sufficient to make the distributions required under such clause
(4) with respect to the obligations owed under this Lease; or
(b) Lessee shall fail to make or be deemed by virtue of payments made
by the Collateral Agent to fail to have made 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;
provided, however, that so long as any Equipment Notes remain outstanding,
failure to make (or be deemed to have made) payment of any of the amounts
referred to in or to be applied pursuant to clauses (5) through (14) of Section
3.4 of the Intercreditor Agreement shall not be a Lease Event of Default; 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 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 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
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(e) Lessee shall fail to observe or perform in any material respect
any of the covenants or agreements to be observed or performed by Lessee in
Section 6.2 or 6.3 of the Intercreditor Agreement; or
(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; 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 30 days after receipt of notice from
Lessor, the Owner Participant or the Indenture Trustee 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 remediable
or remedied only after all adverse consequences thereof, if any, can be and have
been remedied as applicable; 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
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(j) A "Manager Default" (as defined in the Management Agreement) shall
have occurred and be continuing under the Management Agreement, and Lessee shall
have failed to exercise its rights under the Management Agreement in respect of
such Manager Default for a period of 30 days after receipt by Lessee of written
notice from Lessor, the Owner Participant or the Indenture Trustee demanding
that such action be taken; or
(k) An "Insurance Manager Default" (as defined in the Insurance
Agreement) shall have occurred and be continuing under the Insurance Agreement,
and Lessee shall have failed to exercise its rights under the Insurance
Agreement in respect of such Insurance Manager Default for a period of 30 days
after receipt by Lessee of written notice from Lessor, the Owner Participant or
the Indenture Trustee demanding that such action be taken; or
(l) The Administrator (as defined in the Administrative Services
Agreement) shall have defaulted in any material respect in the performance of
any of its obligations under the Administrative Services Agreement, and Lessee
shall have failed to exercise its rights under the Administrative Services
Agreement in respect of such default for a period of 30 days after receipt 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
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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
15.5; 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 not 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 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 not 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
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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 "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
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(including, without limitation, Late Payment Interest, 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.
-------------------
favor of Lessor shall not be deemed exclusive, but shall be cumulative and shall
be in addition to all other remedies in its favor existing at law or in equity.
Lessee hereby waives any mandatory requirements of law, now or hereafter in
effect, which might limit or modify any of the remedies herein provided, to the
extent that such waiver is permitted by law. Lessee hereby waives any and all
existing or future claims of any right to assert any offset or counterclaim
against the Rent payments due hereunder, and agrees to make the rent payments
regardless of any offset or counterclaim or claim which may be asserted by
Lessee on its behalf in connection with the lease of the Equipment. 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
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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.
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 daily equivalent of the Basic Rent in effect
immediately prior to the expiration of the Lease for such Unit 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.
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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 in the United
States 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 a memorandum of each of 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.
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 after the Closing Date and
-------------
during the Lease Term, Mexico, or one or more states in Mexico, establishes a
state 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.
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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.
SECTION 18. Assignment.
----------
Section 18.1. Assignment by Lessor. Lessee and Lessor hereby confirm that
--------------------
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to the Indenture Trustee the Indenture, which assigns as
collateral security and grants a security interest in favor of the Indenture
Trustee in, to and under this Lease and certain of the Rent payable hereunder
(excluding Excepted Property), all as more explicitly set forth in the
Indenture. Lessor agrees that it shall not otherwise assign or convey its
right, title and interest in and to this Lease, the Equipment or any Unit,
except as expressly permitted by and subject to the provisions of the
Participation Agreement, the Trust Agreement and the Indenture.
Section 18.2. Assignment by Lessee. Except 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
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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.
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
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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 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: GARC II 98-A Railcar Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Fax No.: (302) 651-8882
Confirmation No.: (302) 651-1000
With copies to Owner Participant.
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If to Owner Participant: [Owner Participant]
__________________
__________________
__________________
Attention: _______________
Fax No.: _______________
Confirmation No.: _______________
If to the Indenture Trustee: State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attention: Corporate Trust Services
Division
Fax No.: (617) 664-____
Confirmation No.: (617) 664-_____
If to Lessee: General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
Re: (GARC II 98-A)
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.
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SECTION 22. Purchase Options; Renewal Options; and Deemed Renewals.
------------------------------------------------------
Section 22.1 Early Purchase Option. In addition to the option granted
---------------------
Lessee pursuant to Section 6.9 of the Participation Agreement and provided that
Lessee shall have duly given the notice required by the next succeeding sentence
and the corresponding notice under the Other Leases and shall concurrently
purchase all (but not less than all) of the units then subject to the Other
Leases, Lessee shall have the right and, upon the giving of such notice, the
obligation to purchase all (but not less than all) 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 plus the other amounts
specified below. Lessee shall give Lessor written notice not less than 90 days
and not more than 180 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 or duplication, (x) 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), (y) any
Make-Whole Amount and Late Payment Interest with respect to the Equipment Notes
then being prepaid and (z) the Accumulated Equity Deficiency Amount and any Late
Payment Interest related thereto (so that, after receipt and application of all
such payments but without any withdrawal from any Reserve Account, the Owner
Participant shall be entitled under the terms of the Intercreditor Agreement to
receive, and does receive, in respect of the Units, the sum of the Accumulated
Equity Deficiency Amount and Late Payment Interest related thereto and any other
amounts then due to Owner Participant) 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 the Early Purchase Price, together with all
other amounts due and owing by Lessee under the Operative Agreements, as
specified in the paragraph above, or (ii) pay the difference between the amount
specified in clause (i) and the outstanding principal amount of the Equipment
Notes as of the Early Purchase Date and assume on a full recourse basis all of
the Owner Trustee's obligations under the Indenture in respect of the
indebtedness evidenced by such Equipment Notes related to such Units as provided
in Section 3.6 of the Indenture; provided, that, following such
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<PAGE>
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 and on the
dates 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 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 if acceptable to the Owner Participant in
its sole discretion a guaranty of Lessee Parent 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 and not more than 360 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 the Units and the units subject to
the Other Leases (it being understood that at the end of the Basic Term or any
Renewal Term Lessee must return all (and not less than all) such Units and units
if it returns any, or retain all (and not less than all) such Units and units if
it retains any) 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 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, or a subsequent notice required by Section 22.3
or 22.4, 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 22.3; provided, however, that if there are
any Units under a Sublease which expires after the end of the Basic Term and
Lessee does not elect to retain these Units
41
<PAGE>
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 Lessee shall have duly
---------------
given the notice required by Section 22.2 and by the next succeeding sentence of
this Section 22.3 and, in the case of a purchase, Lessee shall have given a
corresponding notice under the Other Leases and shall upon the purchase of the
Units hereunder concurrently purchase the units under the Other Leases, Lessee
shall have the right and, upon the giving of such notice under this Section
22.3, the obligation to purchase all of the Units 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, if a Renewal Term is then in effect, at the
end of such 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 plus in each case, all other amounts due and owing by Lessee
under the Operative Agreements, including, without limitation, Late Payment
Interest and any unpaid Rent (so that, after receipt and application of all such
payments but without any withdrawal from any Reserve Account, the Owner
Participant shall be entitled under the terms of the Intercreditor Agreement to
receive, and does receive, in respect of the Units, the sum of the Accumulated
Equity Deficiency Amount and Late Payment Interest related thereto and any other
amounts then due to Owner Participant). Lessee shall give Lessor written notice
not less than 90 days and not more than 360 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. 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 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 Lessee shall have duly given the
--------------
notice required by Section 22.2, and the corresponding notice under the Other
Leases and shall upon the renewal of the Units hereunder concurrently renew the
units under the Other Leases and Lessee has not exercised its option to purchase
the Units pursuant to Section 22.3, 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 all (but not less than all) of the Units at the
expiration of the Basic Term or any applicable Renewal Term. Lessee may exercise
this renewal option by giving Lessor written notice not less than 90 days and
not more than 360 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 at a rental payment equal to the then fair market rental value (a
"Fair Market Renewal") or a fixed rental (a "Fixed Rate Renewal"). At Lessee's
option, such renewal may, in the case of a Fair Market Renewal, be for a renewal
term of one or more years or, in the case of a Fixed Rate
42
<PAGE>
Renewal, be for an initial renewal term of three years (but not to extend beyond
the Outside Renewal Date) and 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, in each case as Lessee shall specify in such notice, which
notice shall be irrevocable. The Basic Rent for each Unit during any Renewal
Term (the "Renewal Rent") shall (a) in the case of any Fixed Rate Renewal, be
50% of the average of the monthly Basic Rent installments payable hereunder for
such Unit during the Basic Term, payable monthly in arrears, and (b) in the case
of any Fair Market Renewal, be the Fair Market Rental Value determined at the
commencement of the applicable Renewal 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. Lessee shall not be entitled to
enter any Fixed Rate Renewal following the expiry of any Fair Market Renewal.
Section 22.5 Rent; Appraisal; Outside Renewal Date. Promptly following
-------------------------------------
Lessee's written notice pursuant to Section 22.2 of its election to retain the
Units at the end of the Basic Term or any Renewal Term (and, in any event, if it
is anticipated that there will be any Extended Units at the end of the Basic
Term or such Renewal Term), Lessor and Lessee shall determine (a) if Lessee
shall have exercised a Fixed Rate Renewal, (i) 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) of the Units, and (ii) the latest date such that (1) the period
from the Closing Date to such date would not exceed 80% of the useful life of
any Unit (as determined in subclause (i) above) from and after the Closing Date,
and (2) the Fair Market Sales Value of each Unit (determined without regard to
inflation or deflation) on such date would not be less than 20% of the Equipment
Cost of such Unit (such date determined under this subclause (ii) shall
thereafter be the latest date to which this Lease may be renewed pursuant to a
Fixed Rate Renewal under Section 22.4 (the "Outside Renewal Date")), (b) if the
--------------------
Lessee shall have exercised the purchase option under Section 22.3(i) or any
renewal option under Section 22.4 (or if it is anticipated that there will be
any Extended Units at the end the Basic Term or such Renewal Term), the Fair
Market Sales Value of the applicable Units as of the end of the then existing
Basic Term or Renewal Term, as applicable, in each case assuming such Units are
at least in the condition required by this Lease, and (c) if Lessee shall have
exercised a Fair Market Renewal (or if it is anticipated that there will be any
Extended Units at the end the Basic Term or such Renewal Term), the Fair Market
Rental Value of the applicable Units as of the end of the then existing Basic
Term or Renewal Term, as applicable , in each case assuming such Units are at
least in the condition required by this Lease.
Section 22.6 Stipulated Loss Value and Termination Value During Renewal
----------------------------------------------------------
Term. All of the provisions of this Lease, other than Section 10, shall be
- ----
applicable during any Renewal Term for such Units, except as specified in the
next sentence. During any Renewal Term, the Stipulated Loss Value and
Termination Value of any Unit shall be determined on the basis of the Fair
Market Sales Value of such Unit as of the first day of such Renewal Term,
reduced in equal monthly increments to the Fair Market Sales Value of such Unit
as of the last day of such
43
<PAGE>
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
---------------
purchase option under Section 22.3(ii) or its renewal option under Section 22.4
at the end of the Basic Term or any Renewal Term, then the Lease for any Unit
subject to a Sublease at the end of the Basic Term or such Renewal Term shall be
deemed automatically renewed for a Renewal Term expiring at the expiration of
such Sublease's term (but in no event later than three years following the
expiry of the Basic Term or such Renewal Term, as applicable) (such Unit, an
"Extended Unit"). The terms and conditions of any such deemed renewal of a Unit
under this Section 22.7 including rent shall otherwise be those generally
provided in Section 22.4 in respect of a Fair Market Renewal for the period
thereof (which shall be considered a Renewal Term).
Section 22.8 Funding of Accounts on Purchase. Lessee will not exercise
-------------------------------
the purchase option under this Section 22 unless either (a) the full amount
required to fund the Post Lease Term Reserve Account is (upon consummation of
such purchase and distribution of all amounts required to be distributed by the
Collateral Agent under the Intercreditor Agreement) and will be then available
to the Collateral Agent to fund such account, or (b) an indemnity pursuant to
Section 3.13 of the Intercreditor Agreement has been provided.
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 WTC be personally liable for or on account of any
statements, representations, warranties, covenants or obligations stated to be
those of Lessor hereunder, except that WTC (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.
44
<PAGE>
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 possib le, each provision of this
Lease shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Lease shall be prohibited by or
invalid under the laws of any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Lease in any other jurisdiction.
Section 25.2 Execution in Counterparts. This Lease may be executed in
-------------------------
any number of counterparts, each executed counterpart constituting an original
and in each case such counterparts shall constitute but one and the same
instrument; provided, however, that to the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code) no
security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page hereof,
which counterpart shall constitute the only "original" hereof for purposes of
the Uniform Commercial Code.
Section 25.3 Headings and Table of Contents; Section References. The
--------------------------------------------------
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this Lease.
Section 25.4 Successors and Assigns. This Lease shall be binding upon
----------------------
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective permitted successors and 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,
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.
45
<PAGE>
Section 25.6. Amendments and Waivers. No term, covenant, agreement or
----------------------
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
Section 25.7. Survival. All warranties, representations, indemnities and
--------
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by such party or on the behalf of any such party under this
Lease, shall be considered to have been relied upon by the other party hereto
and shall survive the consummation of the transactions contemplated hereby on
the Closing Date regardless of any investigation made by either such party or on
behalf of either such party, and to the extent having accrued and not been paid
or relating to or otherwise arising in connection with the transactions
contemplated by the Operative Agreements during the Lease Term, shall survive
the expiration or other termination of this Lease or any other Operative
Agreement.
Section 25.8. Business Days. If any payment is to be made hereunder or
-------------
any action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force and
effect as if made or taken on such scheduled date and as to any payment
(provided any such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date to
the time of such payment on such next succeeding Business Day.
Section 25.9. Directly or Indirectly; 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.
The Lessee agrees to instruct the Manager and the Insurance Manager to take such
actions as shall be necessary or appropriate under such agreements so that the
Lessee shall be in compliance in all material respects with its obligations
hereunder and under the other Operative Agreements.
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.
* * *
46
<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:
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company, 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:
-----------------------------
(1)Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on this ____ day of September, 1998.
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- -----------
(1) This language contained in the original counterpart only.
47
<PAGE>
EXHIBIT A
LEASE SUPPLEMENT NO. _______
(GARC II 98-A)
This Lease Supplement No. ___, dated as of _________, between GARC II 98-A
Railcar Trust by Wilmington Trust Company, 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 (GARC II 98-A) dated as of September 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:
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
(1)Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ____ day of September, 1998.
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- ----------
(1) This language contained in the original counterpart only.
A-3
<PAGE>
Appendix A
to
Lease Agreement
(GARC II 98-A)
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, the Post Lease Reserve Account, the Special Insurance Reserves Account,
and the Excess Cash Account.
"Accumulated Equity Deficiency Amount" shall mean, on any Payment Date, the
aggregate amount equal to the Equity Portion of Basic Rent scheduled for payment
on or prior to such Payment Date and not paid plus the Equity Portion of any
Stipulated Loss Value, Equity Portion of Termination Value, Equity Portion of
Early Purchase Price or Basic Term Purchase Price, if any, then due and owing.
<PAGE>
"Adjusted Payment Amount" shall mean, for each Adjusted Principal Period,
the product of (i) the sum of all principal payments made during such Adjusted
Principal Period (excluding any Prepaid Amount), and (ii) the Adjustment
Multiplier 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 and including the Payment Date immediately preceding 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 and including the
first Payment Date thereafter on which a Prepayment has been made, (b) each
period, if any, between two Payment Dates on which successive Prepayments have
been made, in each case excluding the Payment Date upon which such period
commences to and including, the Payment Date upon which such period ends, and
(c) the period, if any, from but excluding the Payment Date immediately
preceding the Relevant Payment Date on which a Prepayment was made to and
including the Payment Date immediately preceding the Relevant Payment Date.
"Adjustment Multiplier" shall mean at any Payment Date (the "Relevant
Payment Date") for any Adjusted Principal Period, a fraction, the numerator of
which shall be the aggregate Equipment Cost of all Units included in the
Indenture Estate on the Relevant Payment Date (including in this numerator the
Equipment Cost of any Excluded Unit for the Relevant Payment Date) 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 (GARC II) dated as of September 1, 1998, between Lessee Parent and the
Company.
"Administrator" shall have the meaning assigned thereto in the
Administrative Services Agreement.
"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; provided, however, that under no circumstance shall
WTC be considered to be an Affiliate of any of the Owner Participant, the Owner
Trustee, or the Trust, nor shall any of the Owner Participant, the Owner Trustee
or the Trust be considered to be an affiliate of WTC. 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.
<PAGE>
"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.
"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 date of
such prepayment 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.
"Base Rate" shall mean the rate of interest announced from time to time by
The First National Bank of Chicago at its principal office in Chicago, Illinois
as its "corporate base rate" (or its equivalent successor rate, if the corporate
base rate is no longer used).
"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, upon the exercise by Lessee of its renewal option in respect of
such unit, 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 September 20, 2020.
"Basic Term Purchase Price" shall mean, with respect to any Unit, the
amount equal to the product of the percentage set forth in Schedule 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.
3
<PAGE>
"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 Collateral Agent maintains its
corporate trust office, 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.
"Cash Trapping Account" shall have the meaning assigned thereto in the
Intercreditor Agreement.
"Cash Trapping Event" shall have the meaning assigned thereto in the
Intercreditor 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.
"Certificates" or "Pass Through Certificates" shall mean the Pass Through
Certificates issued pursuant to each of the Pass Through Trust Supplements and
the Pass Through Trust 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 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" shall have the meaning assigned thereto in the Intercreditor
Agreement.
"Collateral Agent" shall have the meaning assigned thereto in the
Intercreditor Agreement.
4
<PAGE>
"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
(excluding Alaska and Hawaii).
"Credit Bankrupt" shall mean a Person which (i) 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 (ii) is not paying its debts generally 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 as of any date of determination, the lesser of
(x) (i) in the case of any amount paid to or for the benefit of the Owner
Participant, 2.0% plus the Base Rate in effect as of such date, and (ii) in the
case of any amount other than amounts referred to in (i), 2.0% over the Debt
Rate and (y) the maximum interest rate permitted by law (computed on the basis
of a 360-day year of twelve 30-day months).
"Determination Date" shall mean a Payment Date.
"Early Purchase Date" shall mean the early purchase date specified on
Schedule 6 to the Participation Agreement.
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"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 a 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 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.
"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.
"Equipment Lease" or "Lease" or "Lease Agreement" shall mean the Equipment
Lease Agreement (GARC II 98-A), relating to the Equipment, dated as of
September 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.
"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.
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"Equity Information" shall mean the items set forth on Exhibit E to the
Participation Agreement.
"Equity Insufficiency Circumstance" shall mean, at any date, the failure of
the Owner Participant to have received under the Intercreditor Agreement the
full amount due on such date of the Accumulated Equity Deficiency Amount.
"Equity Portion of Basic Rent" shall mean, at any Payment Date, the amount
set forth in column (__) on Schedule 3 to the Participation Agreement
corresponding to such Payment Date.
"Equity Portion of Early Purchase Price" shall mean the amount designated
as such in accordance with Schedule 6 to the Participation Agreement.
"Equity Portion of Stipulated Loss Value" shall mean, as of any date, the
amount set forth in column (__) on Schedule 4 to the Participation Agreement
corresponding to such date.
"Equity Portion of Termination Value" shall mean, as of any date, the
amount set forth in column (__) on Schedule 4 to the Participation Agreement
corresponding to such 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 or payments under the Tax Indemnity Agreement) to which the Owner
Participant, WTC 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 WTC 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 WTC or to the Owner Participant, as the case may be, (iii) any
insurance proceeds payable under insurance maintained by WTC or the Owner
Participant pursuant to Section 12.5 of the Lease, (iv) any insurance proceeds
payable to or on behalf of WTC 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 WTC or the Owner Participant
pursuant to the Participation Agreement or the Trust Agreement, (vi) all right,
title and interest of the Owner Participant or WTC 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
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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 WTC 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 Participation
Agreement and the Trust Agreement and (x) the respective rights of WTC 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.
"Excess Cash Account" shall have the meaning assigned thereto in the
Intercreditor Agreement.
"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 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 (unless Lessee shall
have assumed such obligations pursuant to and in accordance with Section 3.6 of
the Indenture).
"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 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
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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, such appraisers shall,
within five days after such 15-day period, appoint a third appraiser, and, if no
such third appraiser is appointed within the five days specified therefor, 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, the appraisal most divergent
from such average shall be discarded, the remaining two appraisals shall be
averaged and such average shall be the Fair Market Rental Value or Fair 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" or "Lessee Parent" shall mean General American Transportation
Corporation, a New York corporation.
"GATC Assignment" shall mean the assignment by Lessee Parent 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 Lessee Parent pursuant to the Transfer and Assignment
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
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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.
"Indenture" or "Trust Indenture" shall mean the Trust Indenture and
Security Agreement (GARC II 98-A), dated as of September 1, 1998 between the
Owner Trustee, in the capacities described therein, and the Indenture Trustee.
The term "Indenture" or "Trust 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 (GARC II 98-A)
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
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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 State Street Bank and Trust Company, a
Massachusetts trust company, 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,
and subtracting 1.00 from the resulting quotient. "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 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. The Inflation Factor may
be a negative number.
"Initial Manager" shall mean General American Transportation Corporation, a
New York corporation.
"Insurance Agreement" shall mean the Insurance Agreement dated as of
September 1, 1998 between the Lessee and Lessee Parent.
"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 September 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustee, the Indenture Trustee, the Manager, the
Insurance Manager and certain other Persons.
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"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 and interest at such rate on
any overdue amounts of such interest, (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 Debt Rate, (iv) any Late
Payment Premium, (v) in the case of any Late Payment Premium that is overdue,
interest at the rate specified in the definition of "Late Payment Premium," and
(vi) in respect of any other overdue amount, including Basic Rent and
Supplemental Rent, interest at the Default Rate.
"Late Payment Premium" shall mean, with respect to any Payment Deficiency
for 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 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 equal to the lesser of __% per
annum or the maximum rate permitted by applicable law (computed on the basis of
a 360-day year of twelve 30-day months).
"Lease" or "Lease Agreement" or "Equipment Lease" shall mean the Equipment
Lease Agreement (GARC II 98-A), relating to the Equipment, dated as of
September 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 (GARC II 98-A), dated the
Closing Date or the date that any Replacement Unit is subjected to the Lease,
substantially in the form of
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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" or "Company" shall mean General American Railcar Corporation II, a
Delaware corporation.
"Lessee Agreements" shall mean the Operative Agreements to which the Lessee
is or will be a party.
"Lessee Parent" or "GATC" shall mean General American Transportation
Corporation, a New York corporation.
"Lessor" shall mean the Trust.
"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 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 acts
or omissions 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.
"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.
"Liquidity Reserve Account" shall have the meaning assigned thereto in the
Intercreditor Agreement.
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"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 Lessee Parent,
as Trustee for itself, individually, General American Railcar Corporation,
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.
"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.
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"Management Agreement" shall mean the Operation, Maintenance, Servicing and
Remarketing Agreement dated as of September 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 (whether or not in such capacity).
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
of the Management Agreement.
"Manager's Fleet" shall mean railcars owned, leased or managed by the
Manager other than the Company Fleet.
"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
the Lease.
"Net Economic Return" shall mean the 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, Early Purchase Price and Basic Term Purchase Price initially set forth in
Schedules 3, 4, 5 and 6 to the Participation Agreement.
"Non-Severable Modification" shall mean any Modification that is not a
Severable Modification.
"Non-Shared Payments Account" shall have the meaning assigned thereto in
the Intercreditor Agreement.
"Notice of Delivery" shall have the meaning assigned thereto in Section
2.3(a) of the Participation Agreement.
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"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 such
officer's 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.
"Operating Account" shall have the meaning assigned thereto in the
Intercreditor Agreement.
"Operative Agreements" shall mean the Transfer and Assignment 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 and the Lockbox Agreement.
"Other Leases" means (i) the Equipment Lease Agreement (GARC II 98-B)
dated as of September 1, 1998 between the Lessee and GARC II 98-B Railcar Trust,
by Wilmington Trust Company, not in its individual capacity but solely as Owner
Trustee under a Trust Agreement dated as of September 1, 1998 with
[______________________], and (ii) the Equipment Lease Agreement (GARC II 98-C)
dated as of September 1, 1998 between the Lessee and GARC II 98-C Railcar Trust,
by Wilmington Trust Company, not in its individual capacity but solely as Owner
Trustee under a Trust Agreement dated as of September 1, 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.
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"Owner Participant's Commitment" shall have the meaning assigned thereto in
Section 2.2(a) of the Participation Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, 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.
"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 (GARC II
98-A) dated as of September 1, 1998, among the Lessee, the Manager, the Lessee
Parent, 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 September 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
September 1, 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 State Street Bank and Trust Company, 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.
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"Payment Account" shall have the meaning assigned thereto in Section 6.4(c)
of the Indenture.
"Payment Date" shall mean the 20th day of each month through and including
the Rated Maturity Date, commencing October 20, 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.
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"Person" shall mean an individual, partnership, limited liability company,
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
"Post Lease Term Reserve Account" shall have the meaning assigned thereto
in the Intercreditor Agreement.
"Preliminary Prospectus" shall mean the Preliminary Prospectus dated
September __, 1998 relating to the offering of the Pass Through Certificates.
"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 Underwriting 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 September __, 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.
19
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"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__.
"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.
"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 at the Debt Rate on the unpaid
portions of the principal amounts of the outstanding Equipment Notes.
"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.
20
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"Renewal Rent" shall have the meaning assigned thereto in Section 22.4 of
the Lease.
"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, 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.
"Rent 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" shall mean the next
succeeding Business Day; provided, however, that interest and Late Payment
Premium payable on such Rent Payment Date, and all other calculations as of such
Rent Payment Date, shall be computed as of the date which would have been a Rent
Payment Date if such date were a Business Day.
"Replacement Unit" shall have the meaning assigned thereto in Section 11.4
of the Lease.
"Required Modification" shall have the meaning assigned thereto in Section
9.1 of the Lease.
"Reserve Accounts" shall mean, collectively, the Cash Trapping Account, the
Liquidity Reserve Account, the Special Reserve Account, the Special Insurance
Reserves Account and the Post Lease Reserve Account.
"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 with respect to the Collateral Agent,
the Owner Trustee and the Indenture Trustee, any trust officer at its corporate
trust office (or any other officer to whom any matter has been referred because
of such officer's knowledge and familiarity with the particular subject); 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.
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"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 the
Management Agreement.
"Servicing Agreement" shall mean the Amended and Restated Management and
Servicing Agreement dated as of September 1, 1998 between Lessee Parent and the
Marks Company.
"Severable Modification" shall mean any Modification that is readily
removable without causing damage to the Equipment or any Unit (other than damage
which is de minimis) and without diminishing, other than in a de minimis
respect, the value, utility or useful life of the Equipment or any Unit below
the value, utility or useful life of the Equipment or such Unit immediately
prior to removal of such Modification, assuming that the Equipment or such Unit
was then at least in the condition required to be maintained by the terms of the
Lease.
"Special Insurance Reserves Account" shall have the meaning assigned
thereto in the Intercreditor Agreement.
"Special Reserves Account" shall have the meaning assigned thereto in the
Intercreditor Agreement.
"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 (as
defined in the Intercreditor Agreement) having, at the time of the
22
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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 (as defined in the
Intercreditor Agreement), (iv) a GIC provided by GATX, provided that such
obligations are supported by an Acceptable Letter of Credit (as defined in the
Intercreditor Agreement), (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 Deficiency Account" shall have the meaning assigned
thereto in the Intercreditor Agreement.
"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 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.
23
<PAGE>
"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.
"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 (GARC II
98-A) dated as of September 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.
24
<PAGE>
"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 Assignment Agreement" shall mean the Transfer and Assignment
Agreement dated as of September 1, 1998 between Lessee Parent and the Company.
"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)
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<PAGE>
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 (GARC II 98-A),
dated as of September 1, 1998, between the Owner Participant and Wilmington
Trust Company.
"Trust Estate" shall have the meaning assigned thereto in Section 2.2 of
the Trust Agreement.
"Trust Indenture" or "Indenture" shall mean the Trust Indenture and
Security Agreement (GARC II 98-A), dated as of September 1, 1998 between the
Owner Trustee, in the capacities described therein, and the Indenture Trustee.
The term "Indenture" or "Trust Indenture" shall include, except where the
context otherwise requires, each Indenture Supplement entered into pursuant to
the terms of the Indenture.
"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 Smith Barney Inc. and Morgan Stanley &
Co. Incorporated.
"Underwriting Agreement" shall mean that certain Underwriting 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.
"WTC" shall mean Wilmington Trust Company, a Delaware trust company.
26
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EXHIBIT 10.5
FORM OF
---------------------------
PARTICIPATION AGREEMENT (GARC II 98-A)
Dated as of September 1, 1998
among
GENERAL AMERICAN RAILCAR CORPORATION II,
as Lessee,
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Lessee Parent,
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager,
GARC II 98-A RAILCAR TRUST, BY WILMINGTON TRUST COMPANY,
as Owner Trustee,
[OWNER PARTICIPANT],
as Owner Participant,
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
and
STATE STREET BANK AND TRUST COMPANY,
as Pass Through Trustee
Tank Cars and Covered Hopper Cars
---------------------------
<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...................................... 3
Section 2.4. Owner Participant's Instructions to the Owner.................................. 5
Trustee; Satisfaction of Conditions.
Section 2.5. Expenses....................................................................... 5
Section 2.6. Calculation of Adjustments to Basic Rent,
Confirmation and Verification.................................................................. 8
Stipulated Loss Value and Termination Value;
Section 2.7. Postponement of Closing Date................................................... 11
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of WTC.......................................... 13
Section 3.2. Representations and Warranties of the Lessee................................... 15
Section 3.3. Representations and Warranties of the Indenture
Trustee........................................................................ 19
Section 3.4. Representations, Warranties and Covenants
Regarding Beneficial Interest and Equipment
Notes.......................................................................... 21
Section 3.5. Representations and Warranties of the Pass..................................... 21
Through Trustee.
Section 3.6. Representations and Warranties of the Owner
Participant.................................................................... 23
Section 3.7. Representations and Warranties of the Lessee................................... 25
Parent.
Section 3.8. Opinion Acknowledgment......................................................... 28
SECTION 4. CLOSING CONDITIONS
Section 4.1. Conditions Precedent to Investment by Each
Participant.................................................................... 28
Section 4.2. Additional Conditions Precedent to Investment by
the Pass Through Trustee and Indenture
Trustee........................................................................ 34
Section 4.3. Additional Conditions Precedent to Investment
by the Owner Participant....................................................... 34
Section 4.4. Conditions Precedent to the Obligation of the
</TABLE>
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<TABLE>
<S> <C>
Lessee.................................................................... 35
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE
Section 6.1. Restrictions on Transfer of Beneficial Interest........................... 38
Section 6.2. Lessor's Liens Attributable to the Owner
Participant............................................................... 41
Section 6.3. Lessor's Liens Attributable to WTC........................................ 41
Section 6.4. Liens Created by the Indenture Trustee and the
Loan Participant.......................................................... 42
Section 6.5. Covenants of Owner Trustee, Owner Participant
and Indenture Trustee..................................................... 43
Section 6.6. Amendments to Operative Agreements........................................ 43
Section 6.7. Certain Representations, Warranties and
Covenants................................................................. 43
Section 6.8. Covenants of the Manager.................................................. 43
Section 6.9. Lessee's Purchase in Certain Circumstances................................ 44
Section 6.10. Owner Participant as Affiliate of Lessee.................................. 45
SECTION 7. LESSEE'S INDEMNITIES
Section 7.1. General Tax Indemnity..................................................... 45
Section 7.2. General Indemnification................................................... 54
Section 7.3. Indemnification by Lessee Parent.......................................... 58
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT
SECTION 9. SUCCESSOR INDENTURE TRUSTEE
SECTION 10. MISCELLANEOUS
Section 10.1. Consents.................................................................. 61
Section 10.2. Refinancing............................................................... 61
Section 10.3. Amendments and Waivers.................................................... 63
Section 10.4. Notices................................................................... 64
Section 10.5. Survival.................................................................. 66
Section 10.6. No Guarantee of Residual Value or Debt.................................... 67
Section 10.7. Successors and Assigns.................................................... 67
Section 10.8. Business Day.............................................................. 67
Section 10.9. Governing Law............................................................. 67
Section 10.10. Severability.............................................................. 67
Section 10.11. Counterparts.............................................................. 67
Section 10.12. Headings and Table of Contents............................................ 68
</TABLE>
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<TABLE>
<S> <C>
Section 10.13. Limitations of Liability............................................................. 68
Section 10.14. Maintenance of Non-Recourse Debt..................................................... 69
Section 10.15. Ownership of and Rights in Units..................................................... 69
Section 10.16. No Petition.......................................................................... 69
Section 10.17. Consent To Jurisdiction.............................................................. 70
Section 10.18. WAIVER OF JURY TRIAL................................................................. 71
Section 10.19. Lessee Parent Status................................................................. 71
</TABLE>
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EXHIBITS AND SCHEDULES
- ----------------------
Exhibit A-1 - Form of Certificate of Insurance Broker Confirming Insurance
Coverage (Primary Liability)
Exhibit A-2 - Form of Certificate of Insurance Broker Confirming Insurance
Coverage (Excess Liability)
Exhibit B - Insurance Requirements
Exhibit C - Form of Transfer Agreement
Exhibit D - Form of Notice of Assignment of Existing Car Service Contract
[Exhibit E - Equity Information]
Schedule 1 - Description of Equipment, Designation of Basic Groups,
Designation of Functional Groups, and Equipment Cost
Schedule 1A - List of Existing Car Service Contracts
Schedule 2 - Commitment Percentage and Payment Information for Participants
Schedule 3 - Schedule of Basic Rent Payments
Schedule 4 - Schedule of Stipulated Loss Value and Termination Value
Schedule 5 - Terms of Equipment Notes
Schedule 6 - Purchase Information
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PARTICIPATION AGREEMENT (GARC II 98-A)
This PARTICIPATION AGREEMENT (GARC II 98-A), dated as of September 1, 1998
(this "Agreement"), is by and among (i) General American Railcar Corporation II,
a Delaware corporation (together with its permitted successors and assigns, the
"Lessee"), (ii) General American Transportation Corporation, a New York
corporation, as Lessee Parent (the "Lessee Parent"), (iii) General American
Transportation Corporation, a New York corporation, as Manager (together with
its permitted successors and assigns, the "Manager") under the Management
Agreement (such term and other defined terms used herein shall have the meanings
assigned thereto in Section 1 below), (iv) GARC II 98-A Railcar Trust, a
Delaware business trust, by Wilmington Trust Company ("WTC"), not in its
individual capacity except as expressly provided herein but solely as trustee
under the Trust Agreement (together with its permitted successors and assigns,
the "Owner Trustee"), (v) [Owner Participant], a ___________ corporation
(together with its permitted successors and assigns, the "Owner Participant"),
(vi) State Street Bank and Trust Company, as trustee under the Indenture
(together with its permitted successors and assigns, the "Indenture Trustee"),
and (vii) State Street Bank and Trust Company, not in its individual capacity
except as expressly provided herein but solely as Pass Through Trustee under the
Pass Through Trust Agreement (herein in such capacity, together with its
permitted successors and assigns, called the "Pass Through Trustee" or the "Loan
Participant"). The Owner Participant and the Loan Participant are sometimes
hereinafter referred to collectively as the "Participants".
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Owner Participant and WTC have entered into the Trust Agreement pursuant to
which the Owner Trustee agrees, among other things, to hold the Trust Estate for
the benefit of the Owner Participant thereunder on the terms specified in the
Trust Agreement, subject, however, to the Lien created under the Indenture and,
subject to the terms and conditions hereof, to purchase the Equipment described
in Schedule 1 hereto from the Lessee and concurrently therewith to lease such
Equipment to the Lessee;
WHEREAS, pursuant to the Pass Through Trust Agreement, on the Closing
Date, a grantor trust will be created to facilitate the financing contemplated
hereby;
WHEREAS, on or prior to the Closing Date, the Owner Trustee and the
Indenture Trustee will enter into the Indenture, pursuant to which the Owner
Trustee will agree, among other things, to issue to the Pass Through Trustee, as
Loan Participant, the Equipment Notes as evidence of the loan made by the Loan
Participant in connection with the financing of the Total Equipment Cost;
WHEREAS, Lessee Parent will on the Closing Date, pursuant to the Transfer
and Assignment Agreement (i) sell to the Lessee all of Lessee Parent's right,
title and interest in and to the Equipment, and (ii) contribute to the capital
of the Lessee all of Lessee Parent's right, title
<PAGE>
[Participation Agreement (GARC II 98-A)]
and interest in and to any and all lease agreements with customers of Lessee
Parent in respect of the Equipment and under which Lessee Parent is the lessor
(such lease agreements, together with the other lease agreements being assigned
to the Lessee on the Closing Date pursuant to the Transfer and Assignment
Agreement are hereinafter referred to collectively as the "Existing Car Service
Contracts");
WHEREAS, pursuant to the terms of the Trust Agreement, the Owner
Participant has authorized and directed the Owner Trustee, immediately following
the transactions described in the preceding paragraph, (i) to accept delivery
from the Lessee of the 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,
Lessee Parent and the Owner Participant will enter into the Tax Indemnity
Agreement relating to the Equipment;
WHEREAS, the proceeds from the sale of the Equipment Notes to the Loan
Participant will be applied, together with the equity contribution made by the
Owner Participant pursuant to this Agreement, to effect the purchase of the
Equipment by the Owner Trustee as contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Lessee and the Manager have entered into the Management Agreement, pursuant
to which the Manager will provide management services with respect to the
Equipment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, receipt of which is acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT.
Unless otherwise defined herein or unless the context shall otherwise
require, capitalized terms used in this Agreement shall have the meanings
assigned to such terms in Appendix A to the Equipment Lease Agreement (GARC II
98-A) dated as of September 1, 1998 between the Owner Trustee and the Lessee.
Unless otherwise indicated, all references herein to Sections, Schedules and
Exhibits refer to Sections, Schedules and Exhibits of this Agreement.
2
<PAGE>
[Participation Agreement (GARC II 98-A)]
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING;
TRANSACTION COSTS.
Section 2.1. Sale and Purchase. Subject to the terms and
-----------------
conditions hereof and on the basis of the representations and warranties set
forth herein, the Lessee agrees to sell to the Owner Trustee, and the Owner
Trustee agrees to purchase from the Lessee, on the Closing Date and immediately
following consummation of the transactions described in the fourth recital
clause above, the Equipment described in Schedule 1, and in connection
therewith, the Owner Trustee agrees to pay to the Lessee the cost for each Unit
as specified in Schedule 1. On the Closing Date, the Lessee shall deliver each
Unit to the Owner Trustee, and the Owner Trustee shall accept such delivery.
Section 2.2. Participation in Equipment Cost.
-------------------------------
(a) Equity Participation. On the Closing Date, subject to the
--------------------
terms and conditions hereof and on the basis of the representations and
warranties set forth herein, the Owner Participant agrees to participate in the
payment of the Total Equipment Cost for the Units delivered on the Closing Date
by making an equity investment in the beneficial ownership of such Units in the
amount equal to the product of the Total Equipment Cost for the Units delivered
on the Closing Date and the percentage set forth opposite the Owner
Participant's name in Schedule 2 (the "Owner Participant's Commitment"). The
aggregate amount of the Owner Participant's Commitment plus the aggregate amount
of Transaction Costs payable by the Owner Participant shall not exceed the sum
of (x) the Owner Participant's Commitment and (y) 1.15% of the Total Equipment
Cost. The Owner Participant's Commitment shall be paid to the Indenture Trustee
to be held (but not as part of the Indenture Estate) and applied on behalf of
the Owner Trustee toward payment of the Total Equipment Cost as provided in
Section 2.3.
(b) Debt Participation. On the Closing Date, subject to the
------------------
terms and conditions hereof and on the basis of the representations and
warranties set forth herein, the Loan Participant agrees to participate in the
payment of the Total Equipment Cost for the Units delivered on the Closing Date
by making a secured loan, not from its own funds but solely from funds available
to it for such purpose under the Pass Through Trust to be evidenced by the
Equipment Note, to the Owner Trustee in the amount equal to the product of the
Total Equipment Cost for the Units delivered on the Closing Date and the
percentage set forth opposite such Loan Participant's name in Schedule 2 (the
"Loan Participant's Commitment"). The Equipment Notes shall bear interest at the
Debt Rate.
Section 2.3. Closing Date; Procedure for Participation.
-----------------------------------------
(a) Notice of Closing Date. Not later than the Pricing Date,
the Lessee shall give the Owner Participant, the Indenture Trustee, the Owner
Trustee and the Loan
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[Participation Agreement (GARC II 98-A)]
Participant notice (a "Notice of Delivery") by telex, telegraph, facsimile or
other form of telecommunication or telephone (to be promptly confirmed in
writing) of the Closing Date, which Notice of Delivery shall specify in
reasonable detail the number and type of Units to be delivered on such date, the
aggregate Equipment Cost of such Units, and the respective amounts of the Owner
Participant's Commitment and the Loan Participant's Commitment required to be
paid with respect to such Units. Prior to 11:00 a.m., Chicago time, on the
Closing Date, subject to the satisfaction (or waiver) of the respective
conditions specified in Section 4, the Owner Participant shall make the amount
of the Owner Participant's Commitment required to be paid on the Closing Date
available to the Indenture Trustee, and immediately prior to the delivery and
acceptance of the Units as specified in Section 2.3(b), the Loan Participant
shall make the amount of such Loan Participant's Commitment for the Total
Equipment Cost required to be paid on the Closing Date available to the
Indenture Trustee, in either case, by transferring or delivering such amounts,
in funds immediately available on the Closing Date, to the Indenture Trustee,
either directly to, or for deposit in, the Indenture Trustee's account at State
Street Bank and Trust Company, Two International Place, Boston, MA 02110, ABA
No. [_________], Account [_________], Att.: [_________], Trust GARC II 98-A. The
making available by the Owner Participant of the amount of the Owner
Participant's Commitment for the Total Equipment Cost shall be deemed a waiver
of the Notice of Delivery by the Owner Participant and the Owner Trustee. The
making available by the Loan Participant of the amount of the Loan Participant's
Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice
of Delivery by the Loan Participant and the Indenture Trustee.
(b) Closing. The closing of the transactions contemplated hereby (the
-------
"Closing") shall take place at 11:00 a.m., Chicago time, on the Closing Date at
the offices of Vedder, Price, Kaufman & Kammholz, or at such other place or time
as the parties hereto shall agree. Upon receipt by the Indenture Trustee on the
Closing Date of the full amount of the Owner Participant's Commitment and the
Loan Participant's Commitment in respect of the Units delivered on the Closing
Date, Lessee Parent shall pursuant to the Transfer and Assignment Agreement
deliver the Units to the Lessee by delivery of the GATC Bill of Sale and shall
make an assignment of the Existing Car Service Contracts to the Lessee under the
GATC Assignment, and immediately thereafter, (i) the Indenture Trustee, on
behalf of the Owner Trustee, shall, subject to the conditions set forth in
Sections 4.1 and 4.3 having been fulfilled to the satisfaction of the
Participants or waived by the Participants, pay to the Lessee from the funds
then held by it, in immediately available funds, an amount equal to the Total
Equipment Cost for the Units delivered on the Closing Date, and (ii) the Lessee
shall pay to Lessee Parent pursuant to the Transfer and Assignment Agreement an
amount equal to the Equipment Cost for the Units purchased on the Closing Date,
(iii) the Lessee shall deliver the Units to the Owner Trustee, (iv) the Owner
Trustee shall, pursuant to the Lease, lease and deliver the Units to the Lessee,
and the Lessee, pursuant to the Lease, shall accept delivery of the Units under
the Lease, such lease, delivery and acceptance of the Units under the Lease
shall be conclusively evidenced by the execution and delivery by the Lessee and
the Owner Trustee of a Lease Supplement covering the
4
<PAGE>
[Participation Agreement (GARC II 98-A)]
Equipment so delivered as described in Schedule 1, and (v) the Owner Trustee
shall execute and deliver an Equipment Note relating to such Lease Supplement to
the Loan Participant. Each of the Lessee, the Owner Participant, the Owner
Trustee, the Lessee Parent, the Loan Participant and the Indenture Trustee
hereby agrees to take all actions required to be taken by it in connection with
the Closing as contemplated by this Section 2.3(b).
Section 2.4. Owner Participant's Instructions to the Owner Trustee;
------------------------------------------------------
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 the penultimate sentence of Section 2.2(a)) to the Owner
Trustee, the following (collectively referred to as the "Transaction Costs") if
evidenced by an invoice delivered to the Owner Participant within four (4)
months after the Closing Date and approved by the Lessee (such approval not to
be unreasonably withheld or delayed):
(i) the cost of reproducing, printing and filing the Operative
Agreements, the Equipment Notes, the Pass Through Certificates, the
Prospectus relating to the Pass Through Certificates, and the Underwriting
Agreement and all amendments and supplements to the foregoing, including
all costs and fees in connection with the initial filing and recording of
the Lease, the Indenture and any
5
<PAGE>
[Participation Agreement (GARC II 98-A)]
other document required to be filed or recorded pursuant to the provisions
hereof or of any other Operative Agreement and the fees and expenses of
the Rating Agencies in connection with the rating of the Pass Through
Certificates;
(ii) the reasonable out-of-pocket expenses of the Owner
Participant and the reasonable fees (which shall be the amount specified
in that letter dated _______) of Winston & Strawn, special counsel for the
Owner Participant, plus disbursements, for their services rendered in
connection with the negotiation, execution and delivery of this Agreement
and the other Operative Agreements;
(ii) all costs and fees in connection with the qualification
of the Pass Through Certificates under federal or state securities laws or
Blue Sky laws in accordance with the provisions of Section 9(b) of the
Underwriting Agreement;
(iv) the reasonable fees and expenses of Ernst & Young,
accountants of the Lessee, for their services rendered in connection with
issuing an "agreed upon procedure letter" and "comfort letters" to the
Underwriters and the Owner Participant;
(v) the reasonable fees and expenses of Vedder, Price, Kaufman
& Kammholz, special counsel for Lessee Parent, Manager and the Lessee, for
their services rendered in connection with the preparation of
documentation, negotiation, execution and delivery of the Underwriting
Agreement, this Agreement and the other Operative Agreements;
(vi) the reasonable fees and expenses of Milbank, Tweed,
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 (x) Alvord & Alvord,
special STB counsel and (y) McCarthy Tetrault, special Canadian counsel;
(viii) the reasonable fees and expenses of Morris, James,
Hitchens & Williams, 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 Bingham, Dana LLP,
special counsel for the Indenture Trustee, for their services rendered in
connection with
6
<PAGE>
[Participation Agreement (GARC II 98-A)]
the negotiation, execution and delivery of this Agreement and the other
Operative Agreements;
(x) the commissions payable to the Underwriters in
connection with the sale of the Pass Through Certificates;
(xi) the initial fees and reasonable out-of-pocket expenses
of the Owner Trustee;
(xii) the initial fees and reasonable out-of-pocket expenses
of the Indenture Trustee;
(xiii) the initial fees and reasonable out-of-pocket expenses
of the Pass Through Trustee;
(xiv) the reasonable fees of Rail Solutions, Inc. (which fees
shall in no event exceed $18,000 in the aggregate in respect of the
amounts payable hereunder and under the corresponding documentation
relating to the Other Leases), plus disbursements, for their services
rendered in connection with delivering the Appraisal required by Section
4.3(a) and for other consulting services;
(xv) the reasonable fees of Johnson & Higgins Marsh McLennan
(in an amount not to exceed $7,500 in the aggregate in respect of the
amounts payable hereunder and under the corresponding documentation
relating to the Other Leases), plus disbursements, for their services
rendered as insurance consultants to the Owner Participant;
(xvi) the reasonable fees and expenses of GATX Lease Funding,
Inc. for their services rendered as advisor to Lessee; and
(xviii) the costs incurred in connection with any adjustment
pursuant to Section 2.6(a).
Except as expressly provided above, Transaction Costs shall not
include internal costs and expenses such as salaries and overhead of whatsoever
kind or nature of, or costs incurred by, parties to this Agreement pursuant to
arrangements with third parties for services (other than those expressly
referred to above).
(b) Upon the consummation of the transactions contemplated by this
Agreement, the Lessee agrees to pay when due: (i) the reasonable expenses
(including reasonable legal fees and expenses) of the Owner Trustee, the
Indenture Trustee and the
7
<PAGE>
[Participation Agreement (GARC II 98-A)]
Participants incurred subsequent to the delivery of the Equipment on the Closing
Date, in connection with any supplements, amendments, modifications,
alterations, waivers or consents (whether or not consummated) of any of the
Operative Agreements which are either (1) requested by, or necessitated by
action or inaction on the part of, the Lessee or by any applicable law or
regulation (other than laws or regulations solely relating to the business of
the Lessor or the Owner Participant) or entered into in connection with, or as a
result of, a Lease Default or (2) necessary or required to effectuate the
purpose or intent of any Operative Agreement (including costs incurred in
connection with any adjustment pursuant to Section 2.6) or (3) any other
supplement, amendment, modification, alteration, waiver or consent unless, in
the case of this clause (3), such action would require the consent of the Lessee
pursuant to Section 6.6 hereof and Lessee shall not have provided such consent,
and (ii) the ongoing fees and expenses (including reasonable legal fees and
expenses) of the Owner Trustee under the Trust Agreement; (iii) the ongoing fees
and expenses of the Indenture Trustee under the Operative Agreements; and (iv)
the ongoing fees and expenses of the Pass Through Trustee under the Pass Through
Trust Agreement.
(c) If the transactions contemplated hereby are not consummated as a
result of a default by the Owner Participant in its obligations to consummate
the transactions contemplated hereby, the Owner Participant shall pay those
Transaction Costs referred to in Sections 2.5(a)(ii), (xiv) and (xv) above and
Lessee shall pay the remainder. If the transactions contemplated hereby are not
consummated due to any other reason, the Lessee shall pay all Transaction Costs.
(d) Notwithstanding the foregoing provisions of this Section 2.5, the
Lessee shall have no liability for any costs or expenses relating to any
voluntary transfer of the Owner Participant's interest in the Equipment pursuant
to Section 6.1 other than during the continuance of an Event of Default and no
such costs or expenses shall constitute Transaction Costs.
(e) To the extent Transaction Costs exceed 1.15% of the Total
Equipment Cost, Lessee shall pay the Transaction Costs specified in Sections
2.5(a)(iv), (v) and (xvi) above up to an amount equal to the amount of such
excess.
Section 2.6. Calculation of Adjustments to Basic Rent, Stipulated
----------------------------------------------------
Loss Value and Termination Value; Confirmation and Verification.
- ---------------------------------------------------------------
(a) Calculation of Adjustments. In the event that (A) the Closing
--------------------------
Date is other than _____________, 1998, (B) the actual interest rate on the
Equipment Note is different than the Debt Rate or the amortization of the
Equipment Note is different from that set forth on Schedule 5, (C) a refinancing
contemplated by Section 10.2 occurs, (D) the actual aggregate Equipment Cost or
composition of the Units is different from that set forth on
8
<PAGE>
[Participation Agreement (GARC II 98-A)]
Schedule 1, (E) the actual aggregate amount of Transaction Costs paid pursuant
to Section 2.5(e) is other than an amount equal to 1.15% of the Total Equipment
Cost, (F) there is any change in, or cost relating to a revision in, the
structure of the transaction contemplated hereby as required by any of the
Rating Agencies, or (G) there is any change in the Code or in the regulations
promulgated thereunder or other official administrative pronouncement, which
change is proposed, enacted or effective after the date hereof and prior to the
Closing Date (provided that the Owner Participant or the Lessee, as the case may
be, shall have provided notice to the other prior to the Closing Date), and
which change alters or eliminates the tax assumptions used in calculating Basic
Rent, Stipulated Loss Values, Termination Values, Early Purchase Price and Basic
Term Purchase Price, then, in each such case, the Owner Participant shall
recalculate the payments or amounts, as the case may be, of Basic Rent,
Stipulated Loss Values, Termination Values, Early Purchase Price and Basic Term
Purchase Price, (i) to preserve the Net Economic Return that the Owner
Participant would have realized had such event not occurred, and (ii) to
minimize to the greatest extent possible, consistent with the foregoing clause
(i), the present value (discounted monthly at an interest rate per annum equal
to the Debt Rate) of the payments of Basic Rent; provided, however, that in no
event shall the Early Purchase Price or the Basic Term Purchase Price be less
than the expected fair market value of the Equipment on the Early Purchase Date
and the Basic Term Expiration Date, respectively, as determined by the
Appraisal. Any such recalculation performed due to the occurrence of any one or
more of the events described in clause (A), (B), (D), (F) or (G) above shall be
made prior to the Closing Date. In performing any such recalculation and in
determining the Owner Participant's Net Economic Return, the Owner Participant
shall utilize the same methods and assumptions originally used in making the
computations of Basic Rent, Stipulated Loss Values, Termination Values, Early
Purchase Price and the Basic Term Purchase Price with respect to the Basic Term
initially set forth in Schedules 3, 4 and 6 (other than those assumptions
changed as a result of any of the events described in clauses (A) through (G) of
the preceding sentence necessitating such recalculation; it being agreed that
such recalculation shall reflect solely any changes of assumptions or facts
resulting directly from the event or events necessitating such recalculation).
Such adjustments shall comply (to the extent the original structure complied)
with Section 467 of the Code and the requirements of Sections 4.02(5), 4.07(1)
and (2) and 4.08(1) of Revenue Procedure 75-28, as amended, calculated, except
in the case of a refinancing pursuant to Section 10.2, without taking into
account any change after the Closing Date in or to (i) Section 467 of the Code
(and any regulations thereunder), or (ii) Section 4.08(l) of Revenue Procedure
75-28.
(b) Confirmation and Verification. Upon completion of any
-----------------------------
recalculation described in Section 2.6(a), a duly authorized officer of the
Owner Participant shall provide a certificate to the Lessee either (x) stating
that the payments of Basic Rent, Stipulated Loss Values, Termination Values,
Early Purchase Price and Basic Term Purchase Price with respect to the Basic
Term as are then set forth in Schedules 3, 4 and 6 do not require change, or (y)
setting forth such adjustments to the payments of Basic Rent, Stipulated Loss
Values,
9
<PAGE>
[Participation Agreement (GARC II 98-A)]
Termination Values, Early Purchase Price or Basic Term Purchase Price with
respect to the Basic Term as have been calculated by the Owner Participant in
accordance with Section 2.6(a). Such certificate shall describe in reasonable
detail the basis for any such adjustments, and any such adjustment and
corresponding adjustments to the Stipulated Loss Values, Termination Values,
Early Purchase Price and Basic Term Purchase Price will be computed on a basis
consistent with that used by the Owner Participant in the original calculation
of Basic Rent. Any such adjustment shall be deemed approved upon notice of such
approval by the Lessee to the Owner Participant or on the thirty-first (31st)
day following delivery of such certificate by the Owner Participant to the
Lessee unless the Lessee, prior to such day, requests verification pursuant to
the following sentence, and shall become effective, in the case of adjustments
made pursuant to clause (A), (B), (D), (E), (F) or (G) of the first sentence of
Section 2.6(a), as of the earlier of (i) the first Rent Payment Date and (ii)
the date the Lessee approves or has been deemed to have approved such
adjustment, and, in the case of an adjustment made pursuant to clause (C) of the
first sentence of Section 2.6(a), as of the date of the refinancing. If the
Lessee shall so request, the recalculation of any such adjustments described in
this Section 2.6 shall be verified by a nationally recognized firm of
independent accountants selected by the Owner Participant and reasonably
acceptable to the Lessee, and any such recalculation of such adjustment as so
verified shall be binding on the Lessee and the Owner Participant. Such
accounting firm shall be requested to make its determination within 30 days. The
Owner Participant shall provide to a representative of such accounting firm, on
a confidential basis, such information as it may reasonably require, including
the original assumptions used by the Owner Participant and the methods used by
the Owner Participant in the original calculation of, and any recalculation of,
Basic Rent, Stipulated Loss Values, Termination Values, Early Purchase Price and
Basic Term Purchase Price and such other information as is necessary to
determine whether the computation is accurate and in conformity with the
provisions of this Agreement, provided that in no event shall the Owner
Participant have any obligation to provide the Lessee with any such information;
and provided, further, that the Owner Participant shall have no obligation to
disclose to the Lessee, such accounting firm or any other Person, or to permit
the Lessee, such accounting firm or any other Person, to examine any federal,
state or local income tax returns of the Owner Participant, or books or
accounting records related thereto, for any taxable year. Subject to the
immediately following sentence, the costs of such verification shall be borne by
the Lessee. If such accounting firm's verification shall result in a decrease in
the net present value (expressed as a percentage of Total Equipment Cost) of the
Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) under
the Lease calculated as of the Closing Date, as compared to the net present
value of Basic Rent proposed by the Owner Participant, by more than the greater
of (i) ten basis points or (ii) 5% of the proposed adjustment, then the Owner
Participant agrees to reimburse the Lessee for any amounts paid for such
verification. Any revised adjustment resulting from such verification shall
become effective on the next Rent Payment Date after such verification has been
concluded (except that in the case of an adjustment pursuant to clause (C) of
the first sentence of Section 2.6(c), such adjustment shall be effective as of
the date of the refinancing), and shall take into account any underpayment or
overpayment, together with
10
<PAGE>
[Participation Agreement (GARC II 98-A)]
interest thereon at the Debt Rate, resulting from an earlier effectiveness of
the original adjustment.
(c) Compliance. Notwithstanding the foregoing, any adjustment
----------
made to the payments of Basic Rent, Stipulated Loss Values, Termination Values,
Early Purchase or Basic Term Purchase Price with respect to the Basic Term,
pursuant to the foregoing, shall comply with the following requirements: (i)
each installment of Basic Rent, as so adjusted, under any circumstances and in
any event, will be in an amount at least sufficient for the Owner Trustee to pay
in full as of the due date of such installment any payment of principal of and
interest on the Equipment Notes required to be paid on the due date of such
installment of Basic Rent in accordance with the Scheduled Amortization, and
(ii) Stipulated Loss Value, Termination Value and Early Purchase Price, as so
adjusted, under any circumstances and in any event, will be an amount which,
together with any other amounts required to be paid by the Lessee under the
Lease in connection with an Event of Loss or a termination of the Lease, as the
case may be, will be at least sufficient to pay in full, as of the date of
payment thereof, the aggregate unpaid principal of and all unpaid interest on
the Equipment Notes in accordance with the Scheduled Amortization accrued to the
date on which Stipulated Loss Value, Termination Value or Early Purchase Price,
as the case may be, is paid in accordance with the terms of the Lease.
(d) Invoices. All invoices in respect of Transaction Costs to
--------
the extent not delivered on the Closing Date shall be directed to the Owner
Participant at the address set forth in Section 10.4, with a copy to the Lessee.
Section 2.7. Postponement of Closing Date.
----------------------------
(a) The scheduled Closing Date may be postponed from time to
time with respect to all of the Units for any reason (but in no event later than
September 30, 1998) if the Lessee gives the Owner Participant, the Indenture
Trustee, the Pass Through Trustee, the Owner Trustee and the Underwriters telex,
telegraphic, facsimile or telephonic (confirmed in writing) notice of the
postponement and notice of the date to which such Closing Date has been
postponed, the notice of postponement to be received by each party no later than
5:30 p.m., New York, New York time, on the originally scheduled Closing Date,
and the term "Closing Date" as used in this Agreement shall mean the postponed
"Closing Date".
(b) In the event of any postponement of the originally scheduled
Closing Date pursuant to this Section 2.7 (the originally scheduled Closing Date
being referred to as the "Scheduled Closing Date" for the purposes of this
Section 2.7): (i) the Lessee will reimburse the Owner Participant for the loss
of the use of its funds with respect to the Owner Participant's Commitment
occasioned by such postponement or failure to deliver or accept (unless such
failure to accept is caused by a default by the Owner Participant hereunder or
by the
11
<PAGE>
[Participation Agreement (GARC II 98-A)]
Owner Trustee (acting pursuant to instructions from the Owner Participant) under
the Trust Agreement, the Lease or the Indenture) by paying to the Owner
Participant on demand interest at the Debt Rate, for the period from and
including the Scheduled Closing Date to but excluding the earlier of the date
upon which such funds are returned to the Owner Participant (unless such funds
are returned after 1:00 p.m. (Chicago time) in which case such date of return
shall be included) or the actual Closing Date; provided that the Lessee shall in
any event pay to the Owner Participant at least one day's interest at the Debt
Rate on the amount of such funds, unless the Owner Participant shall have
received, prior to 12:00 noon (Chicago time) on the Business Day preceding the
Scheduled Closing Date, a notice of postponement of the Scheduled Closing Date
pursuant to Section 2.7(a), and (ii) the Indenture Trustee will return not later
than 10:00 a.m. Chicago time, on the first Business Day following the Scheduled
Closing Date, any funds which it shall have received from the Owner Participant
as the Owner Participant's Commitment for such Units, absent joint instructions
from the Lessee and the Owner Participant to retain such funds until the
specified date of postponement established under Section 2.7(a).
(c) The Indenture Trustee agrees that, in the event it has received
telephonic notice (to be confirmed promptly in writing) from the Lessee on the
Scheduled Closing Date that such Scheduled Closing Date is to be postponed, it
will, if instructed in the aforementioned notice from the Lessee (which notice
shall specify the Specified Investments to be purchased), use reasonable best
efforts to invest, at the risk of the Lessee Parent (except as provided below
with respect to the Indenture Trustee's gross negligence or willful misconduct),
the funds received by it from the Owner Participant with respect to the Owner
Participant's Commitment in Specified Investments in accordance with the
Lessee's instructions. Any such Specified Investments purchased by the
Indenture Trustee upon instructions from the Lessee shall be held in trust by
the Indenture Trustee (but not as part of the Indenture Estate under the
Indenture) for the benefit of the Owner Participant whose funds are invested in
Specified Investments upon instructions from the Lessee, and any net profits on
the investment of such funds (including interest), if any, shall be for the
account of and shall on the Closing Date, or on the date the Owner Participant's
Commitment is to be returned to the Owner Participant, be paid over to the
Lessee. The Lessee shall pay to the Indenture Trustee on the Closing Date (if
the Units are delivered and accepted pursuant hereto) the amount of any net loss
on the investment of such funds invested at the instruction of the Lessee. If
the funds furnished by the Owner Participant with respect to the Units are
required to be returned to the Owner Participant, the Lessee Parent shall, on
the date on which such funds are so required to be returned, reimburse the
Indenture Trustee, for the benefit of the Owner Participant, for any net losses
incurred on such investments. The Indenture Trustee shall not be liable for
failure to invest such funds or for any losses incurred on such investments
except for losses resulting from its own willful misconduct or gross negligence.
In order to obtain funds for the payment of the Equipment Cost for the Units or
to return funds furnished by the Owner Participant to the Indenture Trustee for
the benefit of the Owner Participant with respect to the Units, the Indenture
Trustee is authorized to
12
<PAGE>
[Participation Agreement (GARC II 98-A)]
sell any Specified Investments purchased as aforesaid with the funds received by
it from the Owner Participant in connection with the Units.
(d) Notwithstanding the provisions of Section 2.7(a), the Owner
Participant shall not be under any obligation to make the Owner Participant's
Commitment available beyond 12:00 noon (Chicago time) on September 30, 1998.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
Section 3.1. Representations and Warranties of WTC. WTC, in its
-------------------------------------
individual capacity (except with respect to clauses (c) and (k) (to the extent
applicable to WTC in its capacity as Owner Trustee) below) and as Owner Trustee
with respect to clauses (c), (f) and (k) (to the extent applicable to WTC in its
capacity as Owner Trustee) below, represents and warrants to each of the Owner
Participant, the other Trustees, the Manager, the Lessee Parent and the Lessee,
notwithstanding the provisions of Section 10.13 or any similar provision in any
other Operative Agreement, that, as of the date hereof:
(a) WTC (i) is a trust company duly organized and validly
existing in good standing under the laws of the State of Delaware, (ii) has full
corporate power and authority to carry on its business as now conducted and
execute, deliver and perform its obligations hereunder and under the Trust
Agreement and (iii) (assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant) has full power and authority, as Owner
Trustee and/or, to the extent expressly provided herein or therein, in its
individual capacity, execute, deliver and perform its obligations under each of
the Owner Trustee Agreements;
(b) (i) WTC has duly authorized, executed and delivered the
Trust Agreement, (ii) (assuming the due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) WTC in its trustee capacity and,
to the extent expressly provided therein, in its individual capacity, has, or on
or prior to the Closing Date will have, duly authorized, executed and delivered
each of the other Owner Trustee Agreements and, as of the Closing Date, the
Equipment Notes, the Lease Supplements and the Indenture Supplements to be
delivered on the Closing Date, (iii) assuming the due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, the Trust is a
Delaware business trust duly organized and validly existing in good standing
under the laws of the State of Delaware and (iv) the Trust Agreement constitutes
a legal, valid and binding obligation of WTC enforceable against it in
accordance with the terms thereof except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity;
13
<PAGE>
[Participation Agreement (GARC II 98-A)]
(c) assuming the due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee Agreements
(other than the Trust Agreement) to which it is a party constitutes, or when
entered into will constitute, a legal, valid and binding obligation of the Owner
Trustee, enforceable against it in accordance with the terms thereof, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity;
(d) neither the execution and delivery by WTC or as Owner Trustee, as
the case may be, of the Owner Trustee Agreements or the Equipment Notes to be
delivered on the Closing Date, nor the consummation by WTC or as Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or thereby,
nor the compliance by WTC or as Owner Trustee, as the case may be, with any of
the terms and provisions hereof and thereof, (i) requires or will require any
approval of its stockholders, or approval or consent of any trustees or holders
of any indebtedness or obligations of it in its individual capacity, or (ii)
violates or will violate its charter or by-laws, or contravenes or will
contravene any provision of, or constitutes or will constitute a default under,
or results or will result in any breach of, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sale contract, bank loan or credit
agreement, license or other agreement or instrument to which WTC is a party or
by which it or any of its properties may be bound or affected, or contravenes or
will contravene any law, governmental rule or regulation of the United States of
America or the State of Delaware governing the banking or trust powers of WTC,
or any judgment or order applicable to or binding on it;
(e) there are no Taxes payable by WTC or the Owner Trustee, imposed by
the State of Delaware or any political subdivision thereof or by the United
States of America in connection with the execution and delivery by WTC of the
Trust Agreement, and, as WTC or as Owner Trustee, as the case may be, of this
Agreement, the other Owner Trustee Agreements (other than the Trust Agreement)
or the Equipment Notes to be delivered on the Closing Date solely because WTC is
a trust company with its principal place of business in Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware; and there are
no Taxes payable by WTC or the Owner Trustee, as the case may be, imposed by the
State of Delaware or any political subdivision thereof or by the United States
of America in connection with the acquisition of its interest in the Equipment
(other than franchise or other taxes based on or measured by any fees or
compensation received by WTC or the Owner Trustee for services rendered in
connection with the transactions contemplated hereby) solely because WTC is a
trust company with its principal place of business in Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware;
(f) there are no pending or, to its knowledge, threatened actions or
proceedings against WTC or the Owner Trustee, before any court or administrative
agency which individually or in the aggregate, if determined adversely to it,
would materially adversely affect
14
<PAGE>
[Participation Agreement (GARC II 98-A)]
the ability of WTC or the Owner Trustee, as the case may be, to perform its
obligations under the Trust Agreement, the other Owner Trustee Agreements or the
Equipment Notes to be delivered on the Closing Date;
(g) both its chief executive office, and the place where its records
concerning the Equipment and all its interest in, to and under all documents
relating to the Trust Estate, are located in Wilmington, Delaware, and WTC
agrees to give the Owner Participant, the Indenture Trustee and the Lessee
written notice within 30 days following any relocation of said chief executive
office or said place from its present location;
(h) no consent, approval, order or authorization of, giving of notice
to, or registration with, or taking of any other action in respect of, any
Delaware state or local governmental authority or agency or any United States
federal governmental authority or agency regulating the banking or trust powers
of WTC is required for the execution and delivery of, or the carrying out by,
WTC or the Owner Trustee, as the case may be, of any of the transactions
contemplated hereby or by the Trust Agreement or of any of the transactions
contemplated by any of the other Owner Trustee Agreements, other than any such
consent, approval, order, authorization, registration, notice or action as has
been duly obtained, given or taken;
(i) on the Closing Date, the Owner Trustee's right, title and interest
in and to the Equipment delivered on the Closing Date shall be free and clear of
any Lessor's Lien attributable to WTC;
(j) proceeds received by the Owner Trustee from the Owner Participant
pursuant to the Trust Agreement will be administered by it in accordance with
Article III of the Trust Agreement;
(k) the Owner Trustee shall receive from the Lessee such title as was
conveyed to it by the Lessee, subject to the rights of the Owner Trustee and the
Lessee under the Lease and the Lien created pursuant to the Indenture and the
Indenture Supplement in respect of the Equipment delivered on the Closing Date,
and there will be no Lessor's Liens attributable to the Owner Trustee on the
Equipment or any interest therein or on the Trust Estate; and
(l) to its knowledge, no Indenture Default has occurred and is
continuing.
Section 3.2. Representations and Warranties of the Lessee. The
--------------------------------------------
Lessee represents and warrants to each of the Trustees and the Participants, as
of the date hereof:
(a) the Lessee is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware, is duly licensed or
qualified and in good
15
<PAGE>
[Participation Agreement (GARC II 98-A)]
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its ability to carry on its business as now conducted
or to enter into and perform its obligations under the Lessee Agreements, is a
special purpose corporation organized to enter into the transactions
contemplated by this Agreement and similar railcar financings, has the corporate
power and authority to sell the Equipment to the Owner Trustee and to carry on
its business as now conducted, has the requisite power and authority to execute,
deliver and perform its obligations under the Lessee Agreements and has
conducted no business or operations prior to the date hereof (other than those
associated with its organization);
(b) the Lessee Agreements have been duly authorized by all necessary
corporate action (including the requisite approval of its sole stockholder),
this Agreement has been duly executed and delivered (and in the case of the
other Lessee Agreements, such other Lessee Agreements will on the Closing Date
have been duly executed and delivered) by the Lessee, and constitutes (and in
the case of the other Lessee Agreements, such other Lessee Agreements will on
the Closing Date constitute) the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(c) the execution, delivery and performance by the Lessee of each
Lessee Agreement and compliance by the Lessee with all of the provisions thereof
do not and will not contravene any law or regulation, or any order of any court
or governmental authority or agency applicable to or binding on the Lessee or
any of its properties, or contravene the provisions of, or constitute a default
by the Lessee under, or result in the creation of any Lien (except for Permitted
Liens) upon the property of the Lessee under its certificate of incorporation or
by-laws or any indenture, mortgage, contract or other agreement or instrument to
which the Lessee is a party or by which the Lessee or any of its properties may
be bound or affected;
(d) there are no proceedings pending or, to the knowledge of the
Lessee, threatened against the Lessee in any court or before any governmental
authority or arbitration board or tribunal. The Lessee is not subject to any
order of any court or governmental authority or arbitration board or tribunal;
(e) the unaudited balance sheet of the Lessee as at the Closing Date
fairly presents, in conformity with generally accepted accounting principles
applied on a pro forma basis, the pro forma financial position of the Lessee as
of such date;
(f) no consent, approval or authorization of, or filing, registration
or qualification with, or the giving of notice to, any trustee or any holder of
indebtedness of the Lessee or any governmental authority on the part of the
Lessee is required in the United States or Canada in connection with the
execution and delivery by the Lessee of the Lessee Agreements or
16
<PAGE>
[Participation Agreement (GARC II 98-A)]
in order for the Lessee to perform its obligations thereunder in accordance with
the terms thereof, other than notice required to be filed with the STB and the
Registrar General of Canada, which notices shall have been filed on the Closing
Date, it being understood that the registration of the issuance and sale of the
Pass Through Certificates to be issued pursuant to the provisions of the Pass
Through Trust Agreement under the Securities Act of 1933, as amended, and under
the securities laws of any state in which the Pass Through Certificates may be
offered for sale if the laws of such state require such action has been duly
accomplished and the qualification of the Pass Through Trust Agreement under the
Trust Indenture Act of 1939, as amended, has been duly obtained;
(g) the Lease, the Indenture, the Intercreditor Agreement (or a
memorandum thereof), the Lease Supplements in respect of the Units delivered on
the Closing Date and the Indenture Supplements in respect of the Units delivered
on the Closing Date will on or before the Closing Date be duly filed with the
STB pursuant to 49 U.S.C. (S)11301 and deposited with the Registrar General of
Canada pursuant to Section 105 of the Canada Transportation Act, and such filing
with the STB pursuant to 49 U.S.C. (S)11301 and such deposit with the Registrar
General of Canada will under the laws of the United States and Canada perfect
the Owner Trustee's, the Indenture Trustee's and the Collateral Agent's rights
in such Operative Agreements and in the Units and no other filing, recording or
deposit with, or giving of notice to any other U.S. federal, state or local
government or Canadian national or provincial government or agency thereof, or
any other action, is necessary in order to protect the rights of the Owner
Trustee, the Indenture Trustee and the Collateral Agent in such Operative
Agreements or in such Units in the United States, any state thereof or the
District of Columbia or Canada or any province thereof;
(h) the Equipment is covered by the insurance required by Section 12
of the Lease, and all premiums due prior to the Closing Date in respect of such
insurance shall have been paid in full and such insurance is in full force and
effect;
(i) no Lease Default has occurred and is continuing and, to the
knowledge of Lessee, no Event of Loss, or event which, with the giving of
notice, the passage of time or both, would constitute an Event of Loss, has
occurred;
(j) the Lessee is not an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940, as amended;
(k) the acquisition by the Owner Participant of the Beneficial
Interest for its own account will not constitute a prohibited transaction within
the meaning of Section 4975(c)(1)(A) through (D) of the Code or Section
406(a)(1)(A) through (D) of ERISA. The
17
<PAGE>
[Participation Agreement (GARC II 98-A)]
representation made by the Lessee in the preceding clause is made in reliance
upon and subject to the accuracy of the representation of the Owner Participant
in Section 3.6(h) of this Agreement;
(l) on the Closing Date, (i) Lessee shall have and shall pursuant to
the Bill of Sale relating to the Units convey to the Owner Trustee, all legal
and beneficial title to the Units free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to the
Existing Car Service Contracts, and in clauses (iv) and (vii) of the definition
thereof), and such conveyance will not be void or voidable under any applicable
law; and (ii) all of the Units are subject to sublease by Sublessees under the
Existing Car Service Contracts on rental and other terms which are no different,
taken as a whole, than those for similar railcars in the rest of the Manager's
Fleet;
(m) neither the Prospectus nor any written statement furnished by the
Lessee or on behalf of the Lessee in connection with the negotiation of the
Lease or any other Operative Agreement contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. The assumptions and related
financial information relating to the proposed business and operations of the
Lessee and the Company Fleet which are contained under "Structuring Assumptions"
in the Prospectus (the "Structuring Assumptions") and the Equity Information
have been prepared in good faith based upon information that the Lessee deems
fair and reasonable, and there are no statements or conclusions in any of the
Structuring Assumptions or the Equity Information which are based upon or
include information known to the Lessee to be misleading in any material respect
or which fail to take into account material information known to the Lessee
regarding the matters stated therein. Certain information contained in Equity
Information (e.g., statistical information relating to renewal and remarketing
of railcars, potential increases in absolute or nominal railcar lease rates,
anticipated utilization, and maintenance costs) was based upon the historical
experience of the Lessee Parent. Subject to the foregoing, there can be no
assurance that past experience will be indicative of future performance with
respect to these or other operating and marketing factors set forth in the
Equity Information. There is no fact which the Lessee has not disclosed in
writing which materially adversely affects or, so far as the Lessee can now
reasonably foresee, will materially affect adversely the properties, business,
profits or condition (financial or otherwise) of the Lessee;
(n) none of the transactions contemplated by the Operative Agreements
(including, without limitation, the use of the proceeds from the sale of the
Equipment Notes) will result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations T, U and X, as applicable, of the
Board of Governors of the Federal Reserve System. None of the proceeds from the
sale of the Equipment Notes will be used to purchase or carry (or refinance any
borrowing the proceeds of which were used to purchase or carry) any "security"
within the meaning of the Securities Exchange Act of 1934, as amended;
18
<PAGE>
[Participation Agreement (GARC II 98-A)]
(o) the Lessee is not in violation of any term of any charter
instrument, by-law or any other agreement or instrument to which it is a party
or by which it may be bound. The Lessee is in compliance with all laws,
ordinances, governmental rules and regulations to which it is subject, and has
obtained all licenses, permits, franchises and other governmental authorizations
material to the conduct of its business;
(p) on the Closing Date, all sales, use or transfer taxes due and
payable upon the purchase of the Equipment by Lessee from Lessee Parent and by
the Owner Trustee from Lessee and upon the lease thereof by the Owner Trustee to
the Lessee and, if applicable, the assignment of the Existing Car Service
Contracts from Lessee Parent to the Lessee will have been paid or such
transactions will then be exempt from any such taxes, and the Lessee will cause
any required forms or reports in connection with such taxes to be filed in
accordance with applicable laws and regulations. No taxes, fees or other
charges in connection with the execution and delivery of the Operative
Agreements or the issuance and sale of the Equipment Notes to be delivered on
the Closing Date are payable;
(q) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by the Operative
Agreements as a result of any action by Lessee, except for the fees of GATX
Lease Funding, Inc. and of the Underwriters, which shall be included in
Transaction Costs, and Lessee agrees that it will hold the Participants, the
Owner Trustee and the Indenture Trustee harmless from any claim, demand or
liability for any other broker's or finder's or placement fees or commission
alleged to have been incurred as a result of any action by Lessee in connection
with such transactions;
(r) each Unit, taken as a whole, and each major component thereof,
complies in all material respects with all applicable laws and regulations,
conforms with the specifications for such Unit contained in the Appraisal
referred to in Section 4.3(a) hereof and is substantially complete such that it
is ready and available to operate in commercial service and otherwise perform
the function for which it was designed; and the railcar identification marks
shown on Schedule 1 are the marks presently used on the Units of Equipment; and
(s) the Lessee is not subject to regulation as a "holding company," an
"affiliate" of a "holding company," or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 3.3. Representations and Warranties of the Indenture
-----------------------------------------------
Trustee. The Indenture Trustee represents and warrants to each of the Owner
- -------
Participant, the Owner Trustee, the Loan Participant, the Manager, the Lessee
Parent and the Lessee that, as of the date hereof:
19
<PAGE>
[Participation Agreement (GARC II 98-A)]
(a) the Indenture Trustee is a state chartered trust company duly
organized and validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the full corporate power, authority and
legal right under the laws of the Commonwealth of Massachusetts pertaining to
its banking, trust and fiduciary powers to execute, deliver and perform its
obligations under each of the Indenture Trustee Agreements;
(b) the execution, delivery and performance by the Indenture Trustee
of each of the Indenture Trustee Agreements have been duly authorized by the
Indenture Trustee and will not violate any applicable federal or Massachusetts
law governing its banking or trust powers or its charter documents or by-laws or
the provisions of any indenture, mortgage, contract or other agreement to which
it is a party or by which it or any of its properties may be bound or affected;
(c) this Agreement has been duly executed and delivered and
constitutes, and each of the other Indenture Trustee Agreements, when executed
and delivered, will constitute the legal, valid and binding obligation of the
Indenture Trustee, enforceable against the Indenture Trustee in accordance with
its terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(d) there are no proceedings pending or, to the knowledge of the
Indenture Trustee, threatened, and to the knowledge of the Indenture Trustee
there is no existing basis for any such proceedings, against or affecting the
Indenture Trustee in or before any court or before any governmental authority or
arbitration board or tribunal which, individually or in the aggregate, if
adversely determined, might impair the ability of the Indenture Trustee to
perform its obligations under the Indenture Trustee Agreements;
(e) no authorization or approval or other action by, and no notice to
or filing with, any stockholder, trustee or holder of indebtedness or any
federal or Massachusetts state governmental authority or regulatory body
governing the Indenture Trustee in its trust capacity, is required for the due
execution, delivery and performance by the Indenture Trustee of the Indenture
Trustee Agreements, except as have been previously obtained, given or taken;
(f) the Indenture Trustee is not in default under any of the
Indenture Trustee Agreements; and
(g) neither the Indenture Trustee, nor any Person authorized to act on
behalf of the Indenture Trustee, has directly or indirectly offered any interest
in the Trust Estate or the Equipment Notes or any security similar to either
thereof related to this transaction for sale to, or solicited offers to buy any
of the same from, or otherwise approached or negotiated with respect to any of
the same with, any Person other than the Pass Through Trustee and the
Underwriters.
20
<PAGE>
[Participation Agreement (GARC II 98-A)]
Section 3.4. Representations, Warranties and Covenants Regarding
---------------------------------------------------
Beneficial Interest and Equipment Notes.
- ---------------------------------------
(a) The Owner Trustee represents and warrants to each of the Lessee,
the other Trustees, the Manager, the Lessee Parent and the Owner Participant
that, as of the date hereof and as of the Closing Date, neither the Owner
Trustee nor any Person authorized or employed by the Owner Trustee as agent or
otherwise has offered any of the Beneficial Interest or the Equipment Notes or
any similar interest for sale to, or solicited offers to buy any thereof from,
or otherwise approached or negotiated with respect thereto with, any prospective
purchaser.
(b) The Lessee and the Lessee Parent represent and warrant to each of
the Trustees and the Owner Participant that, as of the date hereof and as of the
Closing Date, neither the Lessee, the Lessee Parent nor any Person authorized or
employed by the Lessee or the Lessee Parent as agent or otherwise in connection
with the placement of the Beneficial Interest or the Equipment Notes or any
similar interest has offered any of the Beneficial Interest or the Equipment
Notes or similar interest for sale to, or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
Person other than the Owner Participant and not more than [six (6)] other
institutional investors with respect to the Beneficial Interest, except for the
issue and sale of the Pass Through Certificates as contemplated by the
Underwriting Agreement.
(c) Each of the Owner Trustee, the Owner Participant and the Lessee
agrees, as to its own actions only, severally but not jointly, that neither the
Owner Trustee, the Owner Participant nor the Lessee nor anyone acting on behalf
of the Owner Trustee, the Owner Participant or the Lessee will offer the
Beneficial Interest, the Equipment Notes, or any part thereof or any similar
interest for issue or sale to any prospective purchaser, or solicit any offer to
acquire any of the Beneficial Interest, the Equipment Notes, or any part thereof
in violation of Section 5 of the Securities Act of 1933, as amended.
Section 3.5. Representations and Warranties of the Pass Through
--------------------------------------------------
Trustee. The Pass Through Trustee represents and warrants to each of the Owner
- -------
Participant, the other Trustees, the Manager, the Lessee Parent and the Lessee
that, as of the date hereof:
(a) the Pass Through Trustee is a state chartered trust company duly
organized and validly existing in good standing under the laws of the
Commonwealth of Massachusetts and has the full corporate power, authority and
legal right under the laws of the Commonwealth of Massachusetts pertaining to
its banking, trust and fiduciary powers to execute, deliver and perform its
obligations under the Pass Through Trust Agreement, the Pass Through Trust
Supplement and this Agreement;
21
<PAGE>
[Participation Agreement (GARC II 98-A)]
(b) this Agreement has been, and on the Closing Date, the Pass Through
Trust Agreement and the Pass Through Supplement will have been, duly authorized,
executed and delivered by the Pass Through Trustee; this Agreement constitutes,
and on the Closing Date, the Pass Through Trust Supplement and the Pass Through
Trust Agreement will constitute, the legal, valid and binding obligations of the
Pass Through Trustee, enforceable against the Pass Through Trustee in accordance
with their respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity;
(c) the execution, delivery and performance by the Pass Through
Trustee of the Pass Through Trust Agreement, the Pass Through Trust Supplement
and this Agreement, the purchase by the Pass Through Trustee of the Equipment
Notes pursuant to this Agreement, and the issuance of the Pass Through
Certificates pursuant to the Pass Through Trust Agreement and the Pass Through
Trust Supplement, do not contravene any law, rule or regulation of any federal
or Massachusetts governmental authority or agency regulating the Pass Through
Trustee's banking, trust or fiduciary powers or any judgment or order applicable
to or binding on the Pass Through Trustee and do not contravene or result in any
breach of, or constitute a default under, the Pass Through Trustee's articles of
association or by-laws or any agreement or instrument to which the Pass Through
Trustee is a party or by which it or any of its properties may be bound or
affected;
(d) neither the execution and delivery by the Pass Through Trustee of
the Pass Through Trust Agreement, the Pass Through Trust Supplement or this
Agreement nor the consummation by the Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or approval
of, the giving of notice to, or the registration with, or the taking of any
other action with respect to, any federal or Massachusetts governmental
authority or agency regulating the Pass Through Trustee's banking, trust or
fiduciary powers;
(e) there are no pending or, to its knowledge, threatened actions
or proceedings against the Pass Through Trustee before any court or
administrative agency which individually or in the aggregate, if determined
adversely to it, would materially adversely affect the ability of the Pass
Through Trustee to perform its obligations under this Agreement, the Pass
Through Trust Supplement or the Pass Through Trust Agreement;
(f) the Pass Through Trustee is not in default under the Pass Through
Trust Agreement, as supplemented by the Pass Through Trust Supplement;
(g) the Pass Through Trustee does not directly or indirectly control,
and is not directly or indirectly controlled by or under common control with,
[the Owner Participant,] the Owner Trustee, the Underwriters, the Lessee Parent
or the Lessee;
22
<PAGE>
[Participation Agreement (GARC II 98-A)]
(h) the Pass Through Trustee is purchasing the Equipment Notes for the
purposes contemplated by the Operative Agreements and not with a view to the
transfer or distribution of any Equipment Note to any other Person, except as
contemplated by the Operative Agreements; and
(i) except for the issue and sale of the Pass Through Certificates
contemplated hereby, the Pass Through Trustee has not directly or indirectly
offered any Equipment Note or Pass Through Certificate or any interest in or to
the Trust Estate, the Trust Agreement or any similar interest for sale to, or
solicited any offer to acquire any of the same from, anyone other than the Owner
Trustee and the Owner Participant, and the Pass Through Trustee has not
authorized anyone to act on its behalf to offer directly or indirectly any
Equipment Note, any Pass Through Certificate or any interest in and to the Trust
Estate, the Trust Agreement or any similar interest related to this transaction
for sale to, or to solicit any offer to acquire any of the same from, any Person
other than the Owner Trustee and the Owner Participant.
Section 3.6. Representations and Warranties of the Owner
-------------------------------------------
Participant. The Owner Participant represents and warrants to each of the
- -----------
Trustees, the Manager, the Lessee Parent and the Lessee that, as of the date
hereof:
(a) the Owner Participant is a [__________________] duly organized,
validly existing and in good standing under the laws of the State of [_________]
and has full corporate power and authority to carry on its business as now
conducted;
(b) the Owner Participant has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Owner
Participant Agreements, and the execution, delivery and performance by it
thereof do not and will not contravene any law or regulation, or any order of
any court or governmental authority or agency applicable to or binding on the
Owner Participant or any of its properties, or contravene the provisions of, or
constitute a default under, or result in the creation of any Lien (other than
such as are created by the Operative Agreements) upon the Equipment under, its
[___________] or [___________] or any indenture, mortgage, contract or other
agreement or instrument to which the Owner Participant is a party or by which it
or any of its properties may be bound or affected;
(c) the Owner Participant Agreements have been duly authorized by all
necessary actions on the part of the Owner Participant, do not require any
approval not already obtained of the shareholders of the Owner Participant or
any approval or consent not already obtained of any trustee or holders of
indebtedness or obligations of the Owner Participant, have been, or on or before
the Closing Date will be, duly executed and delivered by the Owner Participant
and (assuming the due authorization, execution and delivery by each other party
thereto) constitute, or will constitute, the legal, valid and binding
obligations of the Owner
23
<PAGE>
[Participation Agreement (GARC II 98-A)]
Participant, enforceable against the Owner Participant in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general principles of equity;
(d) no authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery or performance by the Owner Participant of the Trust
Agreement, the Tax Indemnity Agreement or this Agreement;
(e) the Trust Estate is free and clear of any Lessor's Lien
attributable to the Owner Participant;
(f) there are no pending or, to the Owner Participant's knowledge,
threatened actions or proceedings against the Owner Participant before any court
or administrative agency which would materially adversely affect the Owner
Participant's ability to perform its obligations under the Trust Agreement, the
Tax Indemnity Agreement or this Agreement;
(g) as of the Closing Date, the Owner Participant is purchasing the
Beneficial Interest to be acquired by it for its own account with no present
intention of distributing such Beneficial Interest or any part thereof in any
manner which would violate the Securities Act of 1933, as amended, but without
prejudice, however, to the right of the Owner Participant at all times to sell
or otherwise dispose of all or any part of such Beneficial Interest in
compliance with the Securities Act of 1933, as amended; provided, however, that
subject to the provisions of Section 6.1, the disposition of the Beneficial
Interest shall at all times be within the Owner Participant's control. The
Owner Participant acknowledges that its Beneficial Interest has not been
registered under the Securities Act of 1933, as amended, and that neither the
Owner Trustee nor the Lessee contemplates filing, or is legally required to
file, any such registration statement;
(h) with respect to the source of the amount to be invested by the
Owner Participant pursuant to Section 2.2, no part of such amount constitutes
assets of any employee benefit plan subject to Title I of ERISA or Section 4975
of the Code; and
(i) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by the Operative
Agreements as a result of any action by the Owner Participant, and the Owner
Participant agrees that it will hold Lessee Parent, the Lessee, the Indenture
Trustee, the Loan Participant and Lessor harmless from any claim, demand or
liability for broker's or finder's or placement fees or commission alleged to
have been incurred as a result of any action by the Owner Participant in
connection with this transaction.
24
<PAGE>
[Participation Agreement (GARC II 98-A)]
Section 3.7. Representations and Warranties of the Lessee Parent.
---------------------------------------------------
The Lessee Parent represents and warrants to each of the Trustees and the
Participants, as of the date hereof:
(a) the Lessee Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York, is duly
licensed or qualified and in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its ability to
carry on its business as now conducted or to execute, deliver and perform its
obligations under the Manager Agreements, has the power and authority to carry
on its business as now conducted, and has the requisite power and authority to
execute, deliver and perform its obligations under the Manager Agreements;
(b) the Manager Agreements have been duly authorized by all necessary
corporate action, executed and delivered by the Lessee Parent, and constitute
the legal, valid and binding obligations of the Lessee Parent, enforceable
against the Lessee Parent in accordance with their respective terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally and by
general principles of equity;
(c) the execution, delivery and performance by the Lessee Parent of
each Manager Agreement and compliance by the Lessee Parent with all of the
provisions thereof do not and will not contravene any law or regulation, or any
order of any court or governmental authority or agency applicable to or binding
on the Lessee Parent or any of its properties, or contravene the provisions of,
or constitute a default by the Lessee Parent under, its certificate of
incorporation or by-laws or any indenture, mortgage, contract or other agreement
or instrument to which the Lessee Parent is a party or by which the Lessee
Parent or any of its properties may be bound or affected;
(d) other than as disclosed in the Lessee Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 or Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1998, there are no proceedings
pending or, to the knowledge of the Lessee Parent, threatened against the Lessee
Parent in any court or before any governmental authority or arbitration board or
tribunal which, if adversely determined, would materially adversely affect the
Lessee Parent's ability to perform its obligations under the Manager Agreements
or materially adversely affect its financial condition or business;
(e) the Lessee Parent is not in violation of any term of any charter
instrument, by-law or any other material agreement or instrument to which it is
a party or by which it may be bound. The Lessee Parent is in compliance with
all laws, ordinances, governmental rules and regulations to which it is subject,
the failure to comply with which would have a material and adverse effect on its
operations or condition, financial or otherwise, or would
25
<PAGE>
[Participation Agreement (GARC II 98-A)]
impair the ability of the Lessee Parent to perform its obligations under the
Manager Agreements, and has obtained all licenses, permits, franchises and other
governmental authorizations material to the conduct of its business;
(f) no consent, approval or authorization of, or filing, registration
or qualification with, or the giving of notice to, any trustee or any holder of
indebtedness of the Lessee Parent or any governmental authority on the part of
the Lessee Parent is required in the United States in connection with the
execution and delivery by the Lessee Parent of the Manager Agreements or in
order for the Lessee Parent to perform its obligations thereunder in accordance
with the terms thereof, it being understood that the registration of the
issuance and sale of the Pass Through Certificates to be issued pursuant to the
provisions of the Pass Through Trust Agreement under the Securities Act of 1933,
as amended, and under the securities laws of any state in which the Pass Through
Certificates may be offered for sale if the laws of such state require such
action has been duly accomplished and the qualification of the Pass Through
Trust Agreement under the Trust Indenture Act of 1939, as amended, has been duly
obtained;
(g) to the best knowledge of the Lessee Parent, no Event of Loss has
occurred as of the date of this Agreement with respect to any Unit;
(h) (i) Lessee Parent shall have, and the GATC Bill of Sale to be
delivered on the Closing Date shall convey to the Lessee, all legal and
98-Zbeneficial title to the Units which are being delivered on the Closing Date,
free and clear of all Liens (other than Permitted Liens of the type described in
clause (ii) hereof with respect to the Existing Car Service Contracts, and in
clauses (iv) and (vii) of the definition thereof), and such conveyance will not
be void or voidable under any applicable law; (ii) Lessee Parent shall have, and
the GATC Assignment to be delivered on the Closing Date shall assign to the
Lessee, all legal and beneficial title to the Existing Car Service Contracts,
free and clear of all Liens, and such assignment will not be void or voidable
under any applicable law; and (iii) all of the Units shall be subject to
sublease by Customers under the Existing Car Service Contracts on rental and
other terms which are no different, taken as a whole, than those for similar
railcars in the rest of the Manager's Fleet;
(i) all sales, use or transfer taxes due and payable upon the sale of
the Equipment and assignment of Existing Car Service Contracts by Lessee Parent
to the Lessee will have been paid or such transactions will then be exempt from
any such taxes and Lessee Parent will cause any required forms or reports in
connection with such taxes to be filed in accordance with applicable laws and
regulations;
(j) the Units are substantially similar in terms of objectively
identifiable characteristics that are relevant for purposes of the services to
be performed by the Manager under the Management Agreement to the equipment in
the Manager's Fleet;
26
<PAGE>
[Participation Agreement (GARC II 98-A)]
(k) in selecting the Units to be sold to the Company pursuant to the
GATC Bill of Sale, Lessee Parent has not discriminated against the Company in a
negative fashion when such Units are compared with the other equipment in the
Manager's Fleet;
(l) neither the Prospectus nor any written statement furnished by the
Lessee Parent or on behalf of the Lessee Parent in connection with the
negotiation of the Lease or any other Operative Agreement contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading. The assumptions and
related financial information relating to the proposed business and operations
of the Lessee Parent and the Company Fleet which are contained under
"Structuring Assumptions" in the Prospectus (the "Structuring Assumptions") and
the Equity Information have been prepared in good faith based upon information
that the Lessee Parent deems fair and reasonable, and there are no statements or
conclusions in any of the Structuring Assumptions or the Equity Information
which are based upon or include information known to the Lessee Parent to be
misleading in any material respect or which fail to take into account material
information known to the Lessee Parent regarding the matters stated therein.
Certain information contained in Equity Information (e.g., statistical
information relating to renewal and remarketing of railcars, potential increases
in absolute or nominal railcar lease rates, anticipated utilization, and
maintenance costs) was based upon the historical experience of the Lessee
Parent. Subject to the foregoing, there can be no assurance that past
experience will be indicative of future performance with respect to these or
other operating and marketing factors set forth in the Equity Information.
There is no fact which the Lessee Parent has not disclosed in writing which
materially adversely affects or, so far as the Lessee Parent can now reasonably
foresee, will materially adversely affect the properties, business, profits or
condition (financial or otherwise) of the Lessee Parent;
(m) the representations and warranties of the Lessee contained in
Section 3.2 are true and correct as of the date hereof;
(n) Lessee Parent is not in default under any Existing Car Service
Contract and to the best of the Lessee Parent's knowledge, there are (i) no
defaults by any customer thereunder existing as of the date hereof under the
Existing Car Service Contracts, except such defaults as are not material and
(ii) no claims or liabilities arising as a result of the operation or use of any
Unit prior to the date hereof as to which Lessor, as owner of the Units, would
be liable;
(o) as of the Closing Date, the Lessee shall have provided, or caused
to be provided, in either case in accordance with the terms of the relevant
Existing Car Service Contract, a notice relating to each Existing Car Service
Contract (which notice shall be substantially in the form attached hereto as
Exhibit D) to the related customer under such Existing Car Service Contract;
27
<PAGE>
[Participation Agreement (GARC II 98-A)]
(p) the consolidated balance sheet of the Lessee Parent and its
consolidated subsidiaries as of December 31, 1997, and the related statements of
operations, stockholders' equity and cash flows for the period then ended, have
been prepared in accordance with generally accepted accounting principles
(except as may be stated in the notes thereto), consistently applied, and fairly
set forth, in all material respects, the financial condition of the Lessee
Parent and its consolidated subsidiaries as of such dates and the results of
their operations and cash flows for the periods then ended. The consolidated
statements of earnings and cash flows of the Lessee Parent and its consolidated
subsidiaries for the fiscal quarter ended June 30, 1998, and the related
consolidated balance sheet as at the end of such period present fairly the
consolidated financial position and results of operations and cash flows of the
Lessee Parent and is consolidated subsidiaries in accordance with generally
accepted accounting principles, as at the end of, and for such period (subject
to normal year-end adjustments).
Section 3.8. Opinion Acknowledgment. Each of the parties hereto,
----------------------
with respect to such party, expressly consents to the rendering by its counsel
of the opinion referred to in Section 4.1(e) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the instructions of such
party.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions Precedent to Investment by Each
------------------------------------------
Participant. The obligation of each Participant to make the investment
specified with respect to such Participant in Section 2 on the Closing Date
shall be subject to the satisfaction or waiver of the following conditions
precedent (except that paragraph (k) and clause (i) of paragraph (p) shall not
be conditions precedent to the Owner Participant's obligations hereunder and
paragraph (n) and (s) and clause (ii) of paragraph (p) shall not be conditions
precedent to the Loan Participant's obligations hereunder):
(a) Execution of Operative Agreements. On or before the Closing Date,
---------------------------------
this Agreement, the Trust Agreement, the Lease, the Lease Supplements in respect
of the Units delivered on the Closing Date, the Indenture, the Indenture
Supplements in respect of the Units delivered on the Closing Date, the Equipment
Notes, the Pass Through Trust Agreement, the Pass Through Trust Supplements, the
Management Agreement, the Insurance Agreement, the Transfer and Assignment
Agreement, the Bill of Sale, the GATC Bill of Sale, the Intercreditor Agreement,
the Underwriting Agreement and the Lockbox Agreement shall each be satisfactory
in form and substance to such Participant, shall have been duly executed and
delivered by the parties thereto (except that the execution and delivery of the
documents referred to above (other than this Agreement) by a party hereto or
thereto shall not be a condition precedent to such party's obligations
hereunder), shall each be in full force and effect, and executed counterparts of
each shall have been delivered to such Participant or its counsel on or before
the Closing Date;
28
<PAGE>
[Participation Agreement (GARC II 98-A)]
and no event shall have occurred and be continuing that constitutes a Lease
Default or an Indenture Default.
(b) Recordation and Filing. On or before the Closing Date (except as
----------------------
expressly stated below), the Lessee shall have caused the Lease, the Lease
Supplements in respect of Units delivered on the Closing Date, the Indenture and
the Indenture Supplements in respect of the Units delivered on the Closing Date
and the Intercreditor Agreement (or a memorandum in respect of any or all of the
foregoing), to be duly filed, recorded and deposited with the STB in conformity
with 49 U.S.C. (S)11301 and with the Registrar General of Canada pursuant to
Section 105 of the Canada Transportation Act, and all necessary actions shall
have been taken to cause publication of notice of such deposit in The Canada
Gazette in accordance with said Section 90 within 21 days after the Closing Date
and appropriate Uniform Commercial Code financing statements to be filed where
necessary or reasonably advisable, and the Lessee shall furnish the Indenture
Trustee, the Owner Trustee, the Collateral Agent and each Participant proof
thereof.
(c) Representations and Warranties of the Lessee. On the Closing
--------------------------------------------
Date, the representations and warranties of the Lessee contained in Section 3.2
and Section 3.4(b) hereof shall be true and correct in all material respects as
of the Closing Date as though then made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties were true and correct on and
as of such earlier date), and each of the Owner Trustee, the Indenture Trustee
and the Participants shall have received an Officer's Certificate to such effect
dated such date from the Lessee certifying to the foregoing matters, and the
Lessee shall have performed and complied with all agreements and conditions
herein contained which are required to be performed or complied with by the
Lessee on or before said date.
(d) Representations and Warranties of the Owner Trustee. On the
---------------------------------------------------
Closing Date, the representations and warranties of WTC and the Owner Trustee
contained in Section 3.1 and Section 3.4(a) shall be true and correct in all
material respects as of the Closing Date as though then made on and as of such
date except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties were true
and correct on and as of such earlier date), and each of the Lessee, the
Indenture Trustee, the Pass Through Trustee, Lessee Parent, the Manager and the
Participants shall have received an Officer's Certificate to such effect dated
such date from WTC (in respect of WTC) the Owner Trustee (in respect of the
Owner Trustee) and WTC and the Owner Trustee shall have performed and complied
with all agreements and conditions herein contained which are required to be
performed or complied with by WTC and the Owner Trustee, respectively on or
before said date.
29
<PAGE>
[Participation Agreement (GARC II 98-A)]
(e) Opinions of Counsel. On the Closing Date, the Owner Trustee, the
-------------------
Indenture Trustee and each Participant shall have received the favorable written
opinion of each of (i) Vedder, Price, Kaufman & Kammholz, special counsel for
Lessee Parent, the Lessee and the Manager and counsel for Lessee Parent, the
Lessee and the Manager (which counsel shall be the General Counsel or Assistant
General Counsel of the Lessee Parent), (ii) Morris, James, Hitchens & Williams,
counsel to the Owner Trustee, (iii) Winston & Strawn, special counsel to the
Owner Participant and ___________, counsel to the Owner Participant, (iv)
Bingham Dana LLP counsel to the Pass Through Trustee, (v) Bingham Dana LLP,
counsel to the Indenture Trustee, (vi) Alvord & Alvord, special STB counsel, and
(vii) McCarthy Tetrault, special Canadian counsel, in each case in form and
substance satisfactory to each Participant; provided that, except as otherwise
provided herein, receipt by a party hereto of a favorable written opinion from
counsel to such party with respect to a matter which is also covered by a
representation of such party shall not be a condition precedent to such party's
obligations hereunder.
(f) Title. On the Closing Date, after giving effect to the
-----
transactions contemplated hereby, (i) the Owner Trustee shall have all legal and
beneficial title to each Unit to be delivered on the Closing Date, free and
clear of all Liens (other than Permitted Liens of the type described in clause
(ii) with respect to the Existing Car Service Contracts, and in clauses (iv) and
(vii) of the definition thereof), (ii) the Lessee shall have received all right,
title and interest of Lessee Parent in and to the Existing Car Service
Contracts, free and clear of all Liens and (iii) each Customer under an Existing
Car Service Contract shall have been notified of the assignment thereof to the
Lessee.
(g) Bills of Sale; GATC Assignment. On the Closing Date, (i) the GATC
------------------------------
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 the Existing Car Service Contracts, and in clauses (iv) and
(vii) of the definition thereof) and warranting to the Owner Trustee that at the
time of delivery of each such Unit, Lessee Parent and the Lessee, as the case
may be, had legal and beneficial title thereto and good and lawful right to sell
the same, and title thereto was free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to the
Existing Car Service Contracts, and in clauses (iv) and (vii) of the definition
thereof), and (ii) the GATC Assignment in form and substance reasonably
satisfactory to the Lessee and the Owner Trustee, dated such date covering the
Existing Car Service Contracts, assigning to the Lessee all right, title and
interest of Lessee Parent to the Existing Car Service Contracts, free and clear
of all Liens (other than Permitted Liens) and warranting to the Lessee that at
the time of such assignment, Lessee Parent had legal and beneficial title to the
Existing Car Service Contracts and good and lawful right to sell the same, and
title thereto was free and clear of all Liens (other than Permitted Liens),
shall each have been duly executed and delivered.
30
<PAGE>
[Participation Agreement (GARC II 98-A)]
(h) Insurance Certificate and Opinion. On or before the Closing Date,
---------------------------------
the Indenture Trustee and each Participant shall have received (x) each
certificate relating to insurance that is required pursuant to Section 12 of the
Lease and (y) certificates from a nationally recognized insurance broker
substantially in the forms attached hereto as Exhibits A-1 and A-2 with respect
to the public liability insurance required by Section 12.1(b) of the Lease.
(i) Corporate Documents. Each of the Participants shall have received
-------------------
such documents and evidence with respect to Lessee Parent, the Lessee, the
Manager, the Owner Participant, the Owner Trustee, the Pass Through Trustee and
the Indenture Trustee as the Participants may reasonably request in order to
establish the consummation of the transactions contemplated by this Agreement,
the taking of all corporate and other proceedings in connection therewith and
compliance with the conditions herein or therein set forth.
(j) No Threatened Proceedings. No action or proceeding shall have
-------------------------
been instituted nor shall governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been issued or
proposed to be issued by any court or governmental agency at the time of the
Closing Date, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions contemplated hereby.
(k) Representations and Warranties of the Owner Participant. On the
-------------------------------------------------------
Closing Date, the representations and warranties of the Owner Participant
contained in Section 3.6 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, Lessee Parent,
the Manager, the Indenture Trustee and the Pass Through Trustee shall have
received an Officer's Certificate to such effect dated such date from the Owner
Participant, and the Owner Participant shall have performed and complied with
all agreements and conditions herein contained which are required to be
performed or complied with by the Owner Participant on or before said date.
(l) Notice of Delivery. The Indenture Trustee and the Participants
------------------
shall have received the Notice of Delivery described in Section 2.3(a).
(m) Representations and Warranties of the Indenture Trustee. On the
-------------------------------------------------------
Closing Date, the representations and warranties of the Indenture Trustee
contained in Section 3.3 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, Lessee Parent,
the
31
<PAGE>
[Participation Agreement (GARC II 98-A)]
Manager, the Owner Trustee and the Participants shall have received an
Officer's Certificate to such effect dated such date from the Indenture Trustee,
and the Indenture Trustee shall have performed and complied with all agreements
and conditions herein contained which are required to be performed or complied
with by the Indenture Trustee on or before said date.
(n) Representations and Warranties of the Pass Through Trustee. On
----------------------------------------------------------
the Closing Date, the representations and warranties of the Pass Through Trustee
contained in Section 3.5 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, Lessee Parent,
the Manager, the Indenture Trustee, the Owner Trustee and the Owner Participant
shall have received an Officer's Certificate to such effect dated such date from
the Pass Through Trustee, and the Pass Through Trustee shall have performed and
complied with all agreements and conditions herein contained which are required
to be performed or complied with by the Pass Through Trustee on or before said
date.
(o) No Illegality. No change shall have occurred after the date of
-------------
the execution and delivery of this Agreement in applicable law or regulations
thereunder or interpretations thereof by regulatory authorities that, in the
opinion of such Participant or its counsel, would make it illegal for such
Participant to enter into any transaction contemplated by the Operative
Agreements.
(p) Participants' Investments. (i) The Owner Participant shall have
-------------------------
made available the Owner Participant's Commitment in the amount specified in,
and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan
Participant shall have made available the Loan Participant's Commitment in the
amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3
and the Underwriting Agreement.
(q) Consents. All approvals and consents of any trustees or holders
--------
of any indebtedness or obligations of the Lessee which are required in
connection with the transactions contemplated by this Agreement shall have been
duly obtained and be in full force and effect.
(r) Governmental Actions. All actions, if any, required to have been
--------------------
taken on or prior to the Closing Date in connection with the transactions
contemplated by this Agreement on the Closing Date shall have been taken by any
governmental or political agency, subdivision or instrumentality of the United
States, and all orders, permits, waivers, exemptions, authorizations and
approvals of such entities required to be in effect on the Closing Date in
connection with the transactions contemplated by this Agreement on the Closing
Date shall have
32
<PAGE>
[Participation Agreement (GARC II 98-A)]
been issued, and all such orders, permits, waivers, exemptions, authorizations
and approvals shall be in full force and effect, on the Closing Date.
(s) Tax Indemnity Agreement. On or before the Closing Date, the Tax
-----------------------
Indemnity Agreement shall be satisfactory in form and substance to the Owner
Participant, shall have been duly executed and delivered by Lessee Parent and,
assuming due authorization, execution and delivery by the Owner Participant,
shall be in full force and effect.
(t) Appointment of Representative. The Owner Trustee shall have
-----------------------------
authorized its representative, who shall be an individual designated by the
Lessee and acceptable to the Owner Trustee, to accept the Units being delivered
on the Closing Date from the Lessee and to deliver such Units to the Lessee.
The Lessee shall have authorized its representative (who shall be the same
individual designated by the Lessee under this paragraph) to accept delivery of
the Units from the Owner Trustee as Lessor pursuant to the Lease.
(u) Solvency of the Lessee. The Lessee shall have furnished to the
----------------------
Participants an Officer's Certificate as to the solvency of the Lessee as of the
Closing Date stating, among other things, that on the Closing Date the Liquidity
Reserve Account (as defined in the Intercreditor Agreement) has a balance of
$500,000 and the Collection Account has a balance of $1,500,000.
(v) Schedule of Subleases and Units. The Participants and the
-------------------------------
Collateral Agent shall have received a schedule, certified by the Lessee and the
Manager, listing the Existing Car Service Contracts under the Lease and the
Other Leases, the Customer under each thereof and the Units covered hereby and
the units covered by the Other Leases (which shall constitute in the aggregate
all of the Units under the Lease and the Other Leases).
(w) Projected Coverage Ratio. The Manager shall have furnished to the
------------------------
Participants and the Collateral Agent that portion of the report provided for in
Section 7.1 of the Management Agreement setting forth the Projected Coverage
Ratio for the six-month period immediately succeeding the Closing Date.
(x) Procedures Letter. The Participants shall have received an agreed
-----------------
upon procedures letter from Ernst & Young in form and substance reasonably
satisfactory to each of them.
(y) Representations and Warranties of the Lessee Parent. On the
---------------------------------------------------
Closing Date, the representations and warranties of the Lessee Parent contained
in Section 3.7 hereof shall be true and correct in all material respects as of
the Closing Date as though then made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties were true and correct
33
<PAGE>
[Participation Agreeemnt (GARC II 98-A)]
on and as of such earlier date), and each of the Owner Trustee, the Indenture
Trustee and the Participants shall have received an Officer's Certificate to
such effect dated such date from the Lessee Parent, and the Lessee Parent shall
have performed and complied with all agreements and conditions herein contained
which are required to be performed or complied with by the Lessee Parent on or
before said date.
(z) Insurance Manager Letter. The Participants shall have received a
------------------------
letter from the Insurance Manager, in form reasonably satisfactory to them,
certifying that, in respect of the public liability insurance policies to be
renewed or put into effect as of October 1, 1998, the Insurance Manager has
obtained (i) the advance agreement of its insurers that such policies will
contain the provisions referred to in Section 12.3(b) of the Lease (except in
the case of Section 12.3(b)(iii), the Insurance Manager shall use reasonable
efforts to furnish), and (ii) the agreement of its independent insurance broker,
(A) with respect to the certificate of such broker to be supplied with reference
to such policies, to render the opinion set forth in clause (iii) of Section
12.4(a) of the Lease, and (B) to provide the notices required in Sections
12.4(b) of the Lease.
Section 4.2. Additional Conditions Precedent to Investment by the
----------------------------------------------------
Pass Through Trustee and Indenture Trustee. The obligation of the Pass Through
- ------------------------------------------
Trustee to fund the Loan Participant's Commitment and purchase and pay for the
Equipment Notes to be purchased by it pursuant to Sections 2.2(b) and 2.3 on the
Closing Date shall be subject to the additional conditions that the Equipment
Notes to be delivered on the Closing Date shall have been duly authorized,
executed and delivered to the Pass Through Trustee by a duly authorized officer
of the Owner Trustee and duly authenticated by the Indenture Trustee and that on
the Closing Date the Pass Through Trustee shall have received the proceeds from
the sale of the Pass Through Certificates.
Section 4.3. Additional Conditions Precedent to Investment by the
----------------------------------------------------
Owner Participant. The obligation of the Owner Participant to provide the funds
- -----------------
specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date with
respect to any Unit to be delivered on the Closing Date shall be subject to the
satisfaction or waiver of the following additional conditions precedent:
(a) Appraisal. On or before the Closing Date, the Owner Participant
---------
shall have received an opinion (the "Appraisal") of Rail Solutions, Inc.,
satisfactory in form and substance to the Owner Participant (with a separate
summary or other evidence of such Appraisal as it relates to fair market value
and useful life being provided to the Rating Agencies), concluding that: (i)
the fair market value of each Unit being delivered on the Closing Date is equal
to the portion of the Total Equipment Cost with respect to such Unit; (ii) at
the expiration of the Basic Term, (A) without taking into account inflation or
deflation from and after the Closing Date or the existence of any purchase
option, it is reasonable to expect that each Unit
34
<PAGE>
[Participation Agreement (GARC II 98-A)]
will have a fair market value of at least 20% of the Total Equipment Cost with
respect to such Unit and (B) the remaining economic life of each Unit will be at
least equal to 20% of the economic life of such Unit as estimated in the
Appraisal; (iii) as of the Early Purchase Date, the estimated fair market value
of each Unit being delivered on the Closing Date, taking into account inflation
or deflation from and after the Closing Date, will not exceed the portion of the
Early Purchase Price attributable to such Unit; (iv) as of the expiry of the
Basic Term, the estimated fair market value of each Unit being delivered on the
Closing Date, taking into account inflation or deflation from and after the
Closing Date, will not exceed the portion of the Basic Term Purchase Price; (v)
no Unit being delivered on the Closing Date is Limited Use Property; (vi) the
Fixed Rate Renewal is greater than or equal to the fair market rental value of
each Unit and the Lessee is not compelled to exercise any Fixed Rate Renewal
option; and (vii) such other matters as the Owner Participant may reasonably
request; provided that the Lessee makes no representation as to the fair market
value, useful life, fair market rental value or estimated residual value of the
Equipment, and the Lessee shall not be responsible for, or incur any liabilities
as a result of, the contents of such Appraisal or report to which it relates or,
except to the extent provided in the Tax Indemnity Agreement.
(b) Opinion with Respect to Certain Tax Aspects. On the Closing Date,
-------------------------------------------
the Owner Participant shall have received the opinion of Winston & Strawn,
addressed to the Owner Participant, in form and substance satisfactory to the
Owner Participant, containing such counsel's favorable opinion with respect to
such tax matters as the Owner Participant may reasonably request.
(c) Absence of Change in Tax Laws. No change shall have occurred
-----------------------------
after the date of the execution and delivery of this Agreement in relevant
United States tax laws or regulations, which change would cause a material
adverse change in the projected coverage ratios used as part of the Basic Rent
structuring assumptions.
Section 4.4. Conditions Precedent to the Obligation of the Lessee.
----------------------------------------------------
The obligation of the Lessee with respect to the sale of the Units to the Owner
Trustee and acceptance of the Units under the Lease as of the Closing Date is
subject to the satisfaction or waiver of the following conditions precedent:
(a) Corporate Documents. On or before the Closing Date, the Lessee
-------------------
shall have received such documents and evidence with respect to the Owner
Participant, the Owner Trustee, the Indenture Trustee and the Pass Through
Trustee as the Lessee may reasonably request in order to establish the
authorization of the consummation of, or otherwise relating to the ability to
consummate, the transactions contemplated by this Agreement and the other
Operative Agreements, the taking of all corporate and other proceedings in
connection therewith and compliance with the conditions herein or therein set
forth.
35
<PAGE>
[Participation Agreement (GARC II 98-A)]
(b) Operative Agreements. On or before the Closing Date, the
--------------------
Operative Agreements shall have been duly authorized, executed and delivered by
the respective party or parties thereto (other than the Lessee, the Manager and
Lessee Parent), and an executed counterpart of each thereof shall have been
delivered to the Lessee or its special counsel.
(c) Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of each of the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Owner Participant contained in Section
3 hereof shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date, and the Lessee shall have received
an Officer's Certificate to such effect dated such date from each of the Owner
Trustee as described in Section 4.1(d), the Owner Participant as described in
Section 4.1(k), the Indenture Trustee as described in Section 4.1(m) and the
Pass Through Trustee as described in Section 4.1(n), addressed to the Lessee.
(d) Opinions of Counsel. On the Closing Date, the Lessee shall have
-------------------
received the opinions of counsel referred to in Section 4.1(e) (other than that
set forth in clause (i) therein), addressed to the Lessee.
(e) No Threatened Proceedings. No action or proceeding shall have
-------------------------
been instituted nor shall governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been issued or
proposed to be issued by any court or governmental agency at the time of the
Closing Date, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions contemplated hereby.
(f) Participants' Investments. (i) The Owner Participant shall have
-------------------------
made available the Owner Participant's Commitment in the amount specified in,
and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan
Participant shall have made available the Loan Participant's Commitment in the
amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3.
(g) Absence of Change in Tax Laws. No change shall have occurred
-----------------------------
after the date of the execution and delivery of this Agreement in relevant
United States tax laws or regulations, which change would cause an increase in
the net present value (expressed as a percentage of Total Equipment Cost) of the
Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to
exceed ten (10) basis points.
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE.
The Lessee agrees during the Lease Term and (if longer, in the event that
the Lessee has assumed all of the rights and obligations of the Lessor under the
Indenture in respect of the
36
<PAGE>
[Participation Agreement (GARC II 98-A)]
Equipment Notes) so long as any Equipment Note remains outstanding, that it will
furnish directly to each Participant the following:
(a) as soon as available and in any event within 60 days after the end
of each of the first three quarters, of each fiscal year, a balance sheet of the
Lessee as at the end of such quarter, together with the related consolidated
statements of income and cash flows of the Lessee for the period beginning on
the first day of such fiscal year and ending on the last day of such quarter,
setting forth in each case (except for the balance sheet) in comparative form
the figures for the corresponding periods of the previous fiscal year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles;
(b) as soon as available and in any event within 120 days after the
last day of each fiscal year, a copy of the Lessee's audited annual report
covering the operations of the Lessee including a balance sheet, and related
statements of income and retained earnings and statement of cash flows of the
Lessee for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, which statements will have been certified by a firm of independent public
accountants of recognized national standing selected by the Lessee;
(c) as soon as available, one copy of any document filed by the Lessee
with the Securities and Exchange Commission or any successor agency pursuant to
Section 13(a), 13(c), 14 or 15(d) (or any successor sections) of the Securities
Exchange Act of 1934, as amended (excluding such documents or portions thereof
which are treated as confidential and not available to the public, in accordance
with applicable law, by the Securities and Exchange Commission);
(d) within the time periods prescribed in paragraphs (a) and (b)
above, a certificate, signed by the Treasurer or principal financial officer of
the Lessee, to the effect that the signer has reviewed the Operative Agreements
and activities and records of the Lessee during the immediately preceding fiscal
quarter or year, as the case may be, and that, after due inquiry, such officer
is not aware of any default in compliance by the Lessee with any of the
covenants, terms and provisions of this Agreement or the Lease (except as
specified), and if a Lease Default shall exist, specifying such Lease Default,
the nature and status thereof and what action Lessee is taking or plans to take
with respect thereto;
(e) within the time periods presented in Section 7 of the Management
Agreement, each of the reports referred to therein signed by the appropriate
Person designated therein; and
37
<PAGE>
[Participation Agreeement (GARC II 98-A)]
(f) promptly after request therefor, such additional information with
respect to the financial condition or business of the Lessee as any Participant
may from time to time reasonably request.
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE.
Section 6.1. Restrictions on Transfer of Beneficial Interest. The
-----------------------------------------------
Owner Participant agrees that it shall not sell, convey, assign, pledge,
mortgage or otherwise transfer all or any part of the Beneficial Interest
(collectively, for purposes of this Section 6.1, a "transfer") prior to the
expiration or earlier termination of the Lease Term without the Lessee's prior
written consent (which consent shall not be unreasonably withheld); provided,
however, that no such consent shall be required if the following conditions are
satisfied:
(a) the Person to whom such transfer is to be made (a "Transferee") is
(i) an institutional or corporate investor with tangible net worth or, in the
case of a bank or lending institution, combined capital and surplus at the time
of such transfer, of at least $75,000,000, determined in accordance with
generally accepted accounting principles or (ii) any Affiliate of any such
institutional or corporate investor if such investor guarantees the obligations
so assumed by such Affiliate pursuant to a guaranty in form and substance
satisfactory to the Lessee or (iii) an Affiliate of the Owner Participant;
provided that in the event of a transfer pursuant to clause (iii) which does not
qualify under clauses (i) or (ii), the Owner Participant shall remain liable for
all of its obligations under this Agreement and the other Operative Agreements;
(b) so long as no Lease Event of Default has occurred and is
continuing, neither the Transferee nor any of its Affiliates shall compete
(directly or indirectly) (other than as a passive investor or loan participant
in the financing of equipment or facilities used in full service railcar
leasing) with Lessee Parent in any respect material to the business of Lessee's
Parent of leasing rail cars under full service operating leases; provided, that
no Transferee or Affiliate thereof shall be deemed to (i) be engaged in full
service railcar leasing or (ii) hold (directly or indirectly) any material
interest in any business that is competitive with Lessee's or Lessee Parent's
full service railcar leasing business, solely by reason of any sale, lease or
other disposition (or any actions in furtherance of any of the foregoing) of any
of such Person's interest in any equipment or facilities directly or indirectly
owned, leased or otherwise controlled pursuant to any such Person's passive
investment or loan participation in the financing of any such equipment or
facilities used in full service railcar leasing or any re-leasing or sale of any
rail equipment which is returned to or repossessed by or on behalf of such
Person from a lessee or borrower in connection with a lease financing or lender
transaction entered into by such Person as a passive lessor, investor or lender;
38
<PAGE>
[Participation Agreement (GARC II 98-A)]
(c) each of the Indenture Trustee, the Owner Trustee and the Lessee
shall have received 10 days (or, if a Lease Event of Default shall have occurred
and is continuing and the proposed Transferee or any of its Affiliates would
not, but for the occurrence of such Lease Event of Default, have satisfied the
requirements set forth in subparagraph (b) above or (l) below, fifteen (15)
Business Days) prior written notice of such transfer specifying the name and
address of any proposed Transferee and such additional information as shall be
necessary to determine whether the proposed transfer satisfies the requirements
of this Section 6.1;
(d) such Transferee enters into an agreement (i) in the form attached
hereto as Exhibit C or (ii) otherwise in form and substance satisfactory to each
of the Lessee and the Owner Trustee and not reasonably objected to by the
Indenture Trustee whereby such Transferee confirms that it shall be deemed a
party to this Agreement and each other Operative Agreement to which the
transferring Owner Participant is a party, and agrees to be bound by all the
terms of, and to undertake all of the obligations and liabilities of the
transferring Owner Participant contained in, this Agreement and such other
Operative Agreements and in which the Transferee shall make representations and
warranties comparable to those of the Owner Participant contained herein and
therein;
(e) an opinion of counsel of the Transferee (which counsel shall be
reasonably acceptable to the Lessee, the Owner Trustee and the Indenture Trustee
and which may be internal counsel of the Transferee), confirming (i) the
existence, corporate power and authority of, and due authorization, execution
and delivery of all relevant documentation by, the Transferee (with appropriate
reliance on certificates of corporate officers or public officials as to matters
of fact), (ii) that each agreement referred to in subparagraph (d) above is the
legal, valid, and binding obligation of the Transferee, enforceable against the
Transferee in accordance with its terms (subject to customary qualifications as
to bankruptcy and equitable principles) and (iii) compliance of the transfer
with applicable requirements of federal securities laws and securities laws of
the Transferee's domicile, shall be provided, prior to such transfer, to each of
the Lessee, the Owner Trustee and the Indenture Trustee, which opinion shall be
in form and substance reasonably satisfactory to the Lessee, the Owner Trustee
and the Indenture Trustee;
(f) such transfer complies in all respects with and does not violate
any applicable provisions of the federal securities laws and the securities law
of any applicable state;
(g) except as specifically consented to in writing by each of the
Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee,
the terms of the Operative Agreements shall not be altered;
(h) after giving effect to such transfer, the Beneficial Interest
shall be held by not more than [two] Owner Participants and the total number of
owner participants (including the Owner Participants) holding beneficial
interests in the Company Fleet shall not
39
<PAGE>
[Participation Agreement (GARC II 98-A)]
exceed [five] owner participants (including the Owner Participants); provided
that for the purpose of calculating the number of Owner Participants under this
paragraph (h), any Owner Participants that are Affiliates of each other shall be
considered to be one Owner Participant;
(i) all reasonable expenses of the parties hereto (including, without
limitation, reasonable legal fees and expenses of special counsel) incurred in
connection with each transfer of such Beneficial Interest shall be paid by the
transferring Owner Participant;
(j) such transfer either (i) does not involve the use of any funds
which constitute assets of an employee benefit plan subject to Title I of ERISA
or Section 4975 of the Code or (ii) if clause (i) is not applicable, will not
constitute a prohibited transaction under ERISA or the Code;
(k) as a result of and following such transfer, no Indenture Default
attributable to the Owner Participant or the Owner Trustee shall have occurred
and be continuing;
(l) unless a Lease Event of Default shall have occurred and is
continuing, the transfer does not involve the sale of the stock of any Owner
Participant, the sole asset of which is all or a portion of the Beneficial
Interest, to, or the merger of any such Owner Participant with or into, any
Person who is a competitor of the Lessee Parent as described in paragraph (b) of
this Section 6.1;
(m) the Transferee (i) is a "United States Person" within the meaning
of Section 7701(a)(30) of the Code or (ii) is engaged in a United States trade
or business for purposes of Subtitle A, Chapter 1, Subchapter N of the Code and
is acquiring such Beneficial Interest in connection with such trade or business;
and
(n) the Owner Participant shall deliver to the Lessee an Officer's
Certificate certifying as to compliance with the transfer requirements contained
herein.
Upon any such transfer (i) except as the context otherwise requires, such
Transferee shall be deemed the "Owner Participant" for all purposes, and shall
enjoy the rights and privileges and perform the obligations of the Owner
Participant to the extent of the interest transferred hereunder and under each
other Operative Agreement to which the Owner Participant is a party, and, except
as the context otherwise requires, each reference in this Agreement and each
other Operative Agreement to the "Owner Participant" shall thereafter be deemed
to include such Transferee for all purposes to the extent of the interest
transferred, and (ii) the transferor, except to the extent provided in Section
6.1(i) hereof and except in the case of a transfer to a Transferee described in
the proviso to Section 6.1(a)(iii) hereof, shall be released from all
obligations hereunder and under each other Operative Agreement to which such
transferor is a
40
<PAGE>
[Participation Agreement (GARC II 98-A)]
party or by which such transferor is bound solely to the extent such obligations
are expressly assumed by a Transferee; and provided, further, that in no event
-------- -------
shall any such transfer or assignment waive or release the transferor from any
liability on account of any breach existing prior to such transfer of any of its
representations, warranties, covenants or obligations set forth herein or in any
of the other Operative Agreements or for any fraudulent or willful misconduct.
Subject to subsection 6.1(l), the provisions of this Section 6.1 shall not be
construed to restrict the Owner Participant from consolidating with or merging
into any other corporation or restricting another corporation from merging into
or consolidating with the Owner Participant. Notwithstanding any transfer, the
transferor Owner Participant shall be entitled to all benefits accrued and all
rights vested prior to such transfer, including, without limitation, rights to
indemnification under any of the Operative Agreements. No transfer hereunder
shall, by virtue of the Transferee engaging in a business or activity not
generally conducted by other institutional or corporate investors in lease
transactions, increase the Lessee's indemnification obligations under Section
7.1 or 7.2. The Owner Participant hereby acknowledges and agrees (and each
Transferee by virtue of any transfer shall be deemed to have acknowledged and
agreed) to the terms of the Intercreditor Agreement.
Section 6.2. Lessor's Liens Attributable to the Owner Participant.
----------------------------------------------------
The Owner Participant hereby unconditionally agrees with and for the benefit of
each of the other parties to this Agreement that the Owner Participant shall not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Lien attributable to the Owner Participant on or against all or any portion of
the Indenture Estate or the Equipment, and the Owner Participant agrees that it
shall, at its own cost and expense, take such action as may be necessary to duly
discharge and satisfy in full any such Lessor's Lien; provided that the Owner
Participant may contest any such Lessor's Lien in good faith by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture or loss of the Equipment or any interest therein or
interference with the use, operation, or possession of the Equipment or any
portion thereof by the Lessee under the Lease or the rights of the Indenture
Trustee under the Indenture.
Section 6.3. Lessor's Liens Attributable to WTC. WTC hereby
----------------------------------
unconditionally agrees with and for the benefit of each of the other parties to
this Agreement that it shall not directly or indirectly create, incur, assume or
suffer to exist any Lessor's Lien attributable to it on or against all or any
portion of the Trust Estate or the Equipment, WTC agrees that it shall, at its
own cost and expense, take such action as may be necessary to duly discharge and
satisfy in full any such Lessor's Lien; provided that WTC may contest any such
Lessor's Lien in good faith by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of the Equipment or any interest therein or interference with the use,
operation, or possession of the Equipment or any portion thereof by the Lessee
under the Lease or the right of the Indenture Trustee under the Indenture.
Section 6.4. Liens Created by the Indenture Trustee and the Loan
---------------------------------------------------
Participant.
- -----------
41
<PAGE>
[Participation Agreement (GARC II 98-A)]
(a) The Indenture Trustee, in its individual capacity, covenants and
agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the
Loan Participant that it shall not cause or permit to exist any Lien on or
against all or any portion of the Equipment, the Trust Estate or the Indenture
Estate arising as a result of (i) claims against the Indenture Trustee in its
individual capacity not related to its interest in the Equipment and the Trust
Estate, or to the administration of the Indenture Estate pursuant to the
Indenture, (ii) acts of the Indenture Trustee in its individual capacity not
contemplated by, or failure of the Indenture Trustee to take any action it is
expressly required to perform by, any of the Operative Agreements, (iii) claims
against the Indenture Trustee attributable to the actions of the Indenture
Trustee in its individual capacity relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7 attributable to the
actions of the Indenture Trustee, or (iv) claims against the Indenture Trustee
arising out of the transfer by the Indenture Trustee of all or any portion of
its interest in the Equipment, the Indenture Estate or the Operative Agreements,
other than a transfer permitted by the Operative Agreements and with respect to
which the Indenture Trustee will, at its own cost and expense (and without any
right of reimbursement from any other party hereto), promptly take such action
as may be necessary duly to discharge any such Lien.
(b) The Loan Participant covenants and agrees with each of the Lessee,
the Owner Trustee, the Owner Participant and the Indenture Trustee that it shall
not cause or permit to exist any Lien on or against all or any portion of the
Equipment, the Trust Estate or the Indenture Estate arising as a result of (i)
claims against such Loan Participant not related to its interest in the
Equipment and the Trust Estate, (ii) acts of such Loan Participant not
contemplated by, or failure of such Loan Participant to take any action it is
expressly required to perform by, any of the Operative Agreements, (iii) claims
against such Loan Participant relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7, or (iv) claims against
such Loan Participant arising out of the transfer by such Loan Participant of
all or any portion of its interest in the Equipment, the Indenture Estate or the
Operative Agreements, other than a transfer permitted by the Operative
Agreements and with respect to which such Loan Participant will, at its own cost
and expense (and without any right of reimbursement from the Lessee), promptly
take such action as may be necessary duly to discharge any such Lien.
Section 6.5. Covenants of Owner Trustee, Owner Participant and
-------------------------------------------------
Indenture Trustee. Each of the Owner Participant and WTC, in its individual and
- -----------------
trust capacities, hereby agrees, as to its own actions only and severally and
not jointly, with (a) the Loan Participant and the Indenture Trustee (so long as
the Equipment Notes remain outstanding), not to amend, supplement, or otherwise
modify any provision of the Trust Agreement in such a manner as to adversely
affect the rights of the Loan Participant or the Indenture Trustee without the
prior written consent of such party and (b) with the Lessee, not to terminate or
revoke the Trust Agreement or the trust created by the Trust Agreement prior to
the payment in full and discharge
42
<PAGE>
[Participation Agreement (GARC II 98-A)]
of the Equipment Notes and all other indebtedness secured by the Indenture and
the final discharge thereof. Each of WTC and the Indenture Trustee agrees, for
the benefit of the Lessee and the Owner Participant, to comply with the
provisions of the Indenture and not to amend, supplement, or otherwise modify
any provision of the Indenture except in the manner provided in Article IX
thereof. Notwithstanding anything to the contrary contained herein or in any of
the other Operative Agreements, the Indenture Trustee's obligation to take or
refrain from taking any actions, or to use its discretion (including, but not
limited to, the giving or withholding of consent or approval and the exercise of
any rights or remedies under such Operative Agreement), and any liability
therefor, shall, in addition to any other limitations provided herein or in any
of the other Operative Agreements, be limited by the provisions of the
Indenture.
Section 6.6. Amendments to Operative Agreements. Unless a Lease
----------------------------------
Event of Default shall have occurred and be continuing, the Trustees and
Participants shall not terminate the Operative Agreements to which the Lessee is
not or will not be a party, or amend, supplement, waive or modify such Operative
Agreements in any manner, (i) except in accordance with such Operative
Agreements in effect on the date hereof (as amended, modified or supplemented
from time to time in accordance with the terms hereof and of such Operative
Agreements), or (ii) adverse to the Lessee or to any of its rights or interests
under any of the Operative Agreements, except with the prior written consent of
the Lessee. Without limiting the generality of the foregoing, each of the Owner
Participant and the Trustees (as applicable) agrees that, in any event, unless a
Lease Event of Default shall have occurred and be continuing, it will not amend
Section 2.10 or Article IX of the Indenture or Article IX of the Trust Agreement
without the prior written consent of the Lessee.
Section 6.7. Certain Representations, Warranties and Covenants.
-------------------------------------------------
The Lessee hereby confirms its representations, warranties and covenants in
Article 6 of the Intercreditor Agreement, which are hereby incorporated in this
Agreement by this reference as fully as if set forth herein in their entirety.
Section 6.8. Covenants of the Manager. The Manager hereby confirms
------------------------
the covenants in Article 7 of the Management Agreement, which are hereby
incorporated in this Agreement by this reference as fully as if set forth herein
in their entirety.
Section 6.9. Lessee's Purchase in Certain Circumstances. If (A)
------------------------------------------
the Owner Participant or any Affiliate thereof is or acquires, is acquired by,
merges or otherwise consolidates with any company or Affiliate thereof who would
not be an eligible "Transferee" by reason of Section 6.1(b) (and, in the case of
an Affiliate, such entity continues to be an Affiliate of the Owner Participant
after such acquisition, merger or consolidation), or (B) the Lessee shall have
requested a waiver pursuant to Section 12.3(c) of the Lease and the Lessor and
the Owner Participant shall have refused to grant such waiver or shall have
granted such waiver but shall have refused to further waive the requirement that
amounts be deposited in the Special Insurance
43
<PAGE>
[Participation Agreement (GARC II 98-A)]
Reserves Account pursuant to the Intercreditor Agreement in connection with the
granting of the initial waiver, the Lessee may, by prior written notice to the
Owner Participant, either (x) require that such Owner Participant transfer its
Beneficial Interest in accordance with the terms of Section 6.1 to Lessee or
such other transferee as Lessee shall designate (at a price which would result
in the same economics to such Owner Participant as if such Owner Participant had
been paid its applicable portion of the purchase price calculated as of the date
of such transfer plus all other amounts to which the Owner Participant would be
entitled upon the Lessee's payment in full of all amounts due and owing by
Lessee under the Operative Agreements, as set forth below); provided that,
without regard to such Owner Participant's obligations under the Operative
Agreements relating to the period prior to such transfer, any transfer pursuant
to this clause (x) shall be without additional representations or warranties of
or other liabilities or obligations on such Owner Participant, or (y) on a
Determination Date which is designated by the Lessee by written notice to the
Owner Trustee and the Indenture Trustee not less than 25 days prior to such
Determination Date, purchase the Equipment for a purchase price equal to (I) the
Termination Value calculated as of such Determination Date (provided that in the
case of (B) above, the amount referred to in this Clause (I) shall equal the
greater of the Termination Value or the Fair Market Sales Value of the Equipment
calculated as of such Determination Date), plus (II) all other amounts due and
owing by the Lessee under the Operative Agreements with respect to such Units,
including, without limitation, all accrued and unpaid Basic Rent therefor as of
such Determination Date (exclusive of any Basic Rent payable in advance on such
date), any interest accrued and unpaid with respect to such unpaid Basic Rent,
any Make-Whole Amount then payable on the Equipment Notes pursuant to Section
2.10(c) of the Indenture with respect to the Equipment and any then Late Payment
Premium due and owing under the Operative Agreements with respect to such Units
so that, after receipt and application of all such payments but without any
withdrawal from any Reserve Account the Owner Participant shall be entitled
under the terms of the Intercreditor Agreement to receive, and does receive, in
respect of all such Units, the sum of the Accumulated Equity Deficiency Amount
and Late Payment Interest related thereto and any other amounts then due to
Owner Participant. In the event that such Owner Participant holds less than 100%
of the Beneficial Interest (after excluding any Beneficial Interests held by the
Lessee, the Manager or any Affiliate of either thereof), in lieu of purchasing
of the Equipment as provided above, the Lessee may instead purchase such Owner
Participant's Beneficial Interest for a purchase price equal to (a) the excess
of (i) the purchase price for the Equipment determined as provided above in this
Section 6.9 over (ii) the sum of the principal amount of Equipment Notes then
outstanding (b) multiplied by a fraction equal to the portion such Owner
Participant's Beneficial Interest bears to 100% of the Beneficial Interests.
If the Lessee elects to exercise the option to purchase the Equipment (as
opposed to such Owner Participant's Beneficial Interest) as provided in this
Section 6.9, the Lessee shall, as the purchase price therefor, in the sole
discretion of the Lessee, either (i) pay the purchase price, as specified in the
above paragraph, with respect to the Equipment, together with all other amounts
due and owing by the Lessee under the Operative Agreements, or (ii) so long as
no
44
<PAGE>
[Participation Agreement (GARC II 98-A)]
Lease Event of Default shall have occurred and be continuing and the Owner
Participant is entitled under the terms of the Intercreditor Agreement to and
does receive all such amounts, pay the difference between (x) the amounts
specified in clause (i) above and (y) the unpaid principal amount of the
Equipment Notes scheduled to be outstanding as of the Determination Date
specified by the Lessee in the second sentence of this Section 6.9 (after
deducting therefrom the principal installment, if any, to be paid on such date).
In connection with any purchase of the Units hereunder, the Lessee will make the
payments required by this Section 6.9 in immediately available funds against
delivery of a 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.
Section 6.1. Owner Participant as Affiliate of Lessee. If at any
----------------------------------------
time the original or any successor Owner Participant shall be an Affiliate of
the Lessee, such Owner Participant and the Lessee agree that, notwithstanding
Section 9.5 of the Indenture, they will not vote its Beneficial Interest in any
respect if there is another Owner Participant not affiliated with the Lessee,
and, if there is no such Owner Participant, they will not vote its Beneficial
Interest to modify, amend or supplement any provision of the Lease or this
Agreement or give, or permit the Owner Trustee to give, any consent, waiver,
authorization or approval thereunder if any such action would adversely affect
in a material manner the Indenture Trustee or any holder of an Equipment Note
unless such action shall have been consented to by a Majority in Interest.
SECTION 7. LESSEE'S INDEMNITIES.
Section 7.1. General Tax Indemnity.
---------------------
(a) Tax Indemnities Defined. For purposes of this Section 7.1, "Tax
-----------------------
Indemnitee" means the Loan Participant, the Owner Participant, its Affiliates,
the Owner Trustee both in its individual capacity and as trustee, the Indenture
Trustee both in its individual capacity and as trustee, the Pass Through Trustee
both in its individual capacity and as trustee, each of their successors or
assigns permitted under the terms of the Operative Agreements, any officer,
director, employee or agent of any of the foregoing, the Trust Estate and the
Indenture Estate.
(b) Taxes Indemnified. Except as provided below, all payments by the
-----------------
Lessee to any Tax Indemnitee in connection with the transactions contemplated by
the Operative Agreements shall be free of withholdings of any nature whatsoever
(and at the time that any
45
<PAGE>
[Participation Agreement (GARC II 98-A)]
payment is made upon which any withholdings is required the Lessee shall pay an
additional amount such that the net amount actually received will, after such
withholding and on an After-Tax Basis, equal the full amount of the payment then
due) and shall be free of expense to each Tax Indemnitee for collection or other
charges. The Lessee shall defend, indemnify and save harmless each Tax
Indemnitee from and against, and as between the Lessee and each Tax Indemnitee
the Lessee hereby assumes liability with respect to, all fees (including,
without limitation, license fees and registration fees), taxes (including,
without limitation, income, gross receipts, franchise, sales, use, value added,
property and stamp taxes), assessments, levies, imposts, duties, charges or
withholdings of any nature whatsoever, together with any and all penalties,
additions to tax, fines or interest thereon ("Taxes") imposed against any of the
Tax Indemnitees, any item of Equipment or the Lessee, upon, arising from or
relating to
(i) any item of Equipment,
(ii) the construction, manufacture, financing, purchase,
delivery, ownership, acceptance, rejection, possession, improvement, use,
operation, leasing, subleasing, condition, maintenance, repair,
refinancing, registration, sale, return, replacement, storage, abandonment
or other application or disposition of any item of Equipment,
(iii) the rental payments, receipts or earnings arising from
any item of Equipment or payable pursuant to the Operative Agreements, or
(iv) the Operative Agreements, the Equipment Notes or any
Car Service Contract or otherwise with respect to or in connection with the
transactions contemplated thereby.
(c) Taxes Excluded. In the case of the Owner Participant, its
--------------
Affiliates, the Owner Trustee both in its individual capacity and as trustee,
and each of their respective successors, assigns, officers, directors, employees
and agents described in Section 7.1(a) and the Trust Estate (each, an "Equity
------
Tax Indemnitee" and each Tax Indemnitee which is not an Equity Tax Indemnitee, a
- --------------
"Lender Tax Indemnitee") except with respect to indemnification payments
---------------------
hereunder or payments pursuant to this Section 7.1, the indemnity provided in
Section 7.1(b) shall not include:
(i) as to any Equity Tax Indemnitee, any Income Tax imposed
by the United States federal government;
(ii) as to any Equity Tax Indemnitee, any Income Tax imposed
by any state, local or foreign government or taxing authority or
subdivision thereof, except to the extent such Taxes are solely
attributable to the use or location of
46
<PAGE>
[Participation Agreement (GARC II 98-A)]
any item of Equipment or the activities of the Lessee or its Affiliates or
any sublessee in the taxing jurisdiction;
(iii) as to any Equity Tax Indemnitee, any Tax that is imposed as
a result of the sale, transfer or other disposition, by the Lessor or the
Owner Participant of any of its rights with respect to any item of
Equipment or the Owner Participant's interest in the Trust Estate unless
such sale, transfer or other disposition is a result of an Event of
Default, results from any substitution, repair or replacement of any item
of Equipment under the Lease, or results from any sale, transfer or
disposition required under the Lease (including but not limited to Section
10 of the Lease);
(iv) as to any Equity Tax Indemnitee, any Taxes to the extent
they exceed the Taxes that would have been imposed had an Equity Tax
Indemnitee not transferred, sold or disposed of its Interest or rights in
any item of Equipment to a non-U.S. Person;
(v) Taxes imposed on a Lender Tax Indemnitee with respect to
any period after the payment in full of the Equipment Notes; provided that
the exclusion set forth in this clause (v) shall not apply to Taxes to the
extent such Taxes relate to events occurring or matters arising prior to or
simultaneously with the applicable time or relate to any payment made by
the Lessee after such date;
(vi) as to any Tax Indemnitee, Taxes to the extent caused by any
misrepresentation or breach of warranty or covenant by such Tax Indemnitee
under any of the Operative Agreements or by the gross negligence or willful
misconduct of such Tax Indemnitee;
(vii) as to any Lender Tax Indemnitee, Taxes which become payable
as a result of a sale, assignment, transfer or other disposition (whether
voluntary or involuntary) by such Lender Tax Indemnitee of all or any
portion of its interest in the Equipment or any part thereof, the Trust
Estate, the Indenture Estate or any of the Operative Agreements or rights
created thereunder, other than as a result of (A) the substitution,
modification or improvement of the Equipment or any part thereof, (B) a
modification to the Operative Agreements, or (C) a disposition which occurs
as the result of the exercise of remedies upon a Lease Event of Default;
provided, that, notwithstanding the foregoing, the Lessee shall not be
obligated to indemnify any Lender Tax Indemnitee with respect to net income
taxes imposed within the United States as the result of a sale, assignment,
transfer or other disposition by such Lender Tax Indemnitee or any Taxes
imposed as a result of the status of the Lender Tax Indemnitee as other
than a resident of the United States for tax purposes;
47
<PAGE>
[Participation Agreement (GARC II 98-A)]
(viii) as to any Lender Tax Indemnitee, Taxes imposed as the
result of such Lender Tax Indemnitee not being a resident of the United
States for tax purposes;
(ix) As to any Lender Tax Indemnitee, Income Taxes or transfer
taxes relating to any payments of principal, interest or Make Whole Amount,
if any, on the Equipment Notes paid to any such Tax Indemnitee that are
imposed by the United States federal government, any state or local
government within the United States or any other jurisdiction in which such
Indemnitee is subject to such Taxes as a result of it or an Affiliate being
organized in such jurisdiction or conducting activities in that
jurisdiction unrelated to the transactions contemplated by the Operative
Agreements;
(x) Taxes to the extent directly resulting from or that would
not have been imposed but for (x) in the case of Taxes imposed on or with
respect to any Equity Tax Indemnitee, the existence of any Lessor Liens
with respect to such Equity Tax Indemnitee, (y) in the case of Taxes
imposed on or with respect to any Lender Tax Indemnitee, the existence of
any Indenture Trustee Liens;
(xi) Taxes imposed on a Tax Indemnitee to the extent that such
Taxes would not have been imposed upon such Tax Indemnitee but for any
failure of such Tax Indemnitee or any Affiliate thereof to comply with (x)
any certification, information, documentation, reporting or other similar
requirements concerning the nationality, residence, identity or connection
with the jurisdiction imposing such Taxes, if such compliance is required
under the laws or regulations of such jurisdiction to obtain or establish
relief or exemption from or reduction in such Taxes and the Tax Indemnitee
or such Affiliate was eligible to comply with such requirement or (y) any
other certification, information, documentation, reporting or other similar
requirements under the Tax laws or regulations of the jurisdiction imposing
such Taxes that would establish entitlement to otherwise applicable relief
or exemption from such Taxes; provided, however, that the exclusion set
forth in this clause (xii) shall not apply (I) if, such failure to comply
was due to a failure of the Lessee to provide reasonable assistance on
request in complying with such requirement, (II) if, in the case of Taxes
imposed on the Owner Participant, in the good faith judgment of the Owner
Participant there is a risk of adverse consequence to the Owner Participant
or any Affiliate from such compliance against which the Owner Participant
is not satisfactorily indemnified, (III) in the case of Taxes imposed on
the Owner Participant, if any such failure to comply on the part of the
Owner Trustee was the result of the Owner Trustee's gross negligence or
failure to act in accordance with instructions of the Owner Participant, or
(IV) in the case of any Tax Indemnitee, unless Lessee shall have given such
Tax Indemnitee prior written notice of such requirements;
48
<PAGE>
[Participation Agreement (GARC II 98-A)]
(xii) Taxes that are imposed with respect to any period after
the earlier of (x) return of possession of the Equipment to the Lessor in
accordance with, and at a time and place contemplated by the Lease
(including the payment of all amounts due at such time) and (y) the
termination of the Term pursuant to Section 6, 10, 11, 15 or 22 of the
Lease and the discharge in full of Lessee's payment obligation's thereunder
unless the Equipment is thereafter required to be returned, in which case,
after such return; provided, however, that the exclusion set forth in this
-------- -------
clause (xiii) shall not apply to Taxes to the extent such Taxes relate to
events occurring or matters arising prior to or simultaneously with such
return or termination;
(xiii) As to any Lender Tax Indemnitee, Taxes in the nature of
an intangible or similar tax upon or with respect to the value of the
interest of a Loan Participant in the Trust Indenture Estate or in any
Equipment Note;
(xiv) Taxes imposed on the Owner Trustee or the Indenture
Trustee that are on, based on or measured by any trustee fees for services
rendered by such Tax Indemnitee in its capacity as trustee under the
Operative Agreements imposed as a result of the Indenture Trustee, the Loan
Participant or any Affiliate of the Loan Participant being organized in, or
conducting activities unrelated to the contemplated transactions in, the
jurisdiction imposing such Taxes;
(xv) Taxes imposed on any Tax Indemnitee, or any other
person who, together with such Tax Indemnitee, is treated as one employer
for employee benefit plan purposes, as a result of, or in connection with,
any "prohibited transaction," within the meaning of the provisions of the
Code or regulations thereunder or as set forth in Section 406 of ERISA or
the regulations implementing ERISA or Section 4975 of the Code or the
regulations thereunder;
(xvi) Taxes for so long as (x) such Taxes are being contested
in accordance with the provisions of Section 7.1(e) hereof, (y) the Lessee
is in compliance with its obligations under Section 7.1(e), and (z) the
payment of such Taxes is not required pursuant to Section 7.1(e);
(xvii) Taxes as to which such Tax Indemnitee is indemnified
pursuant to the Tax Indemnity Agreement;
(xviii) any Taxes imposed on or with respect to any Certificate
Holder; and
49
<PAGE>
[Participation Agreement (GARC II 98-A)]
(xix) Taxes imposed as a result of the authorization or giving
of any future amendments, supplements, waivers or consents with respect to
any Operative Agreement other than (w) those which are legally required,
(x) in connection with the exercise of remedies pursuant to Section 15 of
the Lease, (y) such as have been proposed by the Lessee or consented to by
the Lessee or (z) those that are required pursuant to the terms of the
Operative Agreements.
(d) Payments to Tax Indemnitee. The Lessee agrees to pay, on demand,
--------------------------
any and all Taxes, and to keep at all times all and every part of each item of
Equipment free and clear of all Taxes which might in any way affect the interest
of any Tax Indemnitee therein or result in a Lien upon any such item of
Equipment; provided, however, that the Lessee shall be under no obligation to
pay any Tax so long as either the Tax Indemnitee or the Lessee is contesting in
good faith and by appropriate legal proceedings such tax and the nonpayment
thereof does not, in the reasonable opinion of the Tax Indemnitee, materially
adversely affect the interest of any Tax Indemnitee hereunder or under the
Indenture.
If any Tax indemnified under this Section 7.1 (an "Indemnified Tax") shall
have been charged or levied against any Tax Indemnitee directly and paid by such
Tax Indemnitee after such Tax Indemnitee shall have given written notice thereof
to the Lessee and the same shall have remained unpaid for a period of ten
Business Days thereafter, the Lessee shall reimburse such Tax Indemnitee
payment, such Tax Indemnitee shall promptly notify the Lessee of the Tax charged
or levied (but the failure to so notify the Lessee shall relieve the Lessee of
its obligation hereunder only to the extent such failure precludes a contest by
the Lessee) hereunder.
(e) Contests. If the Lessee shall so request within 30 days after
--------
receipt of such notice, then such Tax Indemnitee shall in good faith at Lessee's
expense contest such Tax; provided, however, that to the extent the contest
involves only Taxes constituting property taxes, sales taxes, or use taxes and
does not involve any taxes or other issues relating to a Tax Indemnitee which
are unrelated to the transactions contemplated by the Operative Agreements, such
contest shall be undertaken by the Lessee at the Lessee's expense and at no-
after-tax cost to the Lessor or the Owner Participant, but if such contest would
involve any other type of Tax or any taxes or issues relating to a Tax
Indemnitee which are unrelated to the transactions contemplated by Operative
Agreements, then such Tax Indemnitee may, in its sole discretion, control such
contest (including selecting the forum for such contest, and determining whether
any such contest shall be conducted by (i) paying such Tax under protest or (ii)
resisting payment of such Tax or (iii) paying such Tax and seeking a refund
thereof; provided, further, however, that at such Tax Indemnitee's option, such
contest shall be conducted by the Lessee in the name of such Tax Indemnitee).
In no event shall such Tax Indemnitee be required or the Lessee be permitted to
contest any Tax for which the Lessee is obligated to indemnify pursuant to this
Section unless: (i) the Lessee shall have acknowledged in writing its liability
to such Tax Indemnitee for an indemnity payment pursuant to this Section as a
result of such claim if and to
50
<PAGE>
[Participation Agreement (GARC II 98-A)]
the extent such Tax Indemnitee or the Lessee, as the case may be, shall not
prevail in the contest of such claim; provided, however, that the Lessee shall
not be required to indemnify for such Taxes to the extent that the results of
the contest clearly and unambiguously demonstrate that the Tax is not a Tax for
which Lessee is required to indemnify; (ii) such Tax Indemnitee shall have
received the opinion of independent tax counsel selected by the Tax Indemnitee
and reasonably satisfactory to the Lessee furnished at the Lessee's sole
expense, to the effect that a reasonable basis exists for contesting such claim
or, in the event of an appeal, that it is more likely than not that an appellate
court or an administrative agency with appellate jurisdiction, as the case may
be, will reverse or substantially modify the adverse determination; (iii) the
Lessee shall have agreed to pay such Tax Indemnitee on demand (and at no after-
tax costs to the Lessor and the Owner Participant) all reasonable costs and
expenses that such Tax Indemnitee may incur in connection with contesting such
claim (including, without limitation, all costs, expenses, reasonable legal and
accounting fees, disbursements, penalties, interest and additions to the Tax);
(iv) no Lease Event of Default shall have occurred and shall have been
continuing, unless the Lessee shall have posted a satisfactory bond or other
security with respect to the costs of such contest and the Taxes which may be
required to be indemnified; (v) such Tax Indemnitee shall have determined that
the action to be taken will not result in any substantial danger of sale,
forfeiture or loss of, or the creation of any Lien, or the Lessee shall have or
otherwise made a provision to protect the interest of such Tax Indemnitee (in a
manner satisfactory to such Tax Indemnitee), on the Equipment or any portion
thereof or any interest therein; (vi) the amount of such claims alone, or, if
the subject matter thereof shall be of a continuing or recurring nature, when
aggregated with identical potential claims shall be at least $5,000; and (vii)
if such contest shall be conducted in a manner requiring the payment of the
claim, the Lessee shall have paid the amount required (and at no after-tax costs
to the Lessor and the Owner Participant). The Lessee shall cooperate with the
Tax Indemnitee with respect to any contest controlled and conducted by the Tax
Indemnitee and the Tax Indemnitee shall consult with the Lessee regarding the
conduct of such contest. The Tax Indemnitee shall cooperate with respect to any
contest controlled and conducted by the Lessee and the Lessee shall consult with
the Tax Indemnitee regarding the conduct of such contest.
Notwithstanding anything to the contrary contained in this Section 7.1, no
Tax Indemnitee shall be required to contest any claim if the subject matter
thereof shall be of a continuing or recurring nature and shall have previously
been adversely decided to the Tax Indemnitee pursuant to the contest provisions
of this Section unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings or court decisions) enacted, promulgated or effective after such claim
shall have been so previously decided, and such Tax Indemnitee shall have
received an opinion of independent tax counsel selected by the Tax Indemnitee
and reasonably satisfactory to the Lessee, furnished at the Lessee's sole
expense, to the effect that such change is favorable to the position which such
Tax Indemnitee or the Lessee, as the case may be, had asserted in such previous
contest and as a result of such change, there is a reasonable basis to contest
such claim.
51
<PAGE>
[Participation Agreement (GARC II 98-A)]
(f) Payments to Lessee. With respect to any payment or indemnity
------------------
hereunder, such payment or indemnity shall have included an amount payable to
the Tax Indemnitee sufficient to hold such Tax Indemnitee harmless on an After-
Tax Basis from all Taxes required to be paid by such Tax Indemnitee with respect
to such payment or indemnity under the laws of any federal, state or local
government or taxing authority in or of the United States, or under the laws of
any taxing authority or governmental subdivision in or of a foreign country;
provided that, if any Tax Indemnitee realizes and recognizes a permanent tax
benefit by reason of such payment or indemnity (whether such tax benefit shall
be by means of a foreign tax credit, investment tax credit, depreciation or
recovery deduction or otherwise), such Tax Indemnitee shall pay to the Lessee an
amount equal to the sum of such tax benefit plus any tax benefit realized as the
result of any payment made pursuant to this proviso, when, as, if and to the
extent realized; provided further that, (i) if at the time such payment shall be
due to the Lessee, a Lease Event of Default shall have occurred and be
continuing, such amount shall not be payable until such Lease Event of Default
shall have been cured, and (ii) the amount which such Tax Indemnitee shall be
required to pay to the Lessee shall not exceed the amounts which the Lessee has
theretofore paid such Tax Indemnitee hereunder with respect to such indemnity.
For purposes of this Section 7.1, in determining the order in which
any Tax Indemnitee utilizes withholding or other foreign taxes as a credit
against such Tax Indemnitee's United States income taxes, such Tax Indemnitee
shall be deemed to utilize (i) first, all foreign taxes other than those
described in clause (ii) below; provided, however, that such other foreign taxes
which are carried back to the taxable year for which a determination is being
made pursuant to such paragraph (i) shall be deemed utilized after the foreign
taxes described in clause (ii) below, and (ii) then, on a pro rata basis, all
foreign taxes (including fees, taxes and other charges hereunder) with respect
to which such Tax Indemnitee is entitled to obtain indemnification pursuant to
an indemnification provision contained in any lease, loan agreement, financing
document or participation agreement (including, without limitation, this
Agreement).
(g) Reports. In the event any reports with respect to Indemnified
-------
Taxes are required to be made, the Lessee will either prepare and file such
reports (and in the case of reports which are required to be filed on the basis
of individual items of Equipment, such reports shall be prepared and filed in
such manner as to show, if required, the interest of each Tax Indemnitee in such
items of Equipment) or, if it shall not be permitted to file the same, it will
notify each Tax Indemnitee of such reporting requirements, prepare such reports
in such manner as shall be satisfactory to each Tax Indemnitee and deliver the
same to each tax Indemnitee within a reasonable period prior to the date the
same is to be filed. The Lessee shall provide such information as the Owner
Participant or the Lessor may reasonably require from the Lessee to enable the
Owner Participant and the Lessor to fulfill their respective tax filing, tax
audit, and tax litigation obligations.
52
<PAGE>
[Participation Agreement (GARC II 98-A)]
(h) Survival. In the event that, during the continuance of this
--------
Agreement, any Indemnified Tax accrues or becomes payable or is levied or
assessed (or is attributable to the period of time during which the Lease is in
existence or prior to the return of Equipment in accordance the provisions of
the Lease) which the Lessee is or will be obligated to pay or reimburse,
pursuant to this Section 7.1, such liability shall continue, notwithstanding the
expiration of the Lease, until all such Taxes are paid or reimbursed by the
Lessee.
(i) Affiliated Group. For purposes of applying this Section 7.1 with
----------------
respect to any Tax, the term "Owner Participant" shall include each member of
the affiliated group of corporations with which [_____________] (and its
successors and assigns) files consolidated or combined tax returns relating to
such Imposition.
(j) Income Tax. For purposes of this Section 7.1, the term Income Tax
means any Tax based on or measured by or with respect to gross or net income
(including without limitation, capital gains taxes, personal holding company
taxes, minimum taxes and tax preferences) or gross or net receipts and Taxes
which are capital, net worth, conduct of business, franchise or excess profits
taxes and interest, additions to tax, penalties, or other charges in respect
thereof (provided, however, that Taxes that are, or are in the nature of, sales,
-------- -------
use, rental, value-added, excise, ad valorem, or property (whether tangible or
intangible) taxes shall not constitute an Income Tax).
(k) Certain Withholding. All payments by the Lessee of Basic Rent,
-------------------
Stipulated Loss Value or Termination Value (or any other payment of purchase
price with respect to any Unit) shall, to the extent being applied to pay any
amount due as principal, interest or Make-Whole on the Equipment Notes, be free
of withholdings of any nature whatsoever (and at the time that any payment is
made upon which any such withholding is required the Lessee shall pay an
additional amount such that the net amount actually received will, after such
withholding and on an After-Tax Basis, equal the full amount of the payment then
due on the Equipment Notes) and shall be free of expense for collection or other
charges; provided, however, that (i) in the event an obligation to withhold
arises and such withholding would not be a Tax against which the payee is
indemnified under this Section 7.1, the Lessee shall be entitled to
reimbursement from such payee for such Taxes, and (ii) if such withholding Taxes
are not Taxes for which the holders of the Equipment Notes are indemnified, then
the Lessee shall not be required to gross up such payment.
Section 7.2. General Indemnification.
-----------------------
(a) Claims Defined. For the purposes of this Section 7, "Claims"
--------------
shall mean any and all costs, expenses, liabilities, obligations, losses,
damages, penalties, actions or suits or claims of whatsoever kind or nature
(whether or not on the basis of negligence, strict or absolute liability or
liability in tort) which may be imposed on, incurred by, suffered by, or
53
<PAGE>
[Participation Agreement (GARC II 98-A)]
asserted against an Indemnified Person, as defined herein, or any Unit and,
except as otherwise expressly provided in this Section 7.2, shall include, but
not be limited to, all reasonable out-of-pocket costs, disbursements and
expenses (including legal fees and expenses) paid or incurred by an Indemnified
Person in connection therewith or related thereto.
(b) Indemnified Person Defined. For the purposes of this Section 7,
--------------------------
"Indemnified Person" means the Owner Participant, the Owner Trustee, WTC, the
Indenture Trustee and the Pass Through Trustee, each of their Affiliates and
each of their respective directors, officers, employees, successors and
permitted assigns, agents and servants, the Trust Estate and the Indenture
Estate (the respective directors, officers, employees, successors and permitted
assigns, agents and servants of the Owner Participant, the Owner Trustee, WTC,
the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as
applicable, together with the Owner Participant, the Owner Trustee, WTC, the
Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as the
case may be, being referred to herein collectively as the "Related Indemnitee
Group" of the Owner Participant, the Indenture Trustee, the Owner Trustee, WTC
and the Pass Through Trustee, respectively).
(c) Claims Indemnified. Whether or not any Unit is accepted under the
------------------
Lease, or the Closing occurs, and subject to the exclusions stated in paragraph
(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each
Indemnified Person on an After-Tax Basis against Claims directly or indirectly
resulting from or arising out of or alleged to result from or arise out of
(whether or not such Indemnified Person shall be indemnified as to such Claim by
any other Person):
(i) this Agreement or any other Operative Agreement or any of
the transactions contemplated hereby and thereby or any Unit or the
ownership, lease, operation, possession, modification, improvement,
abandonment, use, non-use, maintenance, sublease, substitution, control,
repair, storage, alteration, transfer or other application or disposition,
return, overhaul, testing, servicing, replacement or registration of any
Unit (including, without limitation, injury, death or property damage of
passengers, shippers or others, and environmental control, noise and
pollution regulations, or the presence, discharge, treatment, storage,
handling, generation, disposal, spillage, release, escape of or exposure
of any Person or thing to (directly or indirectly) Hazardous Substances or
damage to the environment (including, without limitation, costs of
investigations or assessments, clean-up costs, response costs, remediation
costs, removal costs, restoration costs, monitoring costs, costs of
corrective actions and natural resource damages)) whether or not in
compliance with the terms of the Lease, or by any of the commodities,
items or materials from time to time contained in any Unit, whether or not
in compliance with the terms of the Lease, or by the inadequacy of any
Unit or deficiency or defect in any Unit or by any other
54
<PAGE>
[Participation Agreement (GARC II 98-A)]
circumstances in connection with any Unit, or by the performance of any
Unit or any risks relating thereto;
(ii) the construction, manufacture, financing, refinancing,
design, purchase, acceptance, rejection, delivery, non-delivery or
condition of any Unit (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent, trademark
or copyright infringement);
(iii) any act or omission (whether negligent or otherwise) or
any breach of or failure to perform or observe, or any other non-compliance
with, any covenant, condition or agreement to be performed by, or other
obligation of, the Lessee or any Affiliate of Lessee under any of the
Operative Agreements, or the falsity of any representation or warranty of
the Lessee or any Affiliate of Lessee in any of the Operative Agreements or
in any document or certificate delivered in connection therewith other than
representations and warranties in the Tax Indemnity Agreement;
(iv) the offer, sale or delivery of any Equipment Notes or Pass
Through Certificates or any interest in the Trust Estate;
(v) any violation of law, rule, regulation or order by the
Lessee or any Affiliate of Lessee or any Sublessee or their respective
directors, officers, employees, agents or servants; and
(vi) any sale, transfer or holding of Equipment Notes or Pass
Through Certificates being deemed to result in a "prohibited transaction"
under ERISA.
(d) Claims Excluded. The following are excluded from the Lessee's
---------------
agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the extent attributable
to acts or events occurring after (except in any case where remedies are
being exercised under Section 15 of the Lease or the Lessee has assumed any
of the obligations with respect to the Equipment Notes under Section 3.6 of
the Indenture) the later to occur of (x) with respect to such Unit, the
earlier to occur of the termination of the Lease or the expiration of the
Lease Term in accordance with the terms thereof, and (y) with respect to
each Unit, the return of such Unit to the Lessor in accordance with the
terms of the Lease (it being understood that, so long as any Unit is in
storage as provided in Section 6.1(c) of the Lease, the date of return
thereof for the purpose of this clause (i) shall be the last day of the
Storage Period);
55
<PAGE>
[Participation Agreement (GARC II 98-A)]
(ii) except in the case of (vi) above, Claims which are Taxes,
whether or not the Lessee is required to indemnify therefor under Section
7.1 hereof or under the Tax Indemnity Agreement;
(iii) with respect to any particular Indemnified Person, Claims
to the extent resulting from (x) the gross negligence or willful misconduct
of such Indemnified Person, or (y) any breach of any covenant to be
performed by such Indemnified Person under any of the Operative Agreements,
or the falsity of any representation or warranty of such Indemnified Person
in any of the Operative Agreements or in a document or certificate
delivered in connection therewith;
(iv) any Claim to the extent attributable to any transfer by the
Lessor of the Equipment or any portion thereof or any transfer by the Owner
Participant of all or any portion of its interest in the Trust Estate other
than (A) any transfer after a Lease Event of Default, (B) the transfer of
all or any portion of the Equipment or any Owner Participant's interest in
the Equipment to the Lessee, (C) the transfer of all or any portion of the
Equipment to a third party pursuant to Lessee's election to terminate the
Lease or (D) any transfer of all or any portion of the Equipment pursuant
to Section 6.9;
(v) with respect to any particular Indemnified Person, any
Claim resulting from the imposition of any Lessor's Lien attributable to
such Indemnified Person; or
(vi) with respect to any particular Indemnified Person, any
Claim, to the extent the risk thereof has been expressly assumed by such
Indemnified Person in connection with the exercise by such Indemnified
Person of the right of inspection granted under Section 6.2 of the Lease,
inspection or restenciling under Section 6.1(c) of the Lease or inspection
under Section 13.2 of the Lease.
(e) Insured Claims. In the case of any Claim indemnified by the
--------------
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified Person
agrees to provide reasonable cooperation to the insurers in the exercise of
their rights to investigate, defend, settle or compromise such Claim as may be
required to retain the benefits of such insurance with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall, after obtaining
----------------
knowledge thereof, promptly notify the Lessee of any Claim as to which
indemnification is sought; provided, however, that the failure to give such
notice shall not release the Lessee from any of its obligations under this
Section 7.2, except (but only if neither the Lessee nor Lessee
56
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[Participation Agreement (GARC II 98-A)]
Parent shall have actual knowledge of such Claim) to the extent that failure to
give notice of any action, suit or proceeding against such Indemnified Person
shall have a material adverse effect on Lessee's ability to defend such Claim or
recover proceeds under any insurance policies maintained by the Lessee. The
Lessee shall, after obtaining knowledge thereof, promptly notify each
Indemnified Person of any indemnified Claim affecting such Indemnified Person.
Subject to the provisions of the following paragraph, the Lessee shall at its
sole cost and expense be entitled to control, and shall assume full
responsibility for, the defense of such claim or liability; provided that the
Lessee shall confirm to such Indemnified Person Lessee's obligations to
indemnify hereunder for such Claim, shall keep the Indemnified Person which is
the subject of such proceeding fully apprised of the status of such proceeding
and shall provide such Indemnified Person with all information with respect to
such proceeding as such Indemnified Person shall reasonably request.
Notwithstanding any of the foregoing to the contrary, the Lessee shall
not be entitled to control and assume responsibility for the defense of any
Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2)
such proceeding will involve any material danger of the sale, forfeiture or loss
of, or the creation of any Lien (other than any Lien permitted under the
Operative Agreements or a Lien which is adequately bonded to the satisfaction of
such Indemnified Person) on, any Unit, (3) in the good faith opinion of such
Indemnified Person, there exists an actual or potential conflict of interest
such that it is advisable for such Indemnified Person to retain control of such
proceeding, (4) such Claim involves the possibility of criminal sanctions or
liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance
shall exist. In the circumstances described in clauses (1) - (5), the
Indemnified Person shall be entitled to control and assume responsibility for
the defense of such claim or liability at the expense of the Lessee. In
addition, any Indemnified Person may participate in any proceeding controlled by
the Lessee pursuant to this Section 7.2, at its own expense, in respect of any
such proceeding as to which the Lessee shall have acknowledged in writing its
obligation to indemnify the Indemnified Person pursuant to this Section 7.2, and
at the expense of the Lessee in respect of any such proceeding as to which the
Lessee shall not have so acknowledged its obligation to the Indemnified Person
pursuant to this Section 7.2. Lessee may in any event participate in all such
proceedings at its own cost. Nothing contained in this Section 7.2(f) shall be
deemed to require an Indemnified Person to contest any Claim or to assume
responsibility for or control of any judicial proceeding with respect thereto.
(g) Subrogation. If a Claim indemnified by the Lessee under this
-----------
Section 7.2 is paid in full by the Lessee and/or an insurer under a policy of
insurance maintained by the Lessee, the Lessee and/or such insurer, as the case
may be, shall be subrogated to the extent of such payment to the rights and
remedies of the Indemnified Person (other than under insurance policies
maintained by such Indemnified Person) on whose behalf such Claim was paid with
respect to the transaction or event giving rise to such Claim. So long as no
Lease Event of Default or event referred to in clause (5) of Section 7.2(f)
hereof shall have occurred and be
57
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[Participation Agreement (GARC II 98-A)]
continuing, should an Indemnified Person receive any refund, in whole or in
part, with respect to any Claim paid by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not in excess of the amount the Lessee or any
of its insurers has paid) to the Lessee.
Section 7.3. Indemnification by Lessee Parent. (a) Claims Indemnified.
-------------------------------- ------------------
Whether or not any Unit is accepted under the Lease, or the Closing occurs, and
subject to the exclusions stated in paragraph (b) below, Lessee Parent agrees to
indemnify, protect, defend and hold harmless each Indemnified Person on an
After-Tax Basis against Claims directly or indirectly resulting from or arising
out of or alleged to result from or arise out of (whether or not such
Indemnified Person shall be indemnified as to such Claim by any other Person):
(i) any breach of or any inaccuracy in any representation or
warranty made by Lessee Parent in this Agreement or any of the other
Operative Agreements or in any certificate delivered pursuant hereto or
thereto;
(ii) any breach of or failure by the Lessee Parent to perform
any covenant or obligation of the Lessee Parent set out in or contemplated
by this Agreement or any of the other Operative Agreements;
(iii) the offer, sale or delivery of any Equipment Note or Pass
Through Certificate or any interest in the Trust Estate;
(iv) any violation of law, rule, regulation or order by the
Lessee Parent or its directors, officers, employees, agents or servants;
and
(v) any sale, transfer or holding of the Equipment Notes or
Pass Through Certificates being deemed to result in a "prohibited
transaction" under ERISA.
(b) Claims Excluded. The following are excluded from the Lessee Parent's
---------------
agreement to indemnify under this Section 7.3:
(i) with respect to any particular Indemnified Person,
Claims to the extent resulting from (x) the gross negligence or willful
misconduct of such Indemnified Person, or (y) any breach of any covenant to
be performed by such Indemnified Person under any of the Operative
Agreements, or the falsity of any representation or warranty of such
Indemnified Person in any of the Operative Agreements or in a document or
certificate delivered in connection therewith;
(ii) any Claim to the extent attributable to any transfer by
the Lessor of the Equipment or any portion thereof or any transfer by the
Owner Participant of all or any portion of its interest in the Trust Estate
other than (A) any transfer after a
58
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[Participation Agreement (GARC II 98-A)]
Lease Event of Default, (B) the transfer of all or any portion of the
Equipment or any Owner Participant's interest in the Equipment to the
Lessee, (C) the transfer of all or any portion of the Equipment to a third
party pursuant to Lessee's election to terminate the Lease or (D) any
transfer of all or any portion of the Equipment pursuant to Section 6.9;
(iii) with respect to any particular Indemnified Person, any
Claim resulting from the imposition of any Lessor's Lien attributable to
such Indemnified Person; or
(iv) with respect to any particular Indemnified Person, any
Claim, to the extent the risk thereof has been expressly assumed by such
Indemnified Person in connection with the exercise by such Indemnified
Person of the right of inspection granted under Section 6.2 of the Lease,
inspection or restenciling under Section 6.1(c) of the Lease or inspection
under Section 13.2 of the Lease.
(c) Claims Procedure. An Indemnified Person shall, after obtaining
----------------
knowledge thereof, promptly notify the Lessee Parent of any Claim as to which
indemnification is sought; provided, however, that the failure to give such
notice shall not release the Lessee Parent from any of its obligations under
this Section 7.3, except (but only if the Lessee Parent shall not have actual
knowledge of such Claim) to the extent that failure to give notice of any
action, suit or proceeding against such Indemnified Person shall have a material
adverse effect on Lessee Parent's ability to defend such Claim or recover
proceeds under any insurance policies maintained by the Lessee Parent. The
Lessee Parent shall, after obtaining knowledge thereof, promptly notify each
Indemnified Person of any indemnified Claim affecting such Indemnified Person.
Subject to the provisions of the following paragraph, the Lessee Parent shall at
its sole cost and expense be entitled to control, and shall assume full
responsibility for, the defense of such claim or liability; provided that the
Lessee Parent shall confirm to such Indemnified Person Lessee Parent's
obligations to indemnify hereunder for such Claim, shall keep the Indemnified
Person which is the subject of such proceeding fully apprised of the status of
such proceeding and shall provide such Indemnified Person with all information
with respect to such proceeding as such Indemnified Person shall reasonably
request.
Notwithstanding any of the foregoing to the contrary, the Lessee
Parent shall not be entitled to control and assume responsibility for the
defense of any Claim if (1) a Lease Event of Default shall have occurred and be
continuing, (2) such proceeding will involve any material danger of the sale,
forfeiture or loss of, or the creation of any Lien (other than any Lien
permitted under the Operative Agreements or a Lien which is adequately bonded to
the satisfaction of such Indemnified Person) on, any Unit, (3) in the good
faith opinion of such Indemnified Person, there exists an actual or potential
conflict of interest such that it is advisable for such Indemnified Person to
retain control of such proceeding, (4) such Claim involves the
59
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[Participation Agreement (GARC II 98-A)]
possibility of criminal sanctions or liability to such Indemnified Person or (5)
an event referred to in clause (5) of Section 7.2(f) hereof shall have occurred
and is continuing. In the circumstances described in clauses (1) - (5), the
Indemnified Person shall be entitled to control and assume responsibility for
the defense of such claim or liability at the expense of the Lessee Parent. In
addition, any Indemnified Person may participate in any proceeding controlled by
the Lessee Parent pursuant to this Section 7.3, at its own expense, in respect
of any such proceeding as to which the Lessee Parent shall have acknowledged in
writing its obligation to indemnify the Indemnified Person pursuant to this
Section 7.3, and at the expense of the Lessee Parent in respect of any such
proceeding as to which the Lessee Parent shall not have so acknowledged its
obligation to the Indemnified Person pursuant to this Section 7.3. Lessee Parent
may in any event participate in all such proceedings at its own cost. Nothing
contained in this Section 7.3(d) shall be deemed to require an Indemnified
Person to contest any Claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
(d) Subrogation. If a Claim indemnified by the Lessee Parent under
-----------
this Section 7.3 is paid in full by or on behalf of the Lessee Parent, the
Lessee Parent or its designee, shall be subrogated to the extent of such payment
to the rights and remedies of the Indemnified Person (other than under insurance
policies maintained by such Indemnified Person) on whose behalf such Claim was
paid with respect to the transaction or event giving rise to such Claim. So
long as no Lease Event of Default or event referred to in clause (5) of Section
7.2(f) hereof shall have occurred and be continuing, should an Indemnified
Person receive any refund, in whole or in part, with respect to any Claim paid
by the Lessee Parent hereunder, it shall promptly pay over the amount refunded
(but not in excess of the amount the Lessee Parent has paid) to the Lessee
Parent.
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT.
Each party to this Agreement acknowledges notice of, and consents in all
respects to, the terms of the Lease, and expressly, severally and as to its own
actions only, agrees that, so long as no Lease Event of Default has occurred and
is continuing, it shall not take or cause to be taken any action contrary to the
Lessee's rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by the Lessee or any Sublessee of the
Equipment.
SECTION 9. SUCCESSOR INDENTURE TRUSTEE.
In the event that the Indenture Trustee gives notice of its resignation
pursuant to Section 8.2 of the Indenture, the Owner Trustee shall promptly
appoint a successor Indenture Trustee reasonably acceptable to the Lessee and
the Pass Through Trustee.
SECTION 10. MISCELLANEOUS.
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[Participation Agreement (GARC II 98-A)]
Section 10.1. Consents. Each Participant covenants and agrees (subject, in
--------
the case of the Loan Participant, to all of the terms and provisions of the
Trust Indenture) that it shall not unreasonably withhold its consent to any
consent requested of the Owner Trustee or the Indenture Trustee, as the case may
be, under the terms of the Operative Agreements that by its terms is not to be
unreasonably withheld by the Owner Trustee or the Indenture Trustee.
Section 10.2. Refinancing. So long as no Lease Event of Default shall have
-----------
occurred and be continuing, the Lessee shall have the right, at any time
following the fifth anniversary of the Closing Date, to request the Owner
Participant and the Owner Trustee to effect an optional prepayment of all, but
not less than all, of the Equipment Notes pursuant to Section 2.10(d) of the
Indenture as part of a refunding or refinancing operation, provided that the
Lessee shall obtain the prior consent of the Owner Participant to be granted in
the sole discretion of the Owner Participant if such refinancing imposes any
increased risk or liability on or otherwise adversely affects, the Owner
Participant; provided further, that the Owner Participant shall not withhold
such consent if in its sole judgment (i) any increased risk, or liability is
both remote and not material, (ii) Lessee Parent is at the time at least as
creditworthy as on the Funding Date and (ii) Lessee Parent provides an
indemnity, in form and substance satisfactory to the Owner Participant, for such
increased risk or liability. As soon as practicable after receipt of such
request and consent, if required, the Owner Participant and the Lessee will
enter into an agreement, in form and substance reasonably satisfactory to the
parties thereto, as to the terms of such refunding or refinancing as follows:
(a) the Lessee, the Owner Participant, the Indenture Trustee, the
Owner Trustee, and any other appropriate parties will enter into a financing or
loan agreement (which may involve an underwriting agreement in connection with a
public offering), in form and substance reasonably satisfactory to the parties
thereto, providing for (i) the issuance and sale by the Owner Trustee or such
other party as may be appropriate on the date specified in such agreement (for
the purposes of this Section 10.2, the "Refunding Date") of debt securities in
an aggregate principal amount (in the lawful currency of the United States)
equal to the principal amount of the Equipment Notes outstanding on the
Refunding Date, having the same maturity date as said Equipment Notes and having
a weighted average life which is not less than or greater than (in either case,
by more than three months) the Remaining Weighted Average Life of said Equipment
Notes, (ii) the application of the proceeds of the sale of such debt securities
to the prepayment of all such Equipment Notes on the Refunding Date, and (iii)
payment by Lessee to the Person or Persons entitled thereto of all other
amounts, in respect of accrued interest, any Make Whole Amount or other premium,
if any, payable on such Refunding Date;
(b) the Lessee and the Owner Trustee will amend the Lease in a manner
such that (i) if the Refunding Date is not a Rent Payment Date and the accrued
and unpaid interest on the Equipment Notes is not otherwise paid pursuant to
Section 10.2(a), the Lessee shall on the Refunding Date prepay that portion of
the next succeeding installment of Basic Rent
61
<PAGE>
[Participation Agreement (GARC II 98-A)]
as shall equal the aggregate interest accrued on the Equipment Notes outstanding
to the Refunding Date, (ii) Basic Rent payable in respect of the period from and
after the Refunding Date shall be recalculated to preserve the Net Economic
Return which the Owner Participant would have realized had such refunding not
occurred, provided that the net present value of Basic Rent shall be minimized
to the extent consistent therewith, and (iii) amounts payable in respect of
Stipulated Loss Value, Early Purchase Price, Termination Value and Basic Term
Purchase Price from and after the Refunding Date shall be appropriately
recalculated to preserve the Net Economic Return which the Owner Participant
would have realized had such refunding not occurred (it being agreed that any
recalculations pursuant to subclauses (ii) and (iii) of this clause (b) shall be
performed in accordance with the requirements of Section 2.6 hereof);
(c) the Owner Trustee will enter into an agreement to provide for the
securing thereunder of the debt securities issued by the Owner Trustee pursuant
to clause (a) of this Section 10.2 in like manner as the Equipment Notes and/or
will enter into such amendments and supplements to the Indenture as may be
necessary to effect such refunding or refinancing, which agreements, amendments
and/or supplements shall be reasonably satisfactory in form and substance to the
Owner Participant; provided that, no such agreement or amendment shall provide
for any increase in the security for the new debt securities; and provided
further that, notwithstanding the foregoing (but subject to the provisions of
clauses (a) and (b) and the lead in paragraph of this Section 10.2 above), the
Lessee reserves the right to set the economic terms and other terms not
customarily negotiated between an owner participant and a lender of the
refunding or refinancing transaction except to the extent adversely affecting
cash flow, coverage ratios and reserve accounts as to the Owner Participant to
be so offered to the extent that they are passed through to the Lessee in, or
define rights or obligations of the Lessee under, the Operative Agreements;
provided, further, that no such amendment or supplement will in the sole
judgment of the Owner Participant increase its obligations or impair its rights
under the Operative Agreements or otherwise adversely affect it without the
consent of the Owner Participant;
(d) (i) in the case of a refunding or refinancing involving a public
offering of debt securities, neither the Owner Trustee nor the Owner Participant
shall be an "issuer" for securities law purposes or an "obligor" within the
meaning of the Trust Indenture Act of 1939, as amended, the offering materials
(including any registration statement) for the refunding or refinancing
transaction shall be reasonably satisfactory to the Owner Participant and (ii)
the Lessee and Lessee Parent shall provide satisfactory indemnity to the Owner
Trustee and Owner Participant with respect to the refunding or refinancing;
(e) unless otherwise agreed by the Owner Participant, the Lessee
shall pay to the Owner Trustee as Supplemental Rent an amount, on an After-Tax
Basis, equal to any Make-Whole Amount, Late Payment Premium, if any, payable in
respect of Equipment Notes outstanding on the Refunding Date, all interest which
is accrued and unpaid in respect of late payments of Basic Rent or any part
thereof, all reasonable fees, costs, expenses of such refunding
62
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[Participation Agreement (GARC II 98-A)]
or refinancing and of the parties hereto incurred in connection with such
refunding or refinancing (including all reasonable out-of-pocket legal fees and
expenses and the reasonable fees of any financial advisors);
(f) the Lessee shall give the Indenture Trustee and the Owner
Participant not less than 25 days prior written notice of the Refunding Date;
(g) the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee shall have received (i) such opinions of counsel as
they may reasonably request concerning compliance with the Securities Act of
1933, as amended, and any other applicable law relating to the sale of
securities and (ii) such other opinions of counsel and such certificates and
other documents, each in form and substance reasonably satisfactory to them, as
they may reasonably request in connection with compliance with the terms and
conditions of this Section 10.2; and
(h) all necessary authorizations, approvals and consents shall have
been obtained and shall be in full force and effect.
The Lessee shall pay to or reimburse the Participants, the Owner Trustee and the
Indenture Trustee for all costs and expenses (including reasonable attorneys'
and accountants' fees) paid or incurred by them in connection with such
refunding or refinancing.
Section 10.3. Amendments and Waivers. Except as otherwise provided in the
----------------------
Indenture, no term, covenant, agreement or condition of this Agreement may be
terminated, amended or compliance therewith waived (either generally or in a
particular instance, retroactively or prospectively) except by an instrument or
instruments in writing executed by each party against which enforcement of the
termination, amendment or waiver is sought.
Section 10.4. Notices. Unless otherwise expressly specified or permitted
-------
by the terms hereof, all communications and notices provided for herein shall be
in writing or by facsimile, and any such notice shall become effective (i) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (ii) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(iii) in the case of notice by facsimile, upon confirmation of receipt thereof,
provided such transmission is promptly further confirmed by any of the methods
set forth in clauses (i) or (ii) above, in each case addressed to each party
hereto at its address set forth below or, in the case of any such party hereto,
at such other address as such party may from time to time designate by written
notice to the other parties hereto:
63
<PAGE>
[Participation Agreement (GARC II 98-A)]
If to Lessee Parent or the Manager:
General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
Re: GARC II 98-A
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
Re: GARC II 98-A
Facsimile No.: (312) 621-6270
Confirmation No.: (312) 621-6451
If to the Owner Trustee:
GARC II 98-A Railcar Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Facsimile No.: (302) 651-8882
Confirmation No.: (302) 651-1000
with a copy to:
the Owner Participant at the
address set forth below
64
<PAGE>
[Participation Agreement (GARC II 98-A)]
If to the Owner Participant:
[[Owner Participant]
____________________
____________________
Attention: ___________________
Facsimile No.: _____________
Confirmation No.: _____________]
If to the Indenture Trustee:
State Street Bank and Trust Company
Two International Place,
Boston, MA 02110
Attention: Corporate Trust Services Division
Facsimile No.: (617) 644-xxxx
Confirmation No.: (617) 664-xxxx
If to the Pass Through Trustee:
State Street Bank and Trust Company
Two International Place,
Boston, MA 02110
Attention: Corporate Trust Services Division
Facsimile No.: (617) 644-xxxx
Confirmation No.: (617) 664-xxxx
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
65
<PAGE>
[Participation Agreement (GARC II 98-A)]
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.
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.
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[Participation Agreement (GARC II 98-A)]
Section 10.8. Business Day. Notwithstanding anything herein or in any
------------
other Operative Agreement to the contrary, if the date on which any payment is
to be made pursuant to this Agreement or any other Operative Agreement is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
succeeding Business Day and (provided such payment is made on such succeeding
Business Day) no interest shall accrue on the amount of such payment from and
after such scheduled date to the time of such payment on such next succeeding
Business Day.
SECTION 10.9. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 10.10. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each executed counterpart constituting an original but all
together only one Agreement.
Section 10.12. Headings and Table of Contents. The headings of the
------------------------------
Sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 10.13. Limitations of Liability.
------------------------
(a) Liabilities of Participants. Neither the Indenture Trustee, the
---------------------------
Owner Trustee nor any Participant shall have any obligation or duty to the
Lessee, to Lessee Parent, to any other Participant or to others with respect to
the transactions contemplated hereby, except those obligations or duties of such
Participant expressly set forth in this Agreement and the other Operative
Agreements, and neither the Indenture Trustee nor any Participant shall be
liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall the Indenture Trustee or any
Participant be liable to the Lessee or Lessee Parent for any action or inaction
on the part of the Owner Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by willful
misconduct or gross negligence of the Owner Trustee, unless such action or
inaction is at the direction of the Indenture Trustee or any Participant, as the
case may be, and such direction is expressly prohibited hereby.
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[Participation Agreement (GARC II 98-A)]
(b) No Recourse to the Owner Trustee. It is expressly understood and
--------------------------------
agreed by and between WTC, the Owner Trustee, the Lessee, the Owner Participant,
the Indenture Trustee, and the Loan Participant, and their respective successors
and permitted assigns that, subject to the proviso contained in this Section
10.13(b), all representations, warranties and undertakings of the Owner Trustee
hereunder shall be binding upon the Owner Trustee only in its capacity as Owner
Trustee under the Trust Agreement, and (except as expressly provided herein) WTC
shall not be liable for any breach thereof, except for its gross negligence or
willful misconduct, or for breach of its covenants, representations and
warranties contained herein, except to the extent covenanted or made in its
individual capacity; provided, however, that nothing in this Section 10.13(b)
shall be construed to limit in scope or substance those representations and
warranties of WTC made expressly in its individual capacity set forth herein.
The term "Owner Trustee" as used in this Agreement shall include any successor
trustee under the Trust Agreement, or the Owner Participant if the trust created
thereby is revoked.
(c) Loan Participant's Source of Funds. It is expressly understood
----------------------------------
and agreed by and between the Owner Trustee, the Lessee, the Owner Participant,
the Indenture Trustee, and the Loan Participant, and their respective successors
and permitted assigns that, subject to the proviso contained in this Section
10.13(c), the undertakings of the Loan Participant hereunder are limited to the
application of the proceeds of the sale of the Pass Through Certificates to the
purchase by the Pass Through Trustee of the Equipment Notes; provided, however,
that nothing in this Section 10.13(c) shall be construed to limit in scope or
substance those representations and warranties of the Loan Participant made
expressly in its individual capacity set forth herein.
Section 10.14. Maintenance of Non-Recourse Debt. The parties hereto agree
--------------------------------
that if the Owner Trustee becomes a debtor subject to the reorganization
provisions of the Bankruptcy Code, 11 U.S.C. (S)101 et seq. (the "Bankruptcy
Code") or any successor provision, the parties hereto will make an election
under 1111(b)(1)(A)(i) of the Bankruptcy Code. If (a) the Owner Trustee becomes
a debtor subject to the reorganization provisions of the Bankruptcy Code or any
successor provision, (b) pursuant to such reorganization provisions the Owner
Trustee is required, by reason of the Owner Trustee being held to have recourse
liability to the Pass Through Trustee or the Indenture Trustee, directly or
indirectly, to make payment on account of any amount payable under the Equipment
Notes or any of the other Operative Agreements and (c) the Pass Through Trustee
and/or the Indenture Trustee actually receives any Excess Amount (as hereinafter
defined) which reflects any payment by the Owner Trustee on account of (b)
above, then the Pass Through Trustee and/or the Indenture Trustee, as the case
may be, shall promptly refund to the Owner Trustee such Excess Amount. For
purposes of this Section 10.14, "Excess Amount" means the amount by which such
payment exceeds the amount which would have been received by the Pass Through
Trustee or the Indenture Trustee if the Owner Trustee had not become subject to
the recourse liability referred to in (b) above.
68
<PAGE>
[Participation Agreement (GARC II 98-A)]
Section 10.15. Ownership of and Rights in Units. The sale of the Units
--------------------------------
contemplated hereby is intended for all purposes to be a true sale of all of the
Lessee's right, title and interest in and to the Units to the Owner Trustee,
which shall be the legal owner thereof. Upon consummation of the sale and
leaseback transactions contemplated hereby, the Lessee's interest in the Units
is intended to be that of a lessee only. It is intended that for federal and
state income tax purposes the Owner Participant will be the owner of the Units.
The rights of the Indenture Trustee in and to the Units pursuant to the
Indenture is intended to be that of a secured party holding a security interest,
subject to the Lease and the rights of the Lessee thereunder. No holder of an
Equipment Note is intended to have any right, title or interest in or to the
Units except as a beneficiary of the Lien granted by the Owner Trustee to the
Indenture Trustee pursuant to the Indenture in trust for the equal and ratable
benefit of the holders from time to time of the Equipment Notes.
Section 10.16. No Petition. Each party hereto agrees that, prior to the
-----------
date which is one year and one day after payment in full of all outstanding
Equipment Notes and all obligations of the Lessee under the Operative Agreements
and release of all Collateral held under the Intercreditor Agreement (i) no
party hereto shall authorize the Lessee to commence a voluntary winding-up or
other voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to the Lessee or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect in any jurisdiction
or seeking the appointment of an administrator, a trustee, receiver, liquidator,
custodian or other similar official of the Lessee or any substantial part of its
property or to consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against the Lessee, or to make a general assignment for the benefit of
any party hereto or any other creditor of the Lessee, and (ii) none of the
parties hereto shall commence or join with any other Person in commencing any
proceeding against the Lessee under any bankruptcy, reorganization, liquidation
or insolvency law or statute now or hereafter in effect in any jurisdiction.
Each of the parties hereto agrees that, prior to the date which is one year and
one day after the payment in full of all outstanding Equipment Notes and all
obligations of the Lessee under the Operative Agreements and release of all
Collateral held under the Intercreditor Agreement, it will not institute
against, or join any other Person in instituting against, Lessee an action in
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or similar proceeding under the laws of the United States or any state of the
United States.
Section 10.17. Consent To Jurisdiction. Each of the parties hereto hereby
-----------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other Operative
Agreement or for recognition and enforcement of any judgment in respect
hereof or thereof, to the
69
<PAGE>
[Participation Agreement (GARC II 98-A)]
nonexclusive general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and the appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form and mail), postage
prepaid, to each party hereto at its address set forth in Section 10.4
hereof, or at such other address of which the other parties shall have been
notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to 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.
Section 10.19. Lessee Parent Status. Notwithstanding anything herein or in
--------------------
any other Operative Agreement to the contrary, any representation, warranty,
covenant, agreement or obligation of the "Lessee Parent", the "Manager", the
"Insurance Manager" or the "Administrator" shall, so long as the same entity
shall hold all such positions, shall be the representations, warranties,
covenants and agreements of such entity as if all made in the name of such
entity without distinction.
* * *
70
<PAGE>
[Participation Agreement (GARC II 98-A)]
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered, all as of the date first above written.
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:__________________________________
Name:________________________________
Title:_______________________________
Manager:
GENERAL AMERICAN TRANSPORTATION
CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
Owner Trustee:
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company, not
in its individual capacity except as
expressly provided herein but solely
as Owner Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
71
<PAGE>
[Participation Agreement (GARC II 98-A)]
Owner Participant:
[OWNER PARTICIPANT]
By:__________________________________
Name:________________________________
Title:_______________________________
Indenture Trustee:
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity
except as expressly provided herein but
solely as Indenture Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
72
<PAGE>
[Participation Agreement (GARC II 98-A)]
Pass Through Trustee:
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity
except as expressly provided herein but
solely as Pass Through Trustee
By:___________________________________________
Name:_________________________________________
Title:________________________________________
73
<PAGE>
EXHIBIT A-1
Form of
Certificate of Insurance Broker Confirming Insurance Coverage
(Primary Liability)
State Street Bank and Trust Company, individually and as Pass Through Trustee
State Street Bank and Trust Company, individually and as Indenture Trustee
GARC II 98-A Railcar Trust, by Wilmington Trust Company,
individually and as Owner Trustee
[Owner Participant], as Owner Participant
Re: Trust GARC II 98-A
Gentlemen:
Reference is hereby made to the Equipment Lease Agreement (GARC II 98-A)
dated as of September 1, 1998 (the "Lease") between the Owner Trustee referred
to above and General American Railcar Corporation II and the Equipment
thereunder. Attached hereto as Exhibit A is a certificate with respect to
certain insurance maintained by the Lessee on the Equipment which is or will
become effective as of any item thereof upon the acceptance by the Lessee
pursuant to the Lease. Such insurance (i) complies with the requirements
contained in Section 12 of the Lease and Exhibit B hereto except as noted below
and (ii) is in full force and effect as of the date hereof and all premiums due
and payable with respect thereto have been paid in full.
Capitalized terms not otherwise defined herein or in the exhibits attached
hereto have the meaning assigned thereto in the Lease.
We hereby agree that, with respect to any policy of insurance maintained
pursuant to Section 12.1 of the Lease, we will provide not less than 30 days'
prior written notice to Lessor, the Indenture Trustee, Loan Participant and
Owner Participant of any non-renewal or material adverse change with respect to
such policy. For purposes of this paragraph, "material adverse change" shall
mean a material adverse change in policy limits, exclusions or deductibles or
any material adverse change in policy coverages inconsistent with the
requirements of Section 12.1(b) of the Lease.
A1-1
<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)
State Street Bank and Trust Company, individually and as Pass Through Trustee
State Street Bank and Trust Company, individually and as Indenture Trustee
GARC II 98-A Railcar Trust, by Wilmington Trust Company, individually and as
Owner Trustee
[Owner Participant], as Owner Participant
Re: Trust GARC II 98-A
Gentlemen:
Reference is hereby made to the Equipment Lease Agreement (GARC II 98-A)
dated as of September 1, 1998 (the "Lease") between the Owner Trustee referred
to above and General American Railcar Corporation II. We hereby certify that the
Lessee is insured under various policies, effective (_______________), that
provide excess public liability coverage for personal injury and property
damage, subject to the policy terms, conditions and exclusions. We further
certify that said policies:
a. afford limits of liability as indicated on the attached Exhibit A,
---------
excess of various underlying insurances or retained amounts and subject to
aggregates where applicable;
b. are in full force and effect and all premiums due with respect to said
policies have been paid in full; and
c. comply with the requirements contained in Section 12 of the Lease and
all of the requirements listed on the attached Exhibit B.
---------
We hereby agree on each of the dates specified in Section 12.1 of the
Lease to issue a certificate (1) describing in reasonable detail the insurance
carried by the Lessee relating to the Equipment and (2) confirming that all
premiums due thereon have been paid.
We hereby agree that, with respect to any policy of insurance maintained
pursuant to Section 12.1 of the Lease, we will provide not less than 30 days'
prior written notice to Lessor, the Indenture Trustee, Loan Participant and
Owner Participant of any non-renewal or material adverse change with respect to
such policy. For purposes of this paragraph, "material adverse
A2-2
<PAGE>
change" shall mean a material adverse change in policy limits, exclusions or
deductibles or any material adverse change in policy coverages inconsistent with
the requirements of Section 12.1(b) of the Lease.
Capitalized terms not otherwise defined herein or in the exhibits attached
hereto have the meaning assigned thereto in the Lease.
A2-3
<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 $1,000,000
Policy #XX XXX XXX Each Claim in turn Excess of
$3,500,000 Each Claim/$9,000,000
aggregate as applicable]
A2A-2
<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
$100,000,000 per occurrence or in the aggregate, and provide coverage excess of
$[3,500,000] per occurrence (and $[9,000,000] in the aggregate) primary general
liability.
3. The policies:
(i) provide that if any such insurance is canceled or terminated
(other than for normal expiration) for any reason whatever, the Lessor,
Indenture Trustee and Owner Participant shall receive 30 days' prior notice of
such cancellation or termination,
(ii) name the Owner Participant, Lessor, Wilmington Trust Company,
the Indenture Trustee and the Loan Participant as additional insured as their
interests may appear (but only as respects liability arising out of the
Operative Agreements or the Equipment),
(iii) provide that inasmuch as such public liability insurance
policies cover more than one insured, all terms, conditions, insuring agreements
and endorsements, with the exceptions of limits of liability deductibles or
retentions and liability for premiums, commissions, assessments or calls,
operate in the same manner as if there were a separate policy or policies
covering each insured,
(iv) waive rights of subrogation against the Owner Participant,
Lessor, Wilmington Trust Company and the Indenture Trustee,
(v) provide that neither the Owner Participant, Lessor, Wilmington
Trust Company nor the Indenture Trustee shall have any liability or obligation
for insurance premiums whether for coverage before or after cancellation or
termination of any such policies,
(vi) shall be primary without contribution from any similar
insurance maintained by Owner Participant, Lessor, Wilmington Trust Company,
Indenture Trustee or Loan Participant.
B-1
<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>
EXHIBIT C
Form of Transfer Agreement
[To Come]
C-1
<PAGE>
EXHIBIT D
Form of Notice of Assignment of
Existing Car Service Contract
[To Come]
D-1
<PAGE>
EXHIBIT E
[Equity Information]
[To Come]
E-1
<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:
State Street Bank and Trust Company
ABA No. ______________
Credit: _____________ Corporate Trust Administration
Attention: ______________
Reference: GARC II 98-A
Account # ___________
2. The percentage representing the Owner Participant's Commitment is
_____________%. All payments to ___________________, as Owner Participant
should be made by wire transfer of immediately available funds to:
_____________________
ABA No. _____________
Account # ___________________
<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.
Basic Term Purchase Price: _____________________________
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
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 on behalf of
General American Railcar Corporation II 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.
/s/ Peter H. Sorensen
-----------------------------------------
Peter H. Sorensen
Director
General American Railcar Corporation II
/s/ Frank B. Bilotta
-----------------------------------------
Frank B. Bilotta
Director
General American Railcar Corporation II
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
</TABLE>
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
GENERAL AMERICAN RAILCAR CORPORATION II
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-4247116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
500 West Monroe Street
Chicago, IL 60661-3676
(Address of principal executive offices) (Zip Code)
Pass Through Certificates, Series 1998 - 1
Equipment Notes, 98-A, 98-B and 98-C
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No. 22-
17940) and is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 18th of September, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Alison Della Bella
------------------------------
Alison Della Bella
Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by General
American Railcar Corporation II of its Pass Through Certificates, Series 1998-1,
and the related issuance of Equipment Notes, Series 98-A, 98-B and 98-C, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Alison Della Bella
-------------------------------------
Alison Della Bella
Assistant Vice President
Dated: September 18, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business June 30, 1998, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...................................................... 1,553,703
Interest-bearing balances............................................................................... 12,440,716
Securities................................................................................................... 9,436,138
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary..................................................................... 8,785,353
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 6,633,608
Allowance for loan and lease losses.................. 92,999
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances................................................. 6,540,609
Assets held in trading accounts.............................................................................. 1,267,679
Premises and fixed assets.................................................................................... 491,928
Other real estate owned...................................................................................... 100
Investments in unconsolidated subsidiaries................................................................... 1,278
Customers' liability to this bank on acceptances outstanding................................................. 68,312
Intangible assets............................................................................................ 231,294
Other assets................................................................................................. 1,667,282
----------
Total assets................................................................................................. 42,484,392
==========
LIABILITIES
Deposits:
In domestic offices..................................................................................... 12,553,371
Noninterest-bearing .............................. 10,204,405
Interest-bearing.................................. 2,348,966
In foreign offices and Edge subsidiary.................................................................. 16,961,571
Noninterest-bearing............................... 154,792
Interest-bearing.................................. 16,806,779
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary..................................................................... 8,182,794
Demand notes issued to the U.S. Treasury and Trading Liabilities............................................. 0
Trading liabilities.......................................................................................... 883,096
Other borrowed money......................................................................................... 361,141
Subordinated notes and debentures............................................................................ 0
Bank's liability on acceptances executed and outstanding..................................................... 68,289
Other liabilities............................................................................................ 1,017,284
Total liabilities............................................................................................ 40,027,546
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................................ 0
Common stock................................................................................................. 29,931
Surplus...................................................................................................... 455,288
Undivided profits and capital reserves/Net unrealized holding gains (losses)................................. 1,964,924
Net unrealized holding gains (losses) on available-for-sale securities....................................... 15,557
Cumulative foreign currency translation adjustments.......................................................... (8,854)
Total equity capital......................................................................................... 2,456,846
----------
Total liabilities and equity capital......................................................................... 42,484,392
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
