<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 7, 1995)
$106,835,000 [LOGO]
()General American Transportation Corporation
1996-1 Pass Through Trusts
PASS THROUGH CERTIFICATES, SERIES 1996-1
------------------------
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in one of the two General American Transportation Corporation
1996-1 Pass Through Trusts (the "Pass Through Trusts") to be formed pursuant to
a pass through trust agreement and two separate trust supplements between
General American Transportation Corporation ("GATC" or the "Company") and The
First National Bank of Chicago (the "Pass Through Trustee"), as trustee under
each Pass Through Trust. The property of the Pass Through Trusts will consist of
equipment notes (the "Equipment Notes") issued on a nonrecourse basis by certain
trustees of separate owner trusts (each an "Owner Trustee") pursuant to two
separate leveraged lease transactions to finance not more than 80% of the
equipment cost of certain railroad tank cars and covered hopper cars (each
railcar an "Equipment Unit" or "Unit" and, collectively, the "Equipment") which
will be leased to the Company. Although neither the Pass Through Certificates
nor the Equipment Notes are direct obligations of, or guaranteed by, GATC, the
amounts unconditionally payable by GATC for the lease of the Equipment will be
at least sufficient to pay in full when due all payments of principal of,
premium, if any, and interest on the Equipment Notes held in the Pass Through
Trusts.
The Equipment Notes in respect of each leveraged lease transaction will be
issued in two series. Each Pass Through Trust will purchase one series of the
Equipment Notes issued with respect to each of the two leveraged lease
transactions such that all of the Equipment Notes held in each Pass Through
Trust will have an interest rate corresponding to the interest rate applicable
to such Pass Through Trust. The Equipment Notes acquired by each Pass Through
Trust will mature on or before the final distribution date of the Pass Through
Certificates issued by such Pass Through Trust. Each Equipment Note will be
issued under one of two indentures and will be secured by a security interest in
the Equipment leased by the Company under the lease relating to such indenture
and by an assignment of certain of the Owner Trustee's rights under such lease,
including the right to receive rentals payable by the Company in respect of such
Equipment pursuant to such lease.
Interest paid on the Equipment Notes held in each Pass Through Trust will be
passed through to the Certificateholders of such Pass Through Trust on February
28 and August 28 of each year, commencing February 28, 1997, at the rate per
annum set forth below for such Pass Through Trust until the final distribution
date for such Pass Through Trust. Principal payments on the Equipment Notes held
in each Pass Through Trust will be passed through to the Certificateholders of
each such Pass Through Trust in scheduled amounts on February 28 or August 28,
or both, of each year, commencing on the initial scheduled principal
distribution date for such Pass Through Trust, and continuing until the final
distribution date for such Pass Through Trust. The Equipment Notes may be
prepaid under certain circumstances.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PASS THROUGH PRINCIPAL INTEREST INITIAL SCHEDULED FINAL PRICE TO
CERTIFICATES AMOUNT RATE PRINCIPAL DISTRIBUTION DATE DISTRIBUTION DATE PUBLIC (1)(2)
- ------------------ ----------- -------- --------------------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Series 1996-1A.... $77,257,000 7.50% February 28, 1997 February 28, 2015 100%
Series 1996-1B.... 29,578,000 7.86 August 28, 2016 August 28, 2021 100
</TABLE>
- ------------
(1) Plus accrued interest, if any, at the applicable interest rate from August
28, 1996.
(2) The underwriting commission aggregates $747,845, which constitutes .70% of
the principal amount of the Pass Through Certificates. The underwriting
commissions, and certain other expenses estimated at $1,283,668, will be
payable by the Owner Trustees in the leveraged lease transactions (other
than certain expenses to be paid directly by GATC). The proceeds from the
sale of the Pass Through Certificates will be used to purchase the Equipment
Notes from the Owner Trustees.
------------------------
The Pass Through Certificates are offered by the Underwriters, subject to
prior sale, when, as and if
accepted by the Underwriters and subject to approval of certain legal matters by
Kirkland & Ellis, counsel for the Underwriters. It is expected that delivery of
the Pass Through Certificates in book-entry form will be made on or about August
28, 1996 through the facilities of The Depository Trust Company, against payment
therefor in immediately available funds.
------------------------
MORGAN STANLEY & CO. SALOMON BROTHERS INC
Incorporated
August 22, 1996
<PAGE> 2
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, 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. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SECURITIES OTHER THAN THE SECURITIES TO WHICH THEY RELATE OR AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Summary......................................................................... S-3
Diagram of Payments............................................................. S-10
Use of Proceeds................................................................. S-11
Capitalization.................................................................. S-12
Summary Financial Information................................................... S-13
Description of Business......................................................... S-14
Formation of the Pass Through Trusts............................................ S-19
Description of the Pass Through Certificates.................................... S-19
Description of the Equipment Notes.............................................. S-22
ERISA Considerations............................................................ S-35
Certain Tax Aspects............................................................. S-35
Underwriting.................................................................... S-36
Legal Opinions.................................................................. S-36
PROSPECTUS
Available Information........................................................... 2
Documents Incorporated by Reference............................................. 2
The Company..................................................................... 3
Formation of the Trusts......................................................... 4
Use of Proceeds................................................................. 4
Description of the Pass Through Certificates.................................... 5
Description of the Equipment Notes.............................................. 15
ERISA Considerations............................................................ 19
Federal Income Tax Consequences................................................. 19
Certain Illinois Taxes.......................................................... 22
Plan of Distribution............................................................ 22
Legal Opinions.................................................................. 23
Experts......................................................................... 23
Glossary of Certain Terms....................................................... Appendix I
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PASS THROUGH
CERTIFICATES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
S-2
<PAGE> 3
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the accompanying Prospectus.
THE COMPANY
General American Transportation Corporation ("GATC" or the "Company"), a
New York corporation, is principally engaged in railcar leasing and management.
GATC, through its wholly owned subsidiary GATX Terminals Corporation
("Terminals"), is also 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 OFFERING
Glossary...................... Included at the end of the accompanying
Prospectus as Appendix I is a Glossary of
certain of the significant defined terms used
herein and in the Prospectus.
Pass Through Trusts........... Each of the two General American Transportation
Corporation 1996-1 Pass Through Trusts (each a
"Pass Through Trust"; collectively, the "Pass
Through Trusts") is to be formed pursuant to
one of the two separate trust supplements
(each, a "Trust Supplement") to be entered into
pursuant to the Pass Through Trust Agreement
(the "Basic Agreement") between GATC and The
First National Bank of Chicago (the "Pass
Through Trustee"), as trustee under each Pass
Through Trust. Each Pass Through Trust will be
a separate entity.
Pass Through Trust Property... The property of each Pass Through Trust will
consist of equipment notes (the "Equipment
Notes") issued on a nonrecourse basis by the
two Owner Trustees pursuant to two separate
leveraged lease transactions to finance not
more than 80% of the equipment cost of certain
railroad tank cars and covered hopper cars
(each railcar an "Equipment Unit" or "Unit"
and, collectively, the "Equipment") which will
be leased to the Company. The Equipment
securing the Equipment Notes is described in
"Use of Proceeds" in this Prospectus
Supplement. The Equipment Notes will be issued
in two series with respect to each leveraged
lease transaction. The Pass Through
Certificates, Series 1996-1 (the "Pass Through
Certificates") that will be issued by each Pass
Through Trust will bear interest at the same
rate as the rate on the Equipment Notes
acquired by such Pass Through Trust. The final
maturity date of the Equipment Notes to be
acquired by each Pass Through Trust will occur
on or before the final distribution date of the
Pass Through Certificates issued by such Pass
Through Trust. The aggregate principal amount
of the Equipment Notes to be held in each Pass
Through Trust will be the same as the aggregate
principal amount of the Pass Through
Certificates issued by such Pass Through Trust.
Pass Through Certificates
Offered;
Book-Entry Registration..... Each Pass Through Certificate will represent a
fractional undivided interest in the related
Pass Through Trust. The Pass Through
Certificates will be issued in fully registered
form and will be
S-3
<PAGE> 4
registered in the name of Cede & Co. ("Cede"),
as the nominee of The Depository Trust Company
("DTC"). No person acquiring an interest in the
Pass Through Certificates will be entitled to
receive a definitive certificate (a "Definitive
Certificate") representing such person's
interest in the related Pass Through Trust,
unless Definitive Certificates are issued,
which only occur under limited circumstances.
See "Description of the Pass Through
Certificates -- General" and "-- Book-Entry
Registration" in the accompanying Prospectus.
Regular Distribution Dates.... February 28 and August 28.
Special Distribution Dates.... The 28th day of any month, except in the case of
a refinancing as to which the Special
Distribution Date may be any Business Day.
Record Dates.................. The fifteenth day preceding a Regular
Distribution Date or a Special Distribution
Date.
Initial Average Life Date..... The initial average life date of the Pass
Through Certificates issued by Pass Through
Trusts 1996-1A and 1996-1B are as follows:
<TABLE>
<CAPTION>
PASS THROUGH TRUST DATE
------------------------------------------ ---------------
<S> <C>
1996-1A August 28, 2008
1996-1B June 22, 2019
</TABLE>
Distributions................. Payments of interest on each of the Equipment
Notes held in each Pass Through Trust are
scheduled to be received by the Pass Through
Trustee on February 28 and August 28 of each
year, commencing February 28, 1997, and are to
be distributed to the Certificateholders of
such Pass Through Trust on such dates. Payments
of principal on the Equipment Notes held in
each Pass Through Trust are scheduled to be
received in specified amounts by the Pass
Through Trustee on February 28 or August 28, or
both, of each year, commencing February 28,
1997 in the case of the Series 1996-1A Pass
Through Certificates and August 28, 2016 in the
case of the Series 1996-1B Pass Through
Certificates, and are to be distributed to the
Certificateholders of such Pass Through Trust
on the corresponding Regular Distribution
Dates. Payments of principal of, Make-Whole
Amount, if any, and interest on each of the
Equipment Notes held in the related Pass
Through Trust resulting from prepayments
thereof, if any, will be distributed on a
Special Distribution Date after not less than
20 days' notice from the Pass Through Trustee
to the Certificateholders of such Pass Through
Trust. See "Description of the Pass Through
Certificates -- Payments and Distributions" in
this Prospectus Supplement. For a discussion of
distributions upon an Event of Default, see
"Description of the Pass Through
Certificates -- Events of Default and Certain
Rights Upon an Event of Default" in the
accompanying Prospectus.
In the event that on the date of issuance of the
Pass Through Certificates all the proceeds from
the sale of the Pass Through Certificates are
not used to purchase the Equipment Notes, the
Pass Through Trustee will hold such unused
proceeds in an escrow account. To the extent
that the Equipment Notes are not purchased by
the Pass Through Trustee on or prior to
September 12,
S-4
<PAGE> 5
1996, the unexpended proceeds, together with
interest thereon at the rate applicable to each
series of Pass Through Certificates, but
without premium, will be distributed to
Certificateholders as a Special Payment on
September 28, 1996. See "Description of the
Pass Through Certificates -- Delayed Purchase"
in the accompanying Prospectus.
Same-Day Settlement........... 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.
Method of Distributions....... So long as the Pass Through Certificates are
registered in the name of Cede, as nominee of
DTC, distributions by the Pass Through Trustee
will be made in same-day funds to DTC, which
will in turn make distributions to participants
in DTC ("DTC Participants") in same-day funds.
Responsibility for distributions by DTC
Participants to beneficial owners of the Pass
Through Certificates will be the responsibility
of such DTC Participants and will be made in
accordance with customary industry practices.
See "Description of the Pass Through
Certificates -- Book-Entry Registration" in the
accompanying Prospectus. At such time, if any,
as Definitive Certificates are issued
representing the Pass Through Certificates and
such Definitive Certificates are not registered
in the name of Cede, as nominee for DTC,
distributions by the Pass Through Trustee to
Certificateholders, other than the final
distribution, will be made by check mailed to
each Certificateholder of record on the
applicable record date at its address appearing
on the register maintained with respect to each
Pass Through Trust. The final distribution with
respect to the Pass Through Certificates will
be made only upon presentation and surrender
thereof at the office or agency of the Pass
Through Trustee. See "Description of the Pass
Through Certificates -- Payments and
Distributions" in the accompanying Prospectus.
Interest...................... Interest on each series of Pass Through
Certificates will be passed through to the
Certificateholders of such series at the rate
per annum indicated on the cover of this
Prospectus Supplement with respect to such
series, which is the interest rate borne by the
Equipment Notes to be held in the Pass Through
Trust issuing such series of Pass Through
Certificates. Interest is calculated on the
basis of a 360-day year of twelve 30-day
months. See "Description of the Pass Through
Certificates -- General" in the accompanying
Prospectus.
Principal..................... The principal of the Equipment Notes is payable
in scheduled amounts on February 28 or August
28, or both, of each year, commencing February
28, 1997 in the case of the Series 1996-1A Pass
Through Certificates and August 28, 2016 in the
case of the Series 1996-1B Pass Through
Certificates, and will be passed through to
Certificateholders on such dates. See
"Description of the Pass Through
Certificates -- Payments and Distributions" and
"Description of the Equipment
Notes -- Principal Payments" in this Prospectus
Supplement.
S-5
<PAGE> 6
Equipment Notes: General...... Interest will be payable on each of the
Equipment Notes on the unpaid principal amount
thereof on February 28 and August 28 of each
year, commencing February 28, 1997. The
principal amounts of the Equipment Notes are
payable in accordance with the principal
repayment schedule set forth herein under
"Description of the Equipment
Notes -- Principal Payments."
Equipment Notes: Prepayment... All or a portion of the Equipment Notes may be
prepaid under the following circumstances:
(a) Upon the occurrence of an Event of Loss
with respect to an Equipment Unit, if such
Equipment Unit is not replaced, all or a
portion of the Equipment Notes issued with
respect to the Equipment Group in which
such Equipment Unit was included is
subject to prepayment on a Regular
Distribution Date (or, if earlier, a
Special Distribution Date if prepayment is
then required due to Events of Loss as to
fifteen or more Equipment Units within
such Equipment Group) at a price equal to
the sum of (i) as to principal, an amount
equal to the product obtained by
multiplying the unpaid principal amount of
the Equipment Notes issued with respect to
the same car type and Equipment Group in
which such Equipment Unit was included as
of such prepayment 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 of the same
car type immediately prior to such
prepayment date and (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 such prepayment date, but
without the payment of any Make-Whole
Amount.
(b) In the event the Company elects to
exercise its right to purchase an
Equipment Group as a result of the related
Owner Participant or any affiliate thereof
engaging in a business that is in
competition with the Company's full
service railcar leasing business, unless
the Company elects to assume the related
Equipment Notes on a full recourse basis,
all of the 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 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 prepayment price shall be
equal to the unpaid principal amount of
such Equipment Notes, together with
accrued interest thereon, plus, if such
prepayment is made prior to August 28,
2008 in the case of the Series 1996-1A
Pass Through Certificates and February 28,
2018 in the case of the Series 1996-1B
Pass Through Certificates, the Make-Whole
Amount (if any). See "Description of the
Equipment Notes -- Prepayments" in this
Prospectus Supplement for a
S-6
<PAGE> 7
description of the manner of computing the Make-Whole Amount.
(c) If, at any time on or after August 28,
2003, the Company elects to exercise its
right to terminate the Lease with respect
to any Equipment Unit within any Equipment
Group, or elects to exercise its right to
purchase on specified dates beginning
August 28, 2015 any Equipment Unit within
any Equipment Group (unless the Company
elects to assume the related Equipment
Notes on a full recourse basis), a portion
of the Equipment Notes issued with respect
to such Equipment Group, computed as
provided in paragraph (a) above, will be
prepaid on a Regular Distribution Date
(or, in certain limited circumstances, a
Special Distribution Date) at a price
equal to the unpaid principal amount
thereof, together with accrued interest
thereon plus, if such prepayment is made
prior to August 28, 2008 in the case of
the Series 1996-1A Pass Through
Certificates and February 28, 2018 in the
case of the Series 1996-1B Pass Through
Certificates, the Make-Whole Amount (if
any) referred to in paragraph (b) above.
(d) If under any Indenture (i) one or more
Lease Events of Default under the related
Lease shall have occurred and be
continuing for 180 days or more during
which time the Equipment Notes issued
under such Indenture could, but shall not,
have been accelerated, (ii) such Equipment
Notes 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
additional remedy in respect of the
Equipment Units under such Lease, the
applicable 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" in this Prospectus
Supplement.
Equipment Notes: Security..... The Equipment Notes issued under each Indenture
will be equally and ratably secured by a
perfected first priority security interest in
the Equipment leased by the Company under the
Lease relating to such Indenture and by an
assignment to the Indenture Trustee of certain
of the Owner Trustee's rights under the Lease
covering such Equipment, including the right to
receive rentals payable by the Company in
respect of such Equipment pursuant to such
Lease. See "Description of the Equipment
Notes -- Security" in the accompanying
Prospectus.
The Equipment Notes issued under the different
Indentures are not cross-collateralized and,
consequently, the Equipment Notes issued under
any particular Indenture are not 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
S-7
<PAGE> 8
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.
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 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. See
"Description of the Equipment
Notes -- Indenture Events of Default and
Remedies" in the accompanying Prospectus.
If an Indenture Event of Default under an
Indenture occurs and is continuing, the Pass
Through Trustee will be entitled to exercise
certain remedies, including selling all or part
of the Equipment Notes issued under such
Indenture. So long as the same institution acts
as Pass Through Trustee of the Pass Through
Trusts and any other Trust formed pursuant to
the Basic Agreement it may be faced with a
conflict in deciding from which Trust to sell
Equipment Notes to any available buyers. If the
Trustee sells any of the Equipment Notes for
less than their outstanding principal amount,
the Certificateholders will receive a smaller
principal distribution than anticipated and
will not have any claim for the shortfall
against GATC, the related Owner Trustee, the
related Owner Participant or the Pass Through
Trustee. See "Description of the Pass Through
Certificates -- Events of Default and Certain
Rights Upon an Event of Default" in the
accompanying Prospectus.
Although the Equipment Notes are not direct
obligations of, or guaranteed by, the Company
or any affiliate thereof, the amounts
unconditionally payable by the Company under
the Leases will be sufficient to pay in full
when due all payments of principal of,
Make-Whole Amount, if any, and interest on the
Equipment Notes. See "Description of the
Equipment Notes -- General" in the accompanying
Prospectus.
Use of Proceeds............... The proceeds from the sale of the Pass Through
Certificates will be used by the Pass Through
Trustee to purchase the Equipment Notes from
the Owner Trustees. The Owner Trustees will use
such proceeds to finance not more than 80% of
the equipment cost of the Equipment,
representing in the aggregate the entire debt
portion of two separate leveraged lease
transactions. The net proceeds to the Company
from the sale of the Equipment will be used by
the Company for general corporate purposes. See
"Use of Proceeds" in this Prospectus Supplement
and in the accompanying Prospectus.
Pass Through Trustee.......... The First National Bank of Chicago will act as
Pass Through Trustee, and as paying agent and
registrar for the Pass Through Certificates.
The First National Bank of Chicago also will
act as the Indenture Trustee under each
Indenture.
S-8
<PAGE> 9
Federal Income Tax
Consequences................ Each 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 such 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
"Certain Tax Aspects" in this Prospectus
Supplement and "Federal Income Tax
Consequences" in the accompanying Prospectus.
ERISA Considerations.......... The Pass Through Certificates, with certain
exceptions, are eligible for purchase by
employee benefit plans. See "ERISA
Considerations" in this Prospectus Supplement
and in the accompanying Prospectus.
S-9
<PAGE> 10
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the payment flows in
the leveraged lease transactions among the Company, the Owner Trustees, the
Owner Participants, the Indenture Trustees, the Pass Through Trustee and the
Certificateholders.
In each of the separate leveraged lease transactions, the Company will
lease an Equipment Group from an Owner Trustee, as lessor for such Equipment
Group under a Lease. Equipment Notes with respect to such Equipment Group will
be issued under an Indenture by the related Owner Trustee and will be purchased
by the Pass Through Trustee for the benefit of the Certificateholders. Rent is
payable under the related Lease to such Owner Trustee, as lessor. However, as a
result of the assignment of certain rights of such Owner Trustee under the
related Lease to the related Indenture Trustee, the Company will make rental
payments directly to such Indenture Trustee. From these rental payments such
Indenture Trustee will, on behalf of such Owner Trustee, first make payments to
the Pass Through Trustee as required to meet such Owner Trustee's obligations
under the Equipment Notes and will pay the remaining balance to such Owner
Trustee, for the benefit of the applicable Owner Participant. The Pass Through
Trustee will distribute payments received in respect of the Equipment Notes
relating to such Equipment Group (together with payments received in respect of
the Equipment Notes relating to the other Equipment Group which is the subject
of the other leveraged lease transaction) to the Certificateholders as required
under the terms of the Pass Through Certificates. The First National Bank of
Chicago will act initially both as Pass Through Trustee of each Pass Through
Trust and as Indenture Trustee under each Indenture.
<TABLE>
<S><C>
-----------------------------
| General American |
|Transportation Corporation |
----------------------------
|
| Lease Rental Payments
| Assigned by Owner Trustees
| to Indenture Trustees
|
|
--------------------------
| |
| Indenture Trustee |
| |
-------------------------|
| |
| |
| |
| |
| |
| |
__________________________________| |
| |
| Excess* | Equipment Note
| Payments | Payments
- ------------------ ------------------------ | ------------------------
| Owner Trustee | | Pass Through Trustee | | | Pass Through Trustee |
| for Equipment | | for 1996 - 1A |______|_________________| for 1996-1B |
| Group No. 1 | | Pass Through Trust | | Pass Through Trust |
- ------------------ ------------------------ ------------------------
| | |
| | |
| Excess | |
| Payments | Pass Through |
| | Certificate |
| | Distributions |
- ---------------------- | |
| Owner Participant | -------------------------- -------------------------------
| for Equipment | | Holders of Pass Through | | Holders of Pass Through |
| Group No. 1 | | Certificates, | | Certificates, Series 1996-1B|
- ---------------------- | Series 1996 - 1A | -------------------------------
--------------------------
</TABLE>
- ---------------
* Excess Payments related to Equipment Group No. 2 flow to the respective Owner
Trustee and Owner Participant in the same manner as shown for Equipment Group
No. 1.
S-10
<PAGE> 11
USE OF PROCEEDS
The Pass Through Certificates are being issued in order to facilitate the
financing by the Owner Trustees on behalf of the Owner Participants of their
purchase from the Company of the Equipment Groups to be leased 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 Trusts 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 Equipment Notes will be issued under two separate Trust Indenture and
Security Agreements (each an "Indenture"), each such Indenture being between The
First National Bank of Chicago, as trustee thereunder (in such capacity, the
"Indenture Trustee"), and First Security Bank, National Association, not in its
individual capacity (except as expressly set forth therein) but solely as Owner
Trustee of a separate trust for the benefit of an Owner Participant. Each Owner
Participant will provide from sources other than the Equipment Notes at least
20% of the Equipment Cost of the related Equipment Group as an equity
investment.
The following table sets forth information with respect to the two
Equipment Groups (consisting of an aggregate of 2,474 railcars, all of which
were manufactured in 1995 or 1996) expected to be purchased by the Owner
Trustees and leased to the Company:
EQUIPMENT GROUP NO. 1
<TABLE>
<CAPTION>
FUNCTIONAL CAR AGGREGATE
GROUP TYPE DESCRIPTION EQUIPMENT COST
- ---------- -------------------- ------------------------------ --------------
<S> <C> <C> <C>
A Covered Hopper Cars 5125 Cu. Ft. Power-Flo $ 3,162,083
E Covered Hopper Cars 5161 Cu. Ft. Covered Hopper 15,184,599
F Covered Hopper Cars 2980 Cu. Ft. Cement Car 4,672,263
G Tank Cars Misc. Large Alloy 2,910,019
H Tank Cars 20,000 Gallon 2,292,123
I Tank Cars 13,000 Gallon 2,135,054
J Tank Cars 13,000 Gallon 629,999
K Tank Cars 16,000 Gallon 1,587,051
L Tank Cars 20,000 Gallon 732,687
M Tank Cars 20,000 Gallon 13,319,782
N Tank Cars 23,000 Gallon 24,815,210
O Tank Cars 26,000 Gallon 1,582,431
P Tank Cars 29,000 Gallon 4,522,493
Q Tank Cars 25,000 Gallon 6,603,085
R Tank Cars 13,000 Gallon 11,618,198
S Tank Cars 13,000 Gallon 2,198,019
T Tank Cars 26,000 Gallon 2,056,116
----------
$100,021,212
----------
</TABLE>
EQUIPMENT GROUP NO. 2
<TABLE>
<CAPTION>
FUNCTIONAL CAR AGGREGATE
GROUP TYPE DESCRIPTION EQUIPMENT COST
- ---------- -------------------- ------------------------------ --------------
<S> <C> <C> <C>
B Covered Hopper Cars 4301 Cu. Ft. Covered Hopper $ 3,405,489
C Covered Hopper Cars 5700 Cu. Ft. Plastic Pellet 15,364,051
D Covered Hopper Cars 4750 Cu. Ft. Covered Hopper 375,092
U Tank Cars 33,500 Gallon 19,826,505
V Tank Cars 25,000 Gallon 1,499,009
W Tank Cars 20,000 Gallon 638,378
X Tank Cars 33,500 Gallon 8,900,951
--------------
$ 50,009,475
--------------
Total Equipment Cost.................................. $150,030,687
===========
</TABLE>
S-11
<PAGE> 12
CAPITALIZATION
The following table summarizes the capitalization of the Company as of June
30, 1996:
<TABLE>
<CAPTION>
AT JUNE 30,
1996
-------------
(IN MILLIONS)
<S> <C>
Short-term debt.................................................................. $ 305.2
Long-term debt:
Term debentures and notes, 5.75%-10.80%, due through 2015...................... 922.9
Industrial revenue bonds, 6.625%-7.30%, due through 2024....................... 87.9
Capital lease obligations...................................................... 111.4
-------------
Total debt....................................................................... 1,427.4
Deferred income taxes............................................................ 290.9
Shareholder's equity:
Common Stock -- par value $1 per share, 1,000 shares authorized, issued and
outstanding (wholly-owned by GATX).......................................... --
Additional capital............................................................. 335.0
Reinvested earnings............................................................ 411.9
Cumulative unrealized equity adjustments....................................... 11.3
-------------
Total shareholder's equity....................................................... 758.2
-------------
Total capitalization including short-term debt......................... $ 2,476.5
=========
</TABLE>
The Company has entered into a $300 million revolving credit agreement with
a group of banks. Debt issued under this credit agreement will be unsecured. The
full amount of the facility can be used for general corporate purposes by the
Company. While at June 30, 1996 no borrowings were outstanding under the
agreement, the available line of credit was reduced by $115.4 million of
commercial paper outstanding. As of June 30, 1996, the Company also had
borrowings of $133.6 million under unsecured money market lines. Also, the
Company has a revolving credit agreement in the United Kingdom of L28.0 million,
of which L2.0 million was available at June 30, 1996.
S-12
<PAGE> 13
SUMMARY FINANCIAL INFORMATION
The following table summarizes selected financial information of the
Company and has been derived from the Company's reports on Form 10-K and Form
10-Q. Certain amounts in the financial statements of prior periods have been
reclassified to conform to the current presentation.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Gross income....................................... $ 361.6 $ 353.1 $ 709.2 $ 642.6 $ 601.7 $ 579.2 $ 558.9
Costs and expenses:
Operating expenses............................... 160.6 152.7 312.2 293.0 271.9 255.8 230.7
Interest......................................... 54.9 50.3 99.4 78.3 78.8 96.0 100.7
Provision for depreciation and amortization...... 64.3 60.5 121.4 111.8 104.9 101.2 98.0
Selling, general and administrative.............. 28.9 26.6 55.2 46.7 41.5 38.0 41.0
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses......................... 308.7 290.1 588.2 529.8 497.1 491.0 470.4
Income before income taxes, equity in net earnings
of affiliated companies and cumulative effect of
accounting changes............................... 52.9 63.0 121.0 112.8 104.6 88.2 88.5
Income taxes....................................... 19.7 25.4 47.2 42.7 45.1 31.7 29.0
-------- -------- -------- -------- -------- -------- --------
Income before equity in net earnings of affiliated
companies and cumulative effect of accounting
changes.......................................... 33.2 37.6 73.8 70.1 59.5 56.5 59.5
Equity in net earnings of affiliated companies..... 8.9 10.0 20.1 16.9 14.6 16.3 14.7
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of accounting
changes.......................................... 42.1 47.6 93.9 87.0 74.1 72.8 74.2
Cumulative effect of accounting changes............ -- -- -- -- -- (6.7) --
-------- -------- -------- -------- -------- -------- --------
Net Income......................................... $ 42.1 $ 47.6 $ 93.9 $ 87.0 $ 74.1* $ 66.1 $ 74.2
======== ======== ======== ======== ======== ======== ========
Net cash provided by operating activities.......... $ 99.1 $ 94.1 $ 211.2 $ 200.8 $ 206.5 $ 190.2 $ 177.1
Capital additions.................................. 257.0 214.9 541.2 439.8 273.1 192.8 187.5
BALANCE SHEET DATA (END OF PERIOD):
Property, plant and equipment -- net............... 2,059.3 1,886.5 1,855.1 1,754.9 1,557.3 1,538.0 1,543.7
Due from GATX Corporation.......................... 390.4 373.8 373.9 362.4 361.5 358.7 338.8
Total Assets....................................... 2,852.5 2,609.9 2,631.0 2,466.6 2,215.6 2,164.1 2,136.2
Debt:
Short-term debt.................................. 305.2 167.1 144.8 129.4 104.2 133.3 78.7
Long-term debt:
Equipment trust certificates................... -- -- -- -- -- -- 108.6
Other.......................................... 1,010.8 969.3 972.9 864.1 731.9 723.8 700.2
Capital lease obligations...................... 111.4 117.9 115.1 121.8 126.8 135.0 139.0
Shareholder's equity............................... 758.2 724.5 740.8 703.4 643.9 618.9 593.9
RATIO OF EARNINGS TO FIXED CHARGES**................. 1.76x 2.07x 1.99x 2.16x 2.13x 1.83x 1.81x
</TABLE>
- ---------------
* Net income was reduced by $7.7 million as a result of a change in the federal
tax rate.
** The ratio of earnings to fixed charges represents the number of times "fixed
charges" are covered by "earnings." "Fixed charges" consist of interest on
outstanding debt and capitalized interest, one-third (the proportion deemed
representative of the interest factor) of rentals, amortization of debt
discount and expenses. "Earnings" consist of consolidated income before
income taxes, fixed charges, and in 1992 the cumulative effect of accounting
changes, less equity in net earnings of affiliated companies, net of
distributions received.
S-13
<PAGE> 14
DESCRIPTION OF BUSINESS
The Company is a wholly owned subsidiary of GATX and is engaged in railcar
leasing and management. Terminals is a wholly owned subsidiary of the Company
and is engaged in the operation of public bulk liquid storage terminals and
domestic pipeline systems. The Company 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 storage terminals in the world.
SUMMARY SEGMENT FINANCIAL INFORMATION
The table below sets forth gross income; income before income taxes, equity
in net earnings of affiliated companies and the cumulative effect of accounting
changes; net income; and identifiable assets for the Company's Railcar Leasing
and Management segment and for the Terminals and Pipelines segment for each of
the six months ended June 30, 1996 and 1995, and for each of the five years
ended December 31, 1995, 1994, 1993, 1992, and 1991.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
GROSS INCOME:
Railcar leasing and
management........................ $ 196.4 $ 175.6 $ 360.9 $ 322.1 $ 302.2 $ 289.3 $ 285.3
Terminals and pipelines............. 145.8 159.4 313.4 303.1 281.1 266.5 249.7
-------- -------- -------- -------- -------- -------- --------
Subtotal.......................... 342.2 335.0 674.3 625.2 583.3 555.8 535.0
Interest from GATX.................. 19.4 18.1 34.9 17.4 18.4 23.4 23.9
-------- -------- -------- -------- -------- -------- --------
Total Gross Income................ $ 361.6 $ 353.1 $ 709.2 $ 642.6 $ 601.7 $ 579.2 $ 558.9
======== ======== ======== ======== ======== ======== ========
INCOME BEFORE INCOME TAXES, EQUITY IN
NET EARNINGS OF AFFILIATED COMPANIES
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGES:
Railcar leasing and
management........................ $ 47.5 $ 45.0 $ 90.7 $ 79.6 $ 74.4 $ 68.4 $ 73.6
Terminals and pipelines............. 5.4 18.0 30.3 33.2 30.2 19.8 14.9
-------- -------- -------- -------- -------- -------- --------
Total Income Before Income Taxes,
Equity in Net Earnings of
Affiliated Companies and
Cumulative Effect of Accounting
Changes......................... $ 52.9 $ 63.0 $ 121.0 $ 112.8 $ 104.6 $ 88.2 $ 88.5
======== ======== ======== ======== ======== ======== ========
NET INCOME:
Railcar leasing and
management........................ $ 32.8 $ 30.9 $ 62.9 $ 55.1 $ 47.6 $ 55.6 $ 55.2
Terminals and pipelines............. 9.3 16.7 31.0 31.9 26.5 18.7 19.0
Other............................... -- -- -- -- -- (8.2) --
-------- -------- -------- -------- -------- -------- --------
Total Net Income.................. $ 42.1 $ 47.6 $ 93.9 $ 87.0 $ 74.1* $ 66.1** $ 74.2
======== ======== ======== ======== ======== ======== ========
IDENTIFIABLE ASSETS:
Railcar leasing and
management........................ $2,257.5 $2,031.9 $2,041.9 $1,882.8 $1,701.0 $1,694.7 $1,678.3
Terminals and pipelines............. 1,177.1 1,024.9 1,101.5 1,022.5 872.5 816.2 781.7
Other............................... 0.7 (10.4) 1.0 0.6 1.0 0.9 0.7
-------- -------- -------- -------- -------- -------- --------
Subtotal.......................... 3,435.3 3,046.4 3,144.4 2,905.9 2,574.5 2,511.8 2,460.7
Intersegment amounts................ (582.8) (436.6) (513.4) (439.3) (358.9) (347.7) (324.5)
-------- -------- -------- -------- -------- -------- --------
Total Identifiable Assets......... $2,852.5 $2,609.8 $2,631.0 $2,466.6 $2,215.6 $2,164.1 $2,136.2
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
* Net income was reduced by $7.7 million as a result of a change in the federal
tax rate.
** Net income was reduced by $6.7 million due to the Company's adoption of FAS
106 and FAS 109.
S-14
<PAGE> 15
RAILCAR LEASING AND MANAGEMENT
The Company is principally engaged in leasing specialized railcars,
primarily tank cars, under full service leases. As of June 30, 1996, its fleet
consisted of approximately 66,600 railcars, including approximately 55,000 tank
cars and 11,600 specialized freight cars, primarily Airslide(R) covered hopper
cars and plastic pellet cars. In addition, the Company's Mexican fleet consists
of approximately 1,600 railcars. The Company has upgraded its fleet over time by
adding new larger capacity cars and retiring older smaller capacity cars. The
Company's railcars have a useful life of approximately 30 to 33 years. The
average age of the railcars in the Company's domestic fleet is approximately 15
years and the average age of the railcars in the Company's Mexican fleet is
approximately 19 years.
The following table sets forth the approximate tank car fleet capacity of
the Company as of the end of each of the periods indicated and the number of
cars of all types added to the Company's fleet during such periods:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------
1996 1995 1994 1993 1992 1991
---------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Tank car domestic fleet capacity (in millions
of gallons).................................. 1,212 1,176 1,090 1,024 993 977
Number of cars added to fleet.................. 2,623 6,200 4,900 3,000 1,600 1,500
</TABLE>
The Company's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, food products and minerals. For
1995, approximately 54% of railcar leasing revenue was attributable to shipments
of chemical products, 21% to petroleum products, 18% to food products and 7% to
other products. Many of these products require cars with special features; the
Company offers a wide variety of sizes and types of cars to meet these needs.
The Company leases railcars to over 700 customers, including major chemical,
oil, food and agricultural companies. No single customer accounted for more than
4% of total railcar leasing revenue in 1995.
The Company typically leases new equipment to its customers for a term of
five years or longer, whereas renewals or leases of used cars are typically for
periods ranging from less than a year to seven years with an average lease term
of about three years. The utilization rate of the Company's domestic railcar
fleet as of June 30, 1996 was approximately 94% and the utilization rate of the
Company's Mexican railcar fleet was approximately 52%.
Under its full service leases, the Company maintains and services its
railcars, pays ad valorem taxes and provides many ancillary services. Through
its Car Status Service System, for example, the Company provides customers with
timely information about the location and readiness of their leased cars to
enhance and maximize the utilization of this equipment. The Company also
maintains a network of major service centers which as of June 30, 1996 consisted
of four domestic and one foreign service center, and 25 mobile trucks in 17
locations. The Company also utilizes independent third-party repair shops.
The Company purchases most of its new railcars from Trinity Industries,
Inc. ("Trinity"), a Dallas-based metal products manufacturer, under a contract
entered into in 1984 and extended from time to time thereafter, most recently in
1992. The Company anticipates that through this contract it will continue to be
able to satisfy its customers' new car lease requirements. The Company's
engineering staff provides Trinity with design criteria and equipment
specifications, and works with Trinity's engineers to develop new technology
where needed in order to upgrade or improve car performance or in response to
regulatory requirements.
The full-service railcar leasing industry is comprised of the Company,
Union Tank Car Company, General Electric Railcar Services Corporation, Shippers
Car Line division of ACF Industries, Incorporated, and many smaller companies.
Of the approximately 207,000 tank cars owned and leased in the United States at
December 31, 1995, the Company had approximately 53,900. Principal competitive
factors include price, service and availability.
Because the railcars covered by the Leases are of relatively recent
manufacture, they have not had any significant operating history. For this
reason, and because the Company's obligation under the Leases to make
S-15
<PAGE> 16
payments sufficient to pay in full the Equipment Notes will be unconditional,
and not affected by the financial performance of any of the railcars covered by
the Leases, the Company believes that historical financial information with
respect to the railcars covered by the Leases is not relevant to purchasers of
the Pass Through Certificates.
TERMINALS AND PIPELINES
Terminals is engaged in the storage, handling and intermodal transfer of
petroleum and chemical commodities at key points in the bulk liquid distribution
chain. All of its terminals are located near major distribution and
transportation points and most are capable of receiving and shipping bulk
liquids by ship, rail, barge and truck. Many of the terminals are also linked
with major interstate pipelines. In addition to storing, handling and
transferring bulk liquids, Terminals provides blending and testing services at
most of its facilities. Terminals owns and operates 28 terminals in the United
States. Terminals also owns and operates eight terminals in the United Kingdom.
Terminals also has joint venture interests in 14 international facilities. In
addition, Terminals owns or holds interests in four refined products pipeline
systems.
As of December 31, 1995, Terminals had a total storage capacity of 75
million barrels. This includes 55 million barrels of bulk liquid storage
capacity in the United States, 7 million barrels in the United Kingdom and an
equity interest in another 13 million barrels of storage capacity in Europe and
the Far East. Terminals' smallest bulk liquid facility has a storage capacity of
95,000 barrels while its largest facility, located in Pasadena, Texas, has a
capacity of over 12 million barrels. Capacity utilization at Terminals'
wholly-owned facilities was 85% at the end of 1995; throughput for the year was
655 million barrels. During the first six months of 1996, throughput totaled 344
million barrels and capacity utilization was 86%.
For 1995, 75% of Terminals' revenue was derived from petroleum products and
23% from a variety of chemical products. Demand for Terminals' facilities is
dependent in part upon the demand for petroleum and chemical products and is
also affected by refinery output, foreign imports, the availability of
competitive storage facilities and the expansion of its customers into new
geographical markets.
Terminals serves approximately 300 customers, including major oil and
chemical companies as well as trading firms and larger independent refiners. No
single customer accounted for more than 5% of Terminals' 1995 revenue. Customer
service contracts are both short term and long term.
Terminals along with two Dutch companies, Paktank N.V. and Van Ommeren
N.V., are the three major international public terminalling companies. The
domestic public terminalling industry consists of Terminals, Paktank
Corporation, International-Matex Tank Terminals, and many smaller independent
terminalling companies. In addition to public terminalling companies, oil and
chemical companies also have significant storage capacity in their own private
facilities. Terminals' pipelines compete with rail, trucks and other pipelines
for movement of liquid petroleum products. Principal competitive factors include
price, location relative to distribution facilities, and service.
RELATIONSHIP WITH GATX
All of the Company's outstanding common stock is owned by GATX. GATX will
not guarantee the Pass Through Certificates and does not guarantee any other
indebtedness of the Company. The Company, in the normal course of business,
declares dividends to GATX to provide for GATX's normal operating expenses.
Additional amounts have been advanced to GATX from time to time for corporate
purposes, the redemption of GATX preferred stock and the retirement of debt. In
addition, GATX may make advances to subsidiaries of the Company in the normal
course of business. Interest income on advances by the Company to GATX was $34.8
million in 1995, $17.4 million in 1994 and $18.4 million in 1993. Interest
expense on advances from GATX to the Company was $6.2 million in 1995, $1.8
million in 1994 and $2.2 million in 1993. The interest rate, which is
periodically adjusted in accordance with short-term commercial paper rates,
averaged 7.45% in 1995, 4.09% in 1994 and 4.30% in 1993. These advances have no
fixed maturity date.
The Company and its subsidiaries contribute to GATX pension plans which
cover substantially all of the Company's employees. Costs are allocated to the
Company on the basis of payroll costs with respect to normal
S-16
<PAGE> 17
cost and on the basis of actuarial determinations for prior service cost. In
addition to pension benefits, the Company's employees participate in life
insurance and dental and medical programs sponsored by GATX.
The Company and GATX have policies allocating income tax liabilities. These
policies provide generally for the filing of consolidated tax returns by GATX,
but with payments to or from the Company as though the Company had filed a
separate return, except that the Company might not benefit from its investment
tax credits and foreign taxes paid to the same extent as if separate returns had
been filed.
LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS
The Company and its subsidiaries have been named as defendants in a number
of pending lawsuits. These lawsuits include approximately 30 lawsuits (most
involving multiple plaintiffs) that have been filed in the Superior Court for
the State of California naming Terminals or Calnev Pipe Line Company as
defendants and seeking an unspecified amount of damages arising out of a May
1989 explosion in San Bernardino, California, as well as a number of suits
arising out of an incident in July 1991, when a Company-owned railcar was
involved in a derailment near Dunsmuir, California that resulted in a spill of
metam sodium into the Sacramento River. As a result of the latter incident the
Company has also been named as a potentially responsible party by the State of
California with respect to the assessment and remediation of possible damages to
natural resources. The Company has entered into settlement agreements with the
United States of America, the State of California, Southern Pacific and certain
other defendants settling all material claims arising out of the above incident
in an amount not material to the Company. On July 14, 1995, a judgement in the
amount of $9.7 million was entered against the Company in the U.S. District
Court for the Northern District of Illinois in the matter of General American
Transportation Corporation v. Cryo-Trans, Incorporated, a case involving an
alleged patent infringement by the Company in the construction and use of its
Arcticar(TM) cryogenically cooled railcar. The judgement was subsequently
reduced to $9 million. On August 14, 1996, the Federal Circuit Court of Appeals
reversed the decision of the District Court. It is the opinion of management
that if damages are assessed and taking into consideration the probable
insurance recoveries, these lawsuits will not have a material effect on the
Company's consolidated financial position or results of operations.
Certain of the Company's and Terminals' operations present potential
environmental risks principally through the transportation or storage of various
commodities. Recognizing that some risk to the environment is intrinsic to its
operations, the Company is committed to protecting the environment, as well as
complying with applicable environmental protection laws and regulations. The
Company, as well as its competitors, is subject to extensive regulation under
federal, state and local environmental laws which have the effect of increasing
the costs and liabilities associated with the conduct of its operations. In
addition, the Company's foreign operations are subject to environmental
regulations in effect in each respective jurisdiction.
The Company's policy is to monitor and actively address environmental
concerns in a responsible manner. As of December 31, 1995, the Company had
received notices from the U.S. Environmental Protection Agency ("EPA") that it
is a potentially responsible party ("PRP") for study and clean-up costs at 11
sites under the requirements of the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("Superfund"). Under Superfund
and comparable state laws, the Company may be required to share in the cost to
clean-up various contaminated sites identified by the EPA and other agencies. In
all but one instance, the Company is one of a number of financially responsible
PRPs and has been identified as contributing only a small percentage of the
contamination at each of the sites. Due to various factors such as the required
level of remediation and participation in clean-up efforts by others, the
Company's total clean-up costs at these sites cannot be predicted with
certainty; however, the Company's best estimates for remediation and restoration
of these sites have been determined and are included in its environmental
reserves.
Future costs of environmental compliance are indeterminable due to unknowns
such as the magnitude of possible contamination, the timing and extent of the
corrective actions that may be required, the determination of the Company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties including insurers. Also, the
Company may incur additional costs relating to
S-17
<PAGE> 18
facilities and sites where past operations followed practices and procedures
that were considered acceptable at the time but in the future may require
investigation and/or remedial work to ensure adequate protection to the
environment under current or future standards. If future laws and regulations
contain more stringent requirements than presently anticipated, expenditures may
be higher than the estimates, forecasts, and assessments of potential
environmental costs provided below. However, these costs are expected to be at
least equal to the current level of expenditures. In addition, the Company has
provided indemnities for environmental issues to the buyers of three divested
companies for which the Company believes it has adequate reserves.
The Company's environmental reserve at the end of 1995 was $78 million and
reflects the Company's best estimate of the cost to remediate its environmental
conditions. Additions to the reserve were $14 million in 1995 and $27 million in
1994; 1994 included $13 million recorded in conjunction with terminal
acquisitions. Expenditures charged to the reserve amounted to $16 million and
$12 million in 1995 and 1994, respectively.
In 1995, the Company made capital expenditures of $18 million for
environmental and regulatory compliance compared to $15 million in 1994. These
projects included marine vapor recovery, discharge prevention compliance, waste
water systems, impervious dikes, tank modifications for emissions control, and
tank car cleaning systems. Environmental projects authorized or currently under
consideration would require capital expenditures of approximately $28 million in
1996. It is anticipated that the Company will make annual expenditures at a
similar annual level over the next five years.
The foregoing does not purport to be a complete summary of legal
proceedings involving the Company. For further information concerning such legal
proceedings, reference is hereby made to Item 3 of Part I of the Company's
Annual Report on Form 10-K for the year ending December 31, 1995 and to Item 1
of Part II of its Quarterly Report on Form 10-Q for the quarter ending June 30,
1996.
S-18
<PAGE> 19
FORMATION OF THE PASS THROUGH TRUSTS
The Pass Through Trusts will be formed pursuant to two separate Trust
Supplements between the Pass Through Trustee and GATC in accordance with the
terms of the Pass Through Trust Agreement, dated as of August 1, 1992 between
GATC and The First National Bank of Chicago (the "Basic Agreement"). All Pass
Through Certificates issued with respect to each Pass Through Trust will
represent fractional undivided interests in such Pass Through Trust and the
property held in such Pass Through Trust, and will have no rights, benefits or
interest in respect of the other Pass Through Trust or the property held
therein. Concurrently with the execution and delivery of each Trust Supplement,
the Pass Through Trustee, on behalf of the Pass Through Trust formed thereby,
will enter into a participation agreement with respect to the related Equipment
Group (a "Participation Agreement"). Pursuant to such Participation Agreement,
the Pass Through Trustee, on behalf of such Pass Through Trust, will purchase
the Equipment Notes issued with respect to such Equipment Group so that all of
the Equipment Notes held in such Pass Through Trust will have an interest rate
equal to the interest rate applicable to the Pass Through Certificates issued by
such Pass Through Trust. The maturity dates of the Equipment Notes acquired by
each Pass Through Trust will occur on or before the final distribution date
applicable to the Pass Through Certificates issued with respect to such Pass
Through Trust. The Pass Through Trustee will distribute the amount of payments
of principal, Make-Whole Amount, if any and interest received by it as holder of
the Equipment Notes to the Certificateholders of the Pass Through Trust in which
such Equipment Notes are held. See "Description of the Pass Through
Certificates" and "Description of the Equipment Notes" in this Prospectus
Supplement.
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The Pass Through Certificates offered hereby will be issued pursuant to two
separate Trust Supplements, to be entered into between the Company and the Pass
Through Trustee pursuant to the Basic Agreement. The following summary of the
particular terms of the Pass Through Certificates offered hereby supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Pass Through Certificates set forth in the
accompanying Prospectus under the heading "Description of the Pass Through
Certificates," to which description reference is hereby made. The statements
under this caption are a summary and do not purport to be complete. The summary
makes use of terms defined in and is qualified in its entirety by reference to
all of the provisions of the Basic Agreement, a copy of which has been filed as
an exhibit to the Registration Statement of which the Prospectus is a part, and
to all the provisions of the Trust Supplements which, together with the forms of
the related Equipment Notes, Indentures, Leases, Trust Agreements and
Participation Agreements, will be filed as exhibits to a Current Report on Form
8-K to be filed by the Company with the Commission.
GENERAL
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in one of the two General American Transportation Corporation
1996-1 Pass Through Trusts (the "Pass Through Trusts"), each Pass Through Trust
to be formed pursuant to a Trust Supplement. The property of each 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 two 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 to the Company. See "Use of Proceeds" in
this Prospectus Supplement. The Equipment Notes in respect of each leveraged
lease transaction will be issued in two series. Each Pass Through Trust will
purchase one series of the Equipment Notes issued with respect to each of the
two leveraged lease transactions such that all of the Equipment Notes acquired
by each Pass Through Trust will have an interest rate equal to the interest rate
of the Pass Through Certificates to be issued by such Pass Through Trust and
will mature on or before the final distribution date of the Pass Through
Certificates to be issued by such Pass Through Trust. The aggregate principal
amount of the Equipment Notes held in each Pass Through Trust will be the same
as the aggregate principal amount of the Pass Through Certificates to be issued
by such Pass Through Trust. For a description of the Equipment Notes and the
Indentures, see "Description of the Equipment Notes" in this Prospectus
Supplement and the accompanying Prospectus.
S-19
<PAGE> 20
PAYMENTS AND DISTRIBUTIONS
Payments of interest on the Equipment Notes held in each Pass Through Trust
are scheduled to be received by the Pass Through Trustee on February 28 and
August 28 of each year, commencing February 28, 1997, until the final
distribution date for such 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 February 28 or August 28, or both, of each year commencing
February 28, 1997 in the case of the Series 1996-1A Pass Through Certificates
and August 28, 2016 in the case of the Series 1996-1B Pass Through Certificates
(such February 28 and August 28 of each year are herein referred to as "Regular
Distribution Dates").
Payments of principal, 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 held in a Pass Through Trust, 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 28th 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 issued by such Pass Through Trust. See
"Description of the Pass Through Certificates -- Payments and Distributions" in
the accompanying Prospectus, "Description of the Equipment Notes -- Prepayments"
in this Prospectus Supplement and "Description of the Equipment Notes -- Events
of Default and Certain Rights Upon an Event of Default" in the accompanying
Prospectus.
S-20
<PAGE> 21
POOL FACTORS
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 scheduled repayments of principal of such Equipment Notes and the
resulting Pool Factors for each Pass Through Trust after taking into account
each such repayment are set forth below:
<TABLE>
<CAPTION>
PASS THROUGH TRUST PASS THROUGH TRUST
1996-1A 1996-1B
EQUIPMENT NOTES EQUIPMENT NOTES
REGULAR SCHEDULED PASS THROUGH TRUST SCHEDULED PASS THROUGH TRUST
DISTRIBUTION PAYMENTS 1996-1A PAYMENTS 1996-1B
DATE OF PRINCIPAL POOL FACTOR OF PRINCIPAL POOL FACTOR
- --------------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
February 28, 1997.......... $ 932,336 0.9879320
August 28, 1997............ 713,016 0.9787029
February 28, 1998.......... 1,366,156 0.9610196
August 28, 1998............ 857,397 0.9499216
February 28, 1999.......... 1,179,905 0.9346492
August 28, 1999............ 1,005,611 0.9216327
February 28, 2000.......... 1,281,717 0.9050424
August 28, 2000............ 1,157,955 0.8900541
February 28, 2001.......... 1,266,587 0.8736596
August 28, 2001............ 1,314,740 0.8566419
February 28, 2002.......... 1,316,407 0.8396025
August 28, 2002............ 2,135,751 0.8119578
February 28, 2003.......... 410,548 0.8066437
August 28, 2003............ 2,650,474 0.7723365
February 28, 2004.......... 391,598 0.7672677
August 28, 2004............ 2,900,277 0.7297271
February 28, 2005.......... 378,396 0.7248292
August 28, 2005............ 2,745,590 0.6892908
February 28, 2006.......... 28,861 0.6889172
August 28, 2006............ 2,306,972 0.6590562
August 28, 2007............ 2,595,602 0.6254592
August 28, 2008............ 3,478,126 0.5804390
August 28, 2009............ 5,158,968 0.5136623
August 28, 2010............ 6,921,196 0.4240757
August 28, 2011............ 7,567,175 0.3261276
February 28, 2012.......... 28,532 0.3257583
August 28, 2012............ 8,112,446 0.2207523
February 28, 2013.......... 110,158 0.2193264
August 28, 2013............ 8,650,051 0.1073618
February 28, 2014.......... 206,817 0.1046848
August 28, 2014............ 8,021,856 0.0008514
February 28, 2015.......... 65,779 0.0000000
August 28, 2016............ $2,953,866 0.9001330
February 28, 2017.......... 175,803 0.8941893
February 28, 2018.......... 3,100,301 0.7893715
August 28, 2018............ 1,002,252 0.7554864
February 28, 2019.......... 3,799,957 0.6270140
August 28, 2019............ 8,747,146 0.3312825
February 28, 2020.......... 167,958 0.3256041
August 28, 2020............ 7,723,338 0.0644864
February 28, 2021.......... 344,056 0.0528542
August 28, 2021............ 1,563,323 0.0000000
</TABLE>
See "Description of the Pass Through Certificates -- Pool Factors" in the
accompanying Prospectus for information regarding the computation of the Pool
Factor.
S-21
<PAGE> 22
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary of the particular terms and provisions of the
Equipment Notes supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Equipment Notes set
forth in the accompanying Prospectus under the heading "Description of the
Equipment Notes" to which description reference is hereby made. The statements
under this caption are summaries and do not purport to be complete. The
summaries make use of terms defined in and are qualified in their entirety by
reference to all of the provisions of the Equipment Notes, the Indentures, the
Leases, the Participation Agreements and the Trust Agreements, the forms of
which will be filed as exhibits to a Current Report on Form 8-K to be filed by
the Company with the Commission. Except as otherwise indicated, the following
summaries relate to the Equipment Notes, the Indenture, the Lease, the
Participation Agreement and the Trust Agreement relating to each Equipment
Group.
GENERAL
The Equipment Notes will be issued in two series with respect to each
Equipment Group and will be issued under one of two separate Indentures between
First Security Bank, National Association, as Owner Trustee of a trust for the
benefit of the Owner Participant who is the beneficial owner of such Equipment
Group, and The First National Bank of Chicago, as Indenture Trustee.
The related Owner Trustee will lease each Equipment Group to GATC pursuant
to a separate Lease between such Owner Trustee and GATC with respect to such
Equipment Group. GATC is obligated to make or cause to be made rental and other
payments to the related Indenture Trustee on behalf of the related Owner Trustee
in amounts that will be at least sufficient to pay the principal of, Make-Whole
Amount, if any, and interest on the Equipment Notes issued with respect to such
Equipment Group when and as due and payable. The Equipment Notes are not,
however, direct obligations of, or guaranteed by, GATC or any affiliate thereof.
GATC's rental obligations under the Leases are general obligations of GATC.
PRINCIPAL PAYMENTS
The aggregate principal amounts of the Equipment Notes issued with respect
to each Equipment Group, as such Equipment Groups will be held in each of the
Pass Through Trusts, are as follows:
<TABLE>
<CAPTION>
PASS THROUGH TRUST PASS THROUGH TRUST
1996-1A 1996-1B
7.50% 7.86%
EQUIPMENT NOTES EQUIPMENT NOTES TOTAL
------------------ ------------------ ------------
<S> <C> <C> <C>
Equipment Group No. 1
Covered Hopper Cars......................... $ 11,385,000 $ 4,938,000 $ 16,323,000
Tank Cars................................... 39,102,000 15,482,000 54,584,000
Equipment Group No. 2
Covered Hopper Cars......................... 9,867,000 3,850,000 13,717,000
Tank Cars................................... 16,903,000 5,308,000 22,211,000
-------- -------- --------
Total.................................... $ 77,257,000 $ 29,578,000 $106,835,000
======== ======== ========
</TABLE>
S-22
<PAGE> 23
Interest will be payable on each Equipment Note at the rate per annum
applicable to such Equipment Note on the unpaid principal amount thereof on
February 28 and August 28 of each year, commencing February 28, 1997. Such
interest will be computed on the basis of a 360-day year of twelve 30-day
months. The principal of the Equipment Notes held by the Pass Through Trusts
will be payable as set forth below:
PASS THROUGH TRUST 1996-1A
7.50% EQUIPMENT NOTES
<TABLE>
<CAPTION>
EQUIPMENT GROUP EQUIPMENT GROUP
NO. 1 NO. 2
-------------------------- --------------------------
COVERED COVERED
PAYMENT DATES HOPPER CARS TANK CARS HOPPER CARS TANK CARS TOTAL
- --------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
February 28, 1997................ $ 139,260 $ 484,783 $ 113,461 $ 194,832 $ 932,336
August 28, 1997.................. 158,978 554,038 0 0 713,016
February 28, 1998................ 129,230 448,993 289,983 497,950 1,366,156
August 28, 1998.................. 190,999 666,398 0 0 857,397
February 28, 1999................ 120,025 416,074 236,940 406,866 1,179,905
August 28, 1999.................. 223,875 781,736 0 0 1,005,611
February 28, 2000................ 111,708 386,246 288,448 495,315 1,281,717
August 28, 2000.................. 257,673 900,282 0 0 1,157,955
February 28, 2001................ 104,347 359,745 295,342 507,153 1,266,587
August 28, 2001.................. 292,462 1,022,278 0 0 1,314,740
February 28, 2002................ 98,014 336,825 324,443 557,125 1,316,407
August 28, 2002.................. 328,318 1,147,991 242,694 416,748 2,135,751
February 28, 2003................ 92,788 317,760 0 0 410,548
August 28, 2003.................. 365,323 1,277,702 370,771 636,678 2,650,474
February 28, 2004................ 88,754 302,844 0 0 391,598
August 28, 2004.................. 403,564 1,411,718 399,310 685,685 2,900,277
February 28, 2005................ 86,002 292,394 0 0 378,396
August 28, 2005.................. 443,136 1,527,950 285,107 489,397 2,745,590
February 28, 2006................ 28,861 0 0 0 28,861
August 28, 2006.................. 356,321 1,199,431 276,553 474,667 2,306,972
August 28, 2007.................. 353,700 1,205,167 443,976 592,759 2,595,602
August 28, 2008.................. 361,438 1,254,338 606,268 1,256,082 3,478,126
August 28, 2009.................. 662,755 2,225,281 843,335 1,427,597 5,158,968
August 28, 2010.................. 1,038,954 3,436,510 908,249 1,537,483 6,921,196
August 28, 2011.................. 1,116,876 3,816,314 978,159 1,655,826 7,567,175
February 28, 2012................ 11,874 16,658 0 0 28,532
August 28, 2012.................. 1,189,213 4,086,504 1,053,450 1,783,279 8,112,446
February 28, 2013................ 30,987 79,171 0 0 110,158
August 28, 2013.................. 1,260,898 4,334,073 1,134,537 1,920,543 8,650,051
February 28, 2014................ 53,506 153,311 0 0 206,817
August 28, 2014.................. 1,285,161 4,593,706 775,974 1,367,015 8,021,856
February 28, 2015................ 0 65,779 0 0 65,779
----------- ----------- ----------- ----------- -----------
Total....................... $11,385,000 $39,102,000 $ 9,867,000 $16,903,000 $77,257,000
========== ========== ========= ========== ==========
</TABLE>
S-23
<PAGE> 24
PASS THROUGH TRUST 1996-1B
7.86% EQUIPMENT NOTES
<TABLE>
<CAPTION>
EQUIPMENT GROUP EQUIPMENT GROUP
NO. 1 NO. 2
-------------------------- -------------------------
COVERED COVERED
PAYMENT DATES HOPPER CARS TANK CARS HOPPER CARS TANK CARS TOTAL
- ----------------------------------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
August 28, 2016.................... $ 0 $ 2,953,866 $ 0 $ 0 $ 2,953,866
February 28, 2017.................. 0 175,803 0 0 175,803
February 28, 2018.................. 0 0 972,618 2,127,683 3,100,301
August 28, 2018.................... 1,002,252 0 0 0 1,002,252
February 28, 2019.................. 13,461 0 1,467,180 2,319,316 3,799,957
August 28, 2019.................... 1,553,867 5,348,205 984,073 861,001 8,747,146
February 28, 2020.................. 49,130 118,828 0 0 167,958
August 28, 2020.................... 1,642,793 5,654,416 426,129 0 7,723,338
February 28, 2021.................. 89,695 254,361 0 0 344,056
August 28, 2021.................... 586,802 976,521 0 0 1,563,323
---------- ----------- ---------- ---------- -----------
Total......................... $ 4,938,000 $15,482,000 $ 3,850,000 $5,308,000 $29,578,000
========== =========== ========== ========== ===========
</TABLE>
If any date scheduled for any payment of principal of, Make-Whole Amount,
if any, or interest on the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest. (Indenture, Section 2.04(b))
PREPAYMENTS
Mandatory Prepayments. In the event of an Event of Loss with respect to an
Equipment Unit which is not replaced within a 60-day period following notice of
such Event of Loss, all or a portion of the Equipment Notes issued with respect
to the Equipment Group in which such Equipment Unit was included are required to
be prepaid on the Regular Distribution Date next succeeding the date 25 days
after GATC gives notice of its election to pay the Stipulated Loss Value of such
Equipment Unit or fails to replace the same within such 60-day period (or, if
payment of the Stipulated Loss Value is so required with respect to an aggregate
of fifteen or more Equipment Units in such Equipment Group then on the Special
Distribution Date next occurring not less than 25 days after such notice) at a
price equal to the sum of (i) as to principal, an amount equal to the product
obtained by multiplying the unpaid principal amount of the Equipment Notes
issued with respect to the same car type and Equipment Group in which such
Equipment Unit was included 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 of the
same car type immediately prior to such prepayment date and (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 such prepayment date, but
without the payment of any Make-Whole Amount or other premium. See "Description
of the Equipment Notes -- The Leases -- Events of Loss" in this Prospectus
Supplement. (Lease, Sections 11.1 and 11.2; Indenture, Section 2.10(b))
In the event of (i) a termination by GATC, at its option (which commences
on August 28, 2003), of the Lease with respect to any Equipment Unit or (ii) the
purchase by GATC, at its option, exercisable on specified dates beginning August
28, 2015, of any Equipment Unit (unless the Company elects to assume the related
Equipment Notes on a full recourse basis), the applicable Owner Trustee is
required to prepay a portion of the Equipment Notes issued with respect to the
Equipment Group in which such Equipment Unit was included. Such prepayment will
be made on a Regular Distribution Date (or, in certain limited circumstances, a
Special Distribution Date) upon at least 25 days' prior notice from the
applicable Owner Trustee to the applicable Indenture Trustee at a prepayment
price equal to the unpaid principal amount thereof (computed as provided in the
preceding paragraph) together with accrued interest thereon to the date of
prepayment plus the applicable Make-Whole Amount, if any, if such prepayment is
made prior to August 28, 2008 in the case of the Series 1996-1A Pass Through
Certificates and February 28, 2018 in the
S-24
<PAGE> 25
case of the Series 1996-1B Pass Through Certificates and thereafter without
premium. Such prepayment is to be made with net proceeds of the sale of such
Equipment Unit received by the applicable Owner Trustee and, to the extent such
proceeds are insufficient, with a portion of certain payments received by the
applicable Indenture Trustee from GATC, or to be made with moneys deposited with
the applicable Indenture Trustee by such Owner Trustee. See "Description of the
Equipment Notes -- The Leases -- Termination" and "-- Early Purchase Option" in
this Prospectus Supplement. (Lease, Sections 10 and 22.1; Indenture, Section
2.10(a))
Voluntary Prepayments. In the event the Company elects to exercise its
right to purchase an 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 or any affiliate of the Company 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 full service railcar leasing
business, unless the Company elects, in connection with such exercise of its
right to purchase such Equipment Group, to assume on a full recourse basis 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, plus, if such prepayment is made prior to August 28, 2008 in
the case of the Series 1996-1A Pass Through Certificates and February 28, 2018
in the case of the Series 1996-1B Pass Through Certificates, the applicable
Make-Whole Amount, if any. See "Description of the Equipment Notes -- The
Participation Agreements" in this Prospectus Supplement. (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) any
acceleration of such Equipment Notes, (ii) 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 additional remedy in respect of the
Equipment Units under such Lease or (iii) one or more Lease Events of Default
having occurred under the related Lease and continued for a period of 180 days
or more during which period such Equipment Notes could, but shall not, have been
accelerated by the applicable Indenture Trustee. Such prepayment would be at a
price equal to the unpaid principal amount thereof and accrued interest on such
Equipment Notes to the date of payment, but without the payment of any
Make-Whole Amount. 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 4.04(b))
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 GATC 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 from the prepayment
date to maturity of such Equipment Note, discounted semiannually on each
February 28 and August 28 at a rate equal to the Treasury Rate, based on a
360-day year of twelve 30-day months, over (ii) the aggregate unpaid principal
amount of such Equipment Note plus
S-25
<PAGE> 26
any accrued but unpaid interest thereon by (b) a fraction, the numerator of
which shall be the principal amount of such Equipment Note to be prepaid on such
prepayment date and the denominator of which shall be the aggregate unpaid
principal amount of such Equipment Note; provided, that the aggregate unpaid
principal amount of such Equipment Note for the purpose of clause (a)(ii) and
(b) above shall be determined after deducting the principal installment, if any,
due on such prepayment date.
The "Treasury Rate" means, with respect to each Equipment Note to be
prepaid, a per annum rate (expressed as a semiannual equivalent and as a decimal
and, in the case of United States Treasury bills, converted to a bond equivalent
yield), determined to be the per annum rate equal to the semiannual yield to
maturity of 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 "Average Life Date" of each Equipment Note shall be the date which
follows the prepayment date or, in the case of an Equipment Note not being
prepaid, the date of such determination, by a period equal to the Remaining
Weighted Average Life of such Equipment Note. The "Remaining Weighted Average
Life" of such Equipment Note, at the prepayment or determination date of such
Equipment Note, shall be the number of days equal to the quotient obtained by
dividing (a) the sum of the products obtained by multiplying (i) the amount of
each then remaining principal payment on such Equipment Note 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.
SECURITY
The Equipment Notes issued with respect to each Equipment Group will be
equally and ratably secured by (i) an assignment by the related Owner Trustee to
the related Indenture Trustee of such Owner Trustee's rights (except for certain
limited rights described below) under the Lease with respect to such Equipment
Group, including the right to receive payments of rent thereunder, and (ii) a
perfected first priority security interest to such Indenture Trustee in such
Equipment Group, subject to the rights of GATC under such Lease. See
"Description of the Equipment Notes -- Security" in the accompanying Prospectus.
The assignment by such Owner Trustee to such related Indenture Trustee of its
rights under such Lease excludes rights of such Owner Trustee and the related
Owner Participant relating to indemnification by GATC for certain matters,
insurance proceeds payable to such Owner Trustee in its individual capacity and
to such Owner Participant under liability insurance maintained by GATC under
such Lease or by such Owner Trustee or such Owner Participant, insurance
proceeds payable to such Owner Trustee in its individual capacity or to such
Owner Participant under certain casualty insurance maintained by such Owner
Trustee or such Owner Participant under such Lease and certain reimbursement
payments made by GATC to such Owner Trustee. (Indenture, Granting Clause)
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, (b) default by the related Owner Trustee in
making payments when due of principal of, premium, if any, or interest on any
Equipment Note and continuance of that default for 10 Business Days, (c) failure
by the 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
S-26
<PAGE> 27
Note issued under the Indenture, (d) any representation or warranty made by the
related Owner Trustee in the Indenture or made by such Owner Trustee (except to
the extent made with respect to First Security Bank, National Association in its
individual capacity) 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,
and (e) the occurrence of certain events of bankruptcy, reorganization or
insolvency of the related Owner Participant or the related Owner Trustee. 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 4.01)
In the event that (i) at any time one or more Lease Events of Default under
the related Lease shall occur and shall have continued for a period of 180 days
or more during which time the Equipment Notes issued under the related Indenture
could, but shall not, have been accelerated, (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 additional 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. 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 4.04(b))
In the event GATC fails to make any semiannual basic rental payment within
10 Business Days after the date the same shall become due under a Lease, then
and as long as no other Indenture Event of Default under the 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
10 Business Days after receiving written notice of such failure from the
applicable Indenture Trustee, pay to the applicable Indenture Trustee the amount
of such rental payment together with any interest thereon on account of the
delayed payment thereof, in which event such payment by such Owner Participant
or such Owner Trustee shall be deemed to cure any Indenture Event of Default
which arose from such failure of GATC (but such cure shall not relieve GATC 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
three consecutive or six total failures to make semiannual basic rental
payments. In the event there shall occur a Lease Event of Default under a Lease
in respect of any other payment of rent, or which is curable by the payment of
money, then and as long as no other Indenture Event of Default under the 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 30 days after receiving written notice of such Lease 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 GATC 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 unreimbursed amount of such payments shall exceed
$3 million. 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 then due and owing on the
Equipment Notes prior to any payment from GATC to such Owner Participant or such
Owner Trustee. (Indenture, Section 4.04(a))
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Each Indenture provides that the applicable Indenture Trustee shall, upon
the occurrence of any event known to it that is an Indenture Default or
Indenture Event of Default thereunder, give notice thereof to the holders of the
Equipment Notes issued thereunder, GATC, the applicable Owner Trustee and the
applicable Owner Participant. (Indenture, Section 5.01)
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 principal of, 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 4.06)
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
accrued interest thereon. The holders of a majority in aggregate principal
amount of Equipment Notes outstanding under such Indenture may 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 principal of and interest on the
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 and
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 4.02)
Each Indenture provides that, if an Indenture Event of Default thereunder
has occurred and is continuing, the Indenture Trustee thereunder may 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 in certain circumstances to its having proceeded to
exercise one or more remedies under such Lease with respect to the related
Equipment Group, unless at the time, such Indenture Trustee is stayed or
otherwise prevented from doing so by operation of law, in which case such
Indenture Trustee has agreed to refrain from exercising remedies under such
Indenture for a period of 90 days. Further, an Indenture Trustee may not
exercise remedies under an Indenture in those circumstances in which GATC, 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 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 GATC) 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 GATC shall have occurred and be
continuing under such Indenture. See "Description of the Equipment Notes -- The
Leases -- Lease Events of Default" in this Prospectus Supplement. 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, GATC. Any Equipment sold
in the exercise of such remedies will be free and clear of any rights of those
parties including the rights of GATC under such Lease with respect to such
Equipment; provided that no exercise of any remedies by such Indenture Trustee
may affect the rights of GATC under such Lease unless a Lease Event of Default
under such Lease has occurred and is continuing. (Indenture, Sections 4.03(a)
and (c), 4.04(c) and 4.05; Lease, Section 15)
The holders of a majority in 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
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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 5.02 and 5.03)
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 3.03)
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in 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)
rental payments and other payments, except to the extent indicated in clause (a)
of the following paragraph, (ii) the maintenance of the Equipment Group covered
by such Lease, modifications to the Equipment Units within such Equipment Group
and the return to the related Owner Trustee of such Equipment Group at the end
of the term of such Lease and (iii) the renewal of such Lease and the option of
GATC at the end of the term of such Lease to purchase such Equipment Group.
(Indenture, Section 9.05)
Without the consent of the holder of each Equipment Note outstanding under
an Indenture, no amendment or modification of such Indenture may (a) change the
final maturity of, or reduce the principal amount of, or premium, if any, or
interest payable on any Equipment Notes issued under such Indenture or impair
the right to institute suit for the enforcement of any such payment or change
the date on which any principal or premium, 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 9.01)
ASSUMPTION OF EQUIPMENT NOTES UNDER CERTAIN CIRCUMSTANCES
In the event that GATC elects to purchase any or all of an Equipment Group
prior to the maturity of the related Equipment Notes, either pursuant to the
early purchase option described under " -- The Leases -- Early Purchase Option"
or as a result of the related Owner Participant or any affiliate thereof
engaging in a business in competition with the Company's full service railcar
leasing business as described under " -- The Participation Agreements", GATC
shall have the right to assume the related Equipment Notes on a full recourse
basis. Such assumption shall be subject to certain terms and conditions,
including, among other things, (i) delivery by GATC of an indenture supplement
giving effect to such assumption reasonably satisfactory to the related
Indenture Trustee and execution and delivery by GATC of Equipment Notes
reflecting such assumption, (ii) delivery by GATC to the related Indenture
Trustee and the related Owner Trustee of a certificate stating that GATC 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
lapse 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 GATC 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
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obligation of GATC, enforceable against GATC 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 GATC 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 GATC 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 3.06; Lease, Section 22.1; and Participation Agreement, Section 6.9)
THE LEASES
Term and Rentals. Each Equipment Group will be leased separately by the
related Owner Trustee to GATC for a term commencing on the delivery date thereof
to such Owner Trustee and expiring on August 28, 2021 with respect to Equipment
Group No. 1, August 28, 2020 with respect to the Equipment Group No. 2 covered
hopper cars and August 28, 2019 with respect to the Equipment Group No. 2 tank
cars, unless previously terminated as permitted by the related Lease.
The basic rental payments by GATC under each Lease will be payable on each
February 28 and August 28 (or, if such day is not a Business Day, on the next
succeeding Business Day), commencing February 28, 1997, and will be used to make
payments of principal of and interest due on the Equipment Notes issued under
the related Indenture, which will in turn furnish the funds to be distributed by
the Pass Through Trustee to the Certificateholders on February 28 and August 28
of each year, commencing February 28, 1997. (Lease, Section 3.2; Indenture,
Section 3.01) Rental payments that GATC is obligated to make or cause to be made
under each Lease will not be less than the scheduled payments of principal of
and interest on the Equipment Notes issued under the Indenture relating to such
Lease. In certain cases, the semiannual basic rent payments under each Lease may
be adjusted, but under no circumstances will such rent payments be less than the
scheduled payments of principal of and interest on the Equipment Notes issued
under the Indenture relating to such Lease. The balance of any such semiannual
basic rental payment under each Lease, after payment of the scheduled principal
of and interest on the Equipment Notes issued under the Indenture relating to
such Lease, will be paid over to or for the account of the related Owner
Participant as the beneficial owner of the Equipment Group covered by such
Lease. (Lease, Section 3)
Sublease; Possession and Use. GATC is in the business of leasing railcars
to third parties under operating leases. These leases vary in nature based on
the needs of the sublessee and GATC. GATC shall have the right to sublease the
Equipment to any railroad company incorporated in the United States, Canada or
Mexico or to any other responsible company which is not a railroad company for
use in its business; provided that GATC may not sublease more than 15% of the
Equipment Units within any Equipment Group to a sublessee formed under the laws
of Mexico or any state thereof. Each Lease provides that the Equipment Units are
to be used primarily on domestic routes in the United States and that at no time
shall more than 25% of the Equipment Units within any Equipment Group (as
determined by mileage records) be used outside the United States at the same
time until December 31, 1998, in the case of Equipment Group No. 1, or until
December 31, 2003, in the case of Equipment Group No. 2. Thereafter, no more
than 49% of the Equipment Units within any Equipment Group (as determined by
mileage records) may be used outside the continental United States (exclusive of
Alaska) at the same time. Notwithstanding the foregoing, each Lease provides
that no more than 15% of the Equipment Units within any Equipment Group may be
used in Mexico so long as Mexican law does not afford protection to the
applicable Owner Trustee and the applicable Indenture Trustee comparable to
United States law. GATC may not sublease any Equipment Unit for a term which
extends beyond the term of the related Lease unless no Lease Event of Default
thereunder shall have occurred and be continuing and GATC replaces such
Equipment Unit on or prior to the expiration of the related Lease term in
accordance with the provisions of such Lease. No sublease will discharge GATC of
its obligations under the related Lease. (Lease, Section 8.2 and 8.3) If any
Equipment Unit is leased or the possession is otherwise transferred, such
Equipment Unit will remain subject to the Lien of the related Indenture.
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Liens. Each Equipment Group will be maintained free of any liens, other
than the rights of the related Owner Participant, the related Owner Trustee, the
related Indenture Trustee, the holders of the related Equipment Notes, GATC and
any permitted sublessee arising under the related Lease, the related Indenture,
the related Participation Agreement or the related Trust Agreement between such
Owner Trustee and such Owner Participant pursuant to which such Owner Trustee
acts as trustee for the benefit of such Owner Participant, and other than, in
the case of such Equipment Group, certain limited liens permitted under the
related Lease and related Indenture, including liens for taxes either not yet
due and payable or being contested (so long as there exists no material risk of
sale, forfeiture, loss or loss of use of such Equipment Group or any interest
therein), materialmen's, mechanics' and other similar liens arising in the
ordinary course of business and either not yet due and payable or being
contested (so long as there exists no material risk of sale, forfeiture, loss or
loss of use of such Equipment Group), judgment liens that are being appealed and
whose enforcement has been stayed pending such appeal, and salvage rights of
insurers. (Lease, Section 7)
Termination. So long as no Lease Event of Default (or certain specified
events which with notice or lapse of time or both would become a Lease Event of
Default) thereunder shall have occurred and be continuing, GATC may terminate
each Lease at its option any time on or after August 28, 2003 with respect to
any or all of the Equipment Units within the related Equipment Group (provided
that if such termination is for less than all of the Equipment Units in a
Functional Group, GATC shall exercise such termination with respect to at least
25 Equipment Units within the related Equipment Group, no fewer than 25
Equipment Units shall remain in such Functional Group as a result of such
termination and the determination as to which Equipment Units are subject to
termination shall be made by GATC on a random or other basis (in each case
reasonably acceptable to the related Owner Trustee) without regard to
maintenance status, operating condition or otherwise) (the "Terminated Units")
if GATC determines in good faith (as evidenced by a certified copy of a
resolution adopted by its Board of Directors and a certificate executed by the
Chief Financial Officer of GATC), that such Terminated Units have become
obsolete or surplus to its requirements. GATC is required to give notice to the
related Owner Trustee and the related Indenture Trustee of its intention to
exercise its right of termination at least 120 days prior to the proposed date
of termination, which date shall be a Regular Distribution Date. GATC will act
as agent for the related Owner Trustee in obtaining bids for the Terminated
Units and, if GATC succeeds in locating the eventual purchaser of the Terminated
Units, the related Owner Trustee shall transfer on the termination date all of
its right, title and interest in and to the Terminated Units to the bidder which
has submitted the highest cash bid (who may not be GATC or any affiliate of GATC
but who may be the related Owner Trustee or any affiliate of the related Owner
Trustee). 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, GATC 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 the applicable
Make-Whole Amount, if any. 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 related
Indenture Trustee. Amounts in excess of the outstanding principal amount of the
Equipment Notes issued in respect of such Terminated Units, any applicable
premium 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 related
Owner Participant have also been paid, the related Lease shall terminate with
respect to such Terminated Units and the obligation of GATC thereafter to make
basic rental 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 GATC's obligations thereunder, shall continue in effect.
(Lease, Sections 3.6, 10.1, 10.2 and 10.4; Indenture, Section 3.02)
The Owner Trustee with respect to the applicable Equipment Group shall have
the option to retain the Terminated Units, but it may do so only if such Owner
Trustee shall pay, or cause to be paid, to the related Indenture Trustee funds
in an amount equal to the principal of and accrued interest on the outstanding
Equipment Notes issued with respect to such Terminated Units and an amount equal
to the Make-Whole Amount, if any. (Lease, Section 10.3)
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Early Purchase Option. So long as no Lease Event of Default (or certain
specified events which with notice or lapse of time or both would become a Lease
Event of Default) shall have occurred and be continuing under the related Lease
(subject to certain exceptions), GATC may purchase, at its option, exercisable
on the dates specified below, any or all of the Equipment Units contained in the
related Equipment Group at a price equal to the Early Purchase Price of such
Equipment Units, provided that if GATC elects to purchase some but less than all
of the Equipment Units in a Functional Group, GATC shall exercise such purchase
option with respect to at least 25 Equipment Units within the related Equipment
Group, no fewer than 25 Equipment Units shall remain in such Functional Group as
a result of such purchase and the determination as to which Equipment Units are
to be purchased shall be made on a random or other basis (in each case
reasonably acceptable to the related Owner Trustee) without regard to
maintenance status, operating condition or otherwise. GATC's early purchase
option shall be exercisable on February 28, 2017 with respect to the covered
hopper cars in Equipment Group No. 1, February 28, 2018 with respect to the tank
cars in Equipment Group No. 1, August 28, 2016 with respect to the covered
hopper cars in Equipment Group No. 2 and August 28, 2015 with respect to the
tank cars in Equipment Group No. 2. GATC is required to give irrevocable notice
to the related Owner Trustee not less than 90 days prior to such 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 the Early
Purchase Price shall be deposited by GATC directly with the related Indenture
Trustee unless GATC exercises its right to assume all obligations of the Owner
Trustee under the Equipment Notes issued in respect of such Equipment Units.
Amounts in excess of the outstanding principal amount of the Equipment Notes
issued in respect of such Equipment Units and the then accrued and unpaid
interest thereon will be distributed by the related Indenture Trustee in
accordance with the terms of the related Indenture. The Lien of the related
Indenture shall terminate with respect to such Equipment Units after the Early
Purchase Price and all other amounts due and owing by GATC with respect to such
Equipment Units have been paid. (Lease, Sections 3.6 and 22.1; Indenture,
Sections 3.02 and 10.01)
Events of Loss. If an Event of Loss occurs with respect to an Equipment
Unit, GATC shall give notice thereof to the related Owner Trustee and within 60
days after such notice make an election to either (i) pay to such Owner Trustee
the Stipulated Loss Value of such Equipment Unit, together with certain
additional amounts, or (ii) if no Lease Event of Default under the applicable
Lease has occurred and is continuing, replace such Equipment Unit. In the event
GATC elects to replace such Equipment Unit, it must do so within 60 days after
GATC gives notice of such Event of Loss with equipment of the same car type of
the same or newer model year (or otherwise approved by the related Owner
Trustee, which approval shall not be unreasonably withheld), and having a fair
market value, utility, capacity, remaining economic useful life and condition at
least equal to the Equipment Unit so replaced (assuming such Equipment Unit was
in the condition required to be maintained by the applicable Lease). If GATC
elects to pay the Stipulated Loss Value of an Equipment Unit subject to an Event
of Loss or fails to replace such Unit within such 60-day period, it must pay the
Stipulated Loss Value with respect to such Unit on the Regular Distribution Date
which next succeeds the 25th day following the date of notice of the Company's
election to pay the Stipulated Loss Value (or if payment of the Stipulated Loss
Value is so required with respect to an aggregate of fifteen or more Equipment
Units in such Equipment Group, then on the Special Distribution Date which next
succeeds the 25th day following the date such prepayment becomes required). Upon
making such payment, together with certain additional amounts, which in all
circumstances will be at least sufficient to pay in full as of the date of
payment thereof that portion of the aggregate unpaid principal of the
outstanding Equipment Notes issued with respect to such Equipment Unit, together
with all unpaid interest thereon accrued to the date on which such amount is
paid, but without the payment of any Make-Whole Amount, the Lien of the related
Indenture and the related Lease shall terminate with respect to such Equipment
Unit, title thereto shall be transferred to GATC or its designee and the
obligation of GATC thereafter to make rental payments with respect thereto shall
cease. The Stipulated Loss Value and other payments made by GATC shall be
deposited with the related Indenture Trustee. Amounts in excess of the
outstanding principal amount of the Equipment Notes issued under the related
Indenture and the 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. (Lease, Sections
3.6 and 11.2; Indenture, Sections 3.0 and 10.01)
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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
GATC's reasonable judgment (as evidenced by an Officers' Certificate to such
effect), makes repair uneconomic or renders such Equipment Unit unfit for
commercial use, (ii) destruction of such Equipment Unit or theft or
disappearance thereof for a period exceeding twelve months, (iii) the permanent
return of such Equipment Unit to the manufacturer pursuant to any patent
indemnity provisions, (iv) the taking or appropriating of title to such
Equipment Unit by any governmental authority under the power of eminent domain
or otherwise, or (v) the taking or requisitioning of such Equipment Unit for use
by any governmental authority or any agency or instrumentality thereof under the
power of eminent domain or otherwise and such taking or requisition is for a
period that exceeds the remaining Basic Term or any Renewal Term then in effect
(unless such taking or requisition is by any governmental authority, agency or
instrumentality other than the United States or Canada, in which case such
period shall be the lesser of the period described above or 365 days). (Lease,
Section 11.1)
Lease Events of Default. Events of default (each, a "Lease Event of
Default") under each Lease include, among other things: (a) failure by GATC to
make any payment of Basic Rent, any purchase price to be paid by GATC for any
Equipment Units pursuant to the Lease or the related Participation Agreement,
Stipulated Loss Value or Termination Value, within 10 Business Days after the
same shall have become due, (b) failure by GATC to make any payment of
Supplemental Rent, including indemnity or tax indemnity payments, but not
including Stipulated Loss Value or any purchase price to be paid by GATC for any
Equipment Units pursuant to the 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 GATC of written notice of such failure
from the related Owner Trustee or related Indenture Trustee, (c) failure to
maintain in effect insurance as required by the Lease, such failure not having
been waived, (d) GATC shall make or permit any possession of the Equipment Group
or any portion thereof not permitted by the Lease, provided that such
unauthorized possession shall not constitute a Lease Event of Default for a
period of 45 days after the occurrence thereof so long as (i) such unauthorized
possession is not the result of any willful action of GATC and (ii) such
unauthorized possession is capable of being cured and GATC diligently pursues
such cure throughout such 45-day period, or GATC shall make or permit an
unauthorized assignment or transfer of the Lease, (e) failure by GATC to observe
or perform any of the agreements or covenants relating to the merger,
consolidation or transfer of assets of GATC and such failure continues
unremedied for 30 days during which period GATC diligently pursues the cure of
such failure, (f) failure by GATC to perform or observe any other covenant or
agreement to be performed or observed by it under any Lessee Agreement (other
than the Tax Indemnity Agreement) and such failure continues unremedied for 30
days after notice of such failure from the related Owner Trustee 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 GATC is
diligently proceeding to remedy such failure, (g) any representation or warranty
made by GATC in any Lessee Agreement (other than the Tax Indemnity Agreement)
being untrue or incorrect in any material respect at the time made and such
untruth or incorrectness continues to be material and unremedied for a period of
30 days after notice thereof or, if such untruth or incorrectness is capable of
being remedied, for a period of 60 days after receipt of such notice so long as
GATC is diligently proceeding to remedy such untruth or incorrectness and any
adverse effects thereof, and (h) the occurrence of certain events of bankruptcy,
reorganization or insolvency of GATC. 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)
If a Lease Event of Default under any Lease has occurred and is continuing
and such 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 GATC 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 Units subject thereto. These remedies include the
right to repossess the Equipment Units, to terminate the Lease and any sublease
thereunder and to require GATC 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
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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 sales 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 Unit. If payment is made pursuant to the foregoing
clause (iii), such Equipment Unit shall be transferred to GATC. (Lease, Section
15)
THE PARTICIPATION AGREEMENTS
GATC is required to indemnify each Owner Participant, each Owner Trustee,
each Indenture Trustee and the Pass Through Trustee for certain losses, fees and
expenses and for certain other matters. (Participation Agreement, Section 7.2)
In addition, GATC is required to indemnify each Owner Participant, each Owner
Trustee and each Indenture Trustee for certain taxes in connection with the
ownership, lease, sale or use of the Equipment. (Participation Agreement,
Section 7.1)
Each Participation Agreement provides that if the related Owner Participant
or any affiliate thereof is or acquires, is acquired by, merges or otherwise
consolidates with any company or affiliate thereof engaged in full service
railcar leasing, whether or not a direct competitor to GATC or any affiliate of
GATC, or any person that has a material interest in an enterprise that engages
in a business that is competitive with GATC's full service railcar leasing
business, GATC may, on the Special 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 related Equipment Group for a purchase
price equal to either (i) the Termination Value for such Equipment Group
calculated as of such Special Distribution Date, together with all other amounts
due and owing by GATC with respect to such Equipment Group, including, without
limitation, all accrued and unpaid rental payments and any Make-Whole Amount or
(ii) if GATC has elected to assume on a full recourse basis all of the related
Owner Trustee's obligations in respect of the Equipment Notes issued with
respect to such Equipment Group, the difference between the Termination Value
for such Equipment Group and the outstanding principal amount of the Equipment
Notes issued with respect to such Equipment Group. If GATC elects to exercise
its right to purchase the Equipment Group, unless GATC elects to assume the
related Equipment Notes on a full recourse basis, the purchase price shall be
used to prepay the Equipment Notes issued with respect to such Equipment Group
and if such prepayment is prior to August 28, 2008 in the case of the Series
1996-1A Pass Through Certificates and February 28, 2018 in the case of the
Series 1996-1B Pass Through Certificates, the applicable Make-Whole Amount, if
any, shall be paid. See "Description of the Equipment Notes--Prepayment" in this
Prospectus Supplement. (Participation Agreement, Section 6.9)
Under each Participation Agreement, GATC will be prohibited from
consolidating or merging with or into any other corporation or transferring all
or substantially all of its assets to another corporation unless (a) the
successor corporation, if other than GATC, shall be a corporation organized and
existing under the laws of the United States or any state or the District of
Columbia and shall expressly assume the due and punctual performance and
observance of all the covenants and conditions of the Operative Agreements to be
performed by GATC, (b) immediately prior to and immediately after giving effect
to such transaction, no Lease Event of Default under the related Lease, or event
which with notice or the passage of time or both would become a Lease Event of
Default under the related Lease, shall have occurred, whether as a result of
such transaction or otherwise, (c) GATC shall have made all filings necessary or
appropriate in the reasonable opinion of the related Owner Trustee and the
related Indenture Trustee in order to preserve and protect the rights of the
related Owner Trustee under the related Lease and of the related Indenture
Trustee under the related Indenture, and (d) if the person (x) formed by such
consolidation or surviving such merger (if other than GATC) or the person which
acquires all or substantially all of the assets of GATC is not an affiliate of
GATC, the aggregate net worth of such surviving or acquiring person immediately
after such merger, consolidation or acquisition (determined in accordance with
generally accepted accounting principles) shall not be less than the
consolidated net worth of GATC immediately prior to such merger, consolidation
or acquisition, or (y) with which GATC consolidates or merges or which acquires
all or substantially all of the assets of GATC is an affiliate of GATC, such
person, immediately prior to such consolidation, merger or
S-34
<PAGE> 35
acquisition, has a positive net worth (determined in accordance with generally
accepted accounting principles). (Participation Agreement, Section 6.8)
ERISA CONSIDERATIONS
The United States Department of Labor has granted to each of Morgan Stanley
& Co. Incorporated and Salomon Brothers Inc an administrative exemption
(Prohibited Transaction Exemption 90-24, Exemption Application No. D-8019, 55
Fed. Reg. 20,548 (1990) and Prohibited Transaction Exemption 89-89, Exemption
Application No. D-6446, 54 Fed. Reg. 42,589 (1989), respectively) (the
"Exemptions") from certain of the prohibited transaction rules of ERISA and the
Code with respect to the purchase, both upon their initial issuance and in the
secondary market, the holding and the subsequent resale by an employee benefit
plan of certificates in certain pass through trusts, the assets of which consist
of secured credit instruments that bear interest, including qualified equipment
notes secured by leases. A number of conditions must be satisfied in order for
the Exemptions to apply, including the requirement that the certificates have,
at the time of their purchase by an employee benefit plan, a specified credit
rating. Under the Exemptions, an equipment note secured by a lease will be
considered qualified only if it is a note (a) which is secured by equipment
which is leased, (b) which is secured by the obligation of the lessee to pay
rent under the equipment lease and (c) with respect to which the trust's
security interest is at least as protective of the rights of the trust as the
trust would have if the equipment note were secured only by the equipment and
not by the lease. Any plan that purchases a Pass Through Certificate must be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D promulgated
under the Securities Act. The Exemptions from Section 406(b) or 407(a) of ERISA
do not apply to the acquisition, holding or disposition of Pass Through
Certificates by plans sponsored by the Company, the Underwriters, the Pass
Through Trustee, the Owner Trustees, the Owner Participants or any of their
affiliates.
It is not clear whether the Exemptions apply to participant directed plans
described in Section 404(c) of ERISA or plans that are subject to Section 4975
of the Code but that are not subject to Title I of ERISA, such as certain Keogh
plans and certain individual retirement accounts. In addition, there are various
other terms and conditions to the applicability of the Exemptions. Accordingly,
each fiduciary of a Plan should independently determine if its purchase of a
Pass Through Certificate will require an exemption and, if so, whether the
Exemptions apply to the purchase, or whether any other prohibited transaction
exemption is available. See "ERISA Considerations" in the accompanying
Prospectus.
CERTAIN TAX ASPECTS
The tax consequences set forth in the accompanying Prospectus under
"Federal Income Tax Consequences" and "Certain Illinois Taxes" shall apply to
the Pass Through Certificates offered hereby.
Under certain circumstances, GATC may assume the Equipment Notes on a full
recourse basis. See "Description of the Equipment Notes -- Assumption of the
Equipment Notes Under Certain Circumstances." A number of federal income tax
considerations would be raised by such an assumption of the Equipment Notes
including whether that event would give rise to a taxable event in which a
Certificateholder would recognize gain or loss, the determination of the amount
realized upon such event and whether any original issue discount could arise
upon such event. Under certain regulations (which are generally effective
beginning September 24, 1996) such an assumption by GATC should not be treated
as a taxable event. However, that result is uncertain. Accordingly, each
Certificateholder should consult its own tax advisor as to the potential tax
consequences of such an assumption.
S-35
<PAGE> 36
UNDERWRITING
Under the terms of and subject to the conditions contained in the
Underwriting Agreement, Morgan Stanley & Co. Incorporated and Salomon Brothers
Inc (the "Underwriters") have agreed to purchase from the Pass Through Trustee
the percentage of the Pass Through Certificates of each Pass Through Trust and
the aggregate principal amount of Pass Through Certificates, in each such case
as set forth opposite its name below:
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE TOTAL AGGREGATE
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT
UNDERWRITER EACH SERIES OF CERTIFICATES
- --------------------------------------------------------- ----------------------- ----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated........................ 50% $ 53,418,000
Salomon Brothers Inc..................................... 50 53,417,000
--- ----------------
Total.......................................... 100% $106,835,000
================= =============
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Pass Through Certificates is subject to,
among other things, the approval of certain legal matters by counsel and certain
other conditions. The Underwriters are obligated to take and pay for all of the
Pass Through Certificates to be purchased by them if any are taken.
The Underwriters initially propose to offer all or part of the Pass Through
Certificates directly to the public at the public offering prices per Pass
Through Certificate designation set forth on the cover page of this Prospectus
Supplement and may offer a portion of the Pass Through Certificates to dealers
at a price which represents a concession not in excess of .40% of the principal
amount of the Pass Through Certificates. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of .25% of the principal amount
of the Pass Through Certificates to certain other dealers. After the initial
public offering, the public offering prices and such concessions may from time
to time be varied by the Underwriters.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933.
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. No
Underwriter is 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 such Underwriter. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Pass Through Certificates.
LEGAL OPINIONS
The validity of the Pass Through Certificates is being passed upon for GATC
by Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603, and
for the Underwriters by Kirkland & Ellis, 200 East Randolph Drive, Chicago,
Illinois 60601. Both Mayer, Brown & Platt and Kirkland & Ellis will rely on the
opinion of the law department of The First National Bank of Chicago as to basic
matters relating to the authorization, execution and delivery of the Pass
Through Certificates under the Basic Agreement and the Trust Supplements.
S-36
<PAGE> 37
PROSPECTUS
$650,000,000 (LOGO)
General American Transportation Corporation
PASS THROUGH CERTIFICATES
------------------------
Up to $650,000,000 aggregate principal amount of Pass Through Certificates
may be offered for sale from time to time pursuant to this Prospectus and
related Prospectus Supplements. Pass Through Certificates may be issued in one
or more series in amounts, at prices and on terms to be determined at the time
of the offering. In respect of each offering of Pass Through Certificates, a
separate General American Transportation Corporation Pass Through Trust for each
series of Pass Through Certificates being offered (each, a "Trust") will be
formed pursuant to the Pass Through Trust Agreement (the "Basic Agreement") and
a supplement thereto (a "Trust Supplement") relating to such Trust between
General American Transportation Corporation ("GATC" or the "Company") and,
unless otherwise specified in the Prospectus Supplement, The First National Bank
of Chicago (the "Pass Through Trustee"), as pass through trustee under each
Trust. Each Pass Through Certificate in a series will represent a fractional
undivided interest in the related Trust and will have no rights, benefits or
interest in respect of any other Trust. The property of each Trust will consist
of equipment notes (the "Equipment Notes") (a) issued, with recourse to GATC, by
GATC to finance all or a portion of the equipment cost of, or to purchase all or
a portion of the outstanding debt with respect to, certain railcars (the
"Equipment Units"), which have been or will be purchased by GATC (the "Owned
Equipment") or (b) issued on a nonrecourse basis by one or more owner trustees
pursuant to separate leveraged lease transactions to finance or refinance a
portion of the equipment cost of Equipment Units which have been or will be
leased to GATC (the "Leased Equipment"). The Prospectus Supplement relating to
each offering of Pass Through Certificates will describe certain terms of the
Pass Through Certificates being offered, the Trust or Trusts relating thereto,
the Equipment Notes to be purchased by such Trust or Trusts, the Equipment Units
relating to such Equipment Notes and the leveraged lease transactions, if any,
relating thereto.
The Equipment Notes issued in respect of the Leased Equipment (the "Leased
Equipment Notes") will not be direct obligations of, or guaranteed by, GATC, but
the amounts unconditionally payable by GATC for the lease of such Leased
Equipment will be sufficient to pay in full when due all payments required to be
made on such Leased Equipment Notes. The Equipment Notes issued in respect of
the Owned Equipment (the "Owned Equipment Notes") will be direct obligations of
GATC, secured by a security interest in the Owned Equipment.
Equipment Notes may be issued in respect of Equipment Units in one or more
series, each series having a different interest rate and final maturity date. A
separate Trust will purchase one or more series of the Equipment Notes issued
with respect to each group of Equipment Units (an "Equipment Group"). All of the
Equipment Notes held in such Trust will have an interest rate equal to the
interest rate applicable to the Pass Through Certificates issued by such Trust
and maturity dates occurring on or before the final distribution date applicable
to such Pass Through Certificates. The Equipment Notes issued with respect to
each Equipment Group will be secured by a security interest in such Equipment
Group and, in the case of the Leased Equipment, by the lease relating thereto
(each, a "Lease"), including the right to receive rentals payable in respect of
such Equipment Group by GATC.
Interest paid on the Equipment Notes held in each Trust will be passed
through to the holders of the Pass Through Certificates relating to such Trust
on the dates and at the rate per annum set forth in the Prospectus Supplement
relating to such Pass Through Certificates until the final distribution date for
such Trust. Principal paid on the Equipment Notes held in each Trust will be
passed through to the holders of the Pass Through Certificates relating to such
Trust in scheduled amounts on the dates set forth in the Prospectus Supplement
relating to such Pass Through Certificates until the final distribution date for
such Trust.
The Pass Through Certificates may be sold through underwriters, dealers or
agents or directly to purchasers. See "Plan of Distribution." The Prospectus
Supplement will set forth the names of any underwriters, dealers or agents
involved in the sale of the Pass Through Certificates in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them.
------------------------
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.
THE DATE OF THIS PROSPECTUS IS DECEMBER 7, 1995
<PAGE> 38
AVAILABLE INFORMATION
General American Transportation Corporation, a New York corporation ("GATC"
or the "Company") is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by GATC
with the Commission can be inspected and copied at the Public Reference Section
of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the public reference facilities of the
Commission's Regional Offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. GATC has filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus 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, reference is hereby made to the Registration Statement.
DOCUMENTS INCORPORATED BY REFERENCE
GATC's Annual Report on Form 10-K for the year ended December 31, 1994, its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June 30,
1995, and September 30, 1995, respectively, and its Current Report on Form 8-K
dated July 19, 1995 heretofore filed with the Commission pursuant to the
Exchange Act, are hereby incorporated by reference.
All documents filed by GATC pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified and superseded, to constitute a part of
this Prospectus.
GATC will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon the written or oral request of
such person, a copy of any or all of the foregoing documents incorporated herein
by reference (other than exhibits unless specifically incorporated therein).
Requests for such documents should be directed to General American
Transportation Corporation, 500 West Monroe Street, Chicago, Illinois
60661-3676, Attention: Secretary (telephone 312-621-6200).
THE COMPANY
GATC is a wholly owned subsidiary of GATX Corporation ("GATX") and is
principally engaged in railcar leasing and management. GATX Terminals
Corporation ("Terminals"), a wholly owned subsidiary of the Company, is engaged
in the operation of public bulk liquid terminals and domestic pipeline systems.
The Company 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 Company are located at 500
West Monroe Street, Chicago, Illinois 60661-3676 (telephone: (312) 621-6200).
The Company leases specialized railcars, primarily tank cars and to a
lesser extent Airslide(R) covered hoppers and plastic pellet cars, under full
service leases. The Company's railcars have a useful life of approximately 30 to
33 years. The average age of the railcars in the Company's fleet is
approximately
2
<PAGE> 39
15 years. The Company's customers typically lease new equipment for a term of
five years or longer, whereas renewals or leases of used cars are typically for
periods ranging from less than a year to seven years with an average lease term
of about three years. Under its full service leases, the Company maintains and
services its railcars, pays ad valorem taxes and provides many ancillary
services.
Terminals is engaged in the storage, handling and intermodal transfer of
petroleum and chemical commodities at key points in the bulk liquid distribution
chain. Terminals owns and operates terminals in the United States and the United
Kingdom; Terminals also has joint venture interests in facilities in Europe and
the Pacific Rim. All of its terminals are located near major distribution and
transportation points and most are capable of receiving and shipping bulk
liquids by ship, rail, barge and truck. Many of the terminals are also linked
with major interstate pipelines. In addition to storing, handling and
transferring bulk liquids, Terminals also provides blending and testing services
at most of its facilities.
RELATIONSHIP WITH GATX
All of the Company's outstanding common stock is owned by GATX. GATX is
also the parent of American Steamship Company, a shipping company which operates
self-unloading vessels on the Great Lakes, GATX Logistics, Inc., which provides
distribution and logistics support services, warehousing facilities, and related
real estate services throughout North America, and GATX Financial Services,
which through its principal subsidiary, GATX Capital Corporation as well as its
subsidiaries and joint ventures, arranges and services the financing of
equipment and other capital assets on a worldwide basis.
GATX will not guarantee the Pass Through Certificates and does not
guarantee any other indebtedness of the Company. The Company, in the normal
course of business, pays dividends to GATX to provide for GATX's normal
operating expenses. Additional amounts have been advanced to GATX from time to
time for general corporate purposes, the redemption of GATX preferred stock and
the retirement of debt. In addition, GATX may make advances to subsidiaries of
the Company in the normal course of business. These advances have no fixed
maturity date.
3
<PAGE> 40
FORMATION OF THE TRUSTS
In respect of each offering of Pass Through Certificates, one or more
Trusts will be formed, and the related Pass Through Certificates will be issued,
pursuant to separate Trust Supplements to be entered into between the Pass
Through Trustee and GATC in accordance with the terms of the Basic Agreement.
All Pass Through Certificates with respect to each Trust will represent
fractional undivided interests in such Trust and the property held in such
Trust, and will have no rights, benefits or interest in respect of any other
Trust or the property held therein. Concurrently with the execution and delivery
of each Trust Supplement, the Pass Through Trustee, on behalf of the Trust
formed thereby, will enter into one or more financing, refinancing, purchase or
participation agreements (each such agreement being herein referred to as a
"Participation Agreement") relating to one or more Equipment Groups described in
the applicable Prospectus Supplement. Pursuant to the applicable Participation
Agreement, the Pass Through Trustee, on behalf of such Trust, will purchase the
Equipment Notes issued with respect to each such Equipment Group so that all of
the Equipment Notes held in such Trust will have an interest rate equal to the
interest rate applicable to the Pass Through Certificates issued by such Trust.
The maturity dates of the Equipment Notes acquired by each Trust will occur on
or before the final distribution date applicable to the Pass Through
Certificates issued with respect to such Trust. The Pass Through Trustee will
distribute the amount of payments of principal, premium, if any, and interest
received by it as holder of the Equipment Notes to the Certificateholders of the
Pass Through Certificates with respect to the Trust in which such Equipment
Notes are held. See "Description of the Pass Through Certificates" and
"Description of the Equipment Notes."
USE OF PROCEEDS
The Pass Through Certificates offered pursuant to any Prospectus Supplement
will be issued in order to facilitate the financing of all or a portion of the
cost of Owned Equipment described in such Prospectus Supplement or the financing
or refinancing of the debt component of one or more separate leveraged lease
transactions entered into by GATC, as lessee, with respect to Leased Equipment
described therein. The proceeds from the sale of such Pass Through Certificates
will be used by the Pass Through Trustee on behalf of the applicable Trust or
Trusts to purchase, at par, the Owned Equipment Notes issued by GATC to finance
all or a portion of the cost of Owned Equipment purchased or to be purchased by
GATC or the Leased Equipment Notes to be issued by the respective Owner Trustee
or Owner Trustees to finance or refinance all or a portion of the equipment cost
of Leased Equipment. Simultaneously with the acquisition of such Leased
Equipment, the respective Owner Trustee leased or will lease such Leased
Equipment to GATC. As described in the applicable Prospectus Supplement, a
portion of the Equipment Notes issued with respect to one or more Equipment
Groups may be purchased by investors other than the Pass Through Trustee. Unless
otherwise specified in the applicable Prospectus Supplement, GATC will use the
proceeds from each Owned Equipment Note issued by it and from each separate
leveraged lease transaction for general corporate purposes.
The Equipment Notes with respect to each Equipment Group will be issued
under a separate Trust Indenture and Security Agreement (each, an "Indenture")
between a bank or trust company as trustee thereunder (each, an "Indenture
Trustee") and (a) with respect to the Owned Equipment, GATC or (b) with respect
to the Leased Equipment, an owner trustee, not in its individual capacity
(except as expressly set forth therein) but solely as trustee (each, an "Owner
Trustee"), of a separate trust for the benefit of one or more institutional or
corporate investors (each, an "Owner Participant"). In the case of Leased
Equipment, each Owner Participant will provide, from sources other than the
Equipment Notes, the balance of the equipment cost of the related Equipment
Group. No Owner Participant, however, will be personally liable for any amount
payable under the related Indenture or the Leased Equipment Notes issued
thereunder. Subject to certain restrictions, each Owner Participant may transfer
its interest in the related Equipment Group.
Because GATC's obligation to make payments on the Owned Equipment Notes and
to make payments under the Leases relating to the Leased Equipment Notes will be
unconditional, and not
4
<PAGE> 41
affected by the financial performance of the railcars within the related
Equipment Groups, GATC believes that historical financial information with
respect to the Equipment Groups will not be relevant to purchasers of the Pass
Through Certificates.
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
In connection with each offering of Pass Through Certificates, one or more
separate Trusts will be formed and one or more series of Pass Through
Certificates will be issued pursuant to the Basic Agreement and one or more
Trust Supplements to be entered into between GATC and the Pass Through Trustee.
The following summary relates to the Basic Agreement and each of the Trust
Supplements, the Trusts to be formed thereby and the Pass Through Certificates
to be issued by each Trust except to the extent, if any, described in the
applicable Prospectus Supplement. Citations to the relevant sections of the
Basic Agreement appear below in parentheses. The statements under this caption
are a summary and do not purport to be complete. This summary makes use of terms
defined in and is qualified in its entirety by reference to all of the
provisions of the Basic Agreement, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
form of the Trust Supplement relating to each series of Pass Through
Certificates and the forms of the Leases, if any, Participation Agreements,
Indentures and Equipment Notes relating thereto will be filed as exhibits to a
report by the Company on Form 8-K, 10-Q, or 10-K, as applicable, to be filed
with the Commission following the offering of such series of Pass Through
Certificates.
GENERAL
The Pass Through Certificates of each Trust will be issued in fully
registered form only. Each Pass Through Certificate will represent a fractional
undivided interest in the separate Trust created by the Trust Supplement
pursuant to which such Pass Through Certificate is issued. The property of each
Trust will include the Equipment Notes held in such Trust, all monies at any
time paid thereon and all monies due and to become due thereunder and funds from
time to time deposited with the Pass Through Trustee in accounts relating to
such Trust. Each Pass Through Certificate will correspond to a pro rata share of
the outstanding principal amount of the Equipment Notes and other property held
in the related Trust and will be issued in denominations of $1,000 or any
integral multiple of $1,000. (Sections 2.01, 2.02 and 3.01)
Except as otherwise provided in the applicable Trust Supplement, Pass
Through Certificates will be registered in the name of Cede & Co. ("Cede") as
the nominee of The Depository Trust Company ("DTC") and no person acquiring an
interest in Pass Through Certificates (a "Certificate Owner") will be entitled
to receive a certificate representing such person's interest in the related
Trust unless "Definitive Certificates" are issued as described below. Unless
Definitive Certificates are issued, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
DTC Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer, as the case
may be, to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Pass Through Certificates, or to DTC Participants for
distribution to Certificate Owners in accordance with DTC procedures. See
"Description of the Pass Through Certificates -- Book-Entry Registration."
(Section 3.09)
Interest will be passed through to Certificateholders of each Trust at the
rate per annum set forth on the cover page of the applicable Prospectus
Supplement and will be calculated on the basis of a 360-day year of twelve
30-day months.
The Pass Through Certificates of each series represent interests only in
the related Trust and all payments and distributions shall be made only from the
related Trust Property. (Section 3.08) The Pass Through Certificates do not
represent an interest in or obligation of GATC, the Pass Through Trustee, the
Owner Trustee, if any, in its individual capacity, the Owner Participant, if
any, or any affiliate of any thereof.
5
<PAGE> 42
The Basic Agreement does not and, except as otherwise described in the
applicable Prospectus Supplement, the Indentures will not, include financial
covenants or "event risk" provisions specifically designed to afford
Certificateholders protection in the event of a highly leveraged transaction
affecting GATC. However, the Certificateholders of each series will have the
benefit of a lien on the specific Equipment Group securing the related Equipment
Notes held in the related Trust, as discussed under the caption "Description of
the Equipment Notes -- Security."
BOOK-ENTRY REGISTRATION
Except as otherwise described in the applicable Prospectus Supplement, Pass
Through Certificates will be subject to the provisions described under this
caption for book-entry registration with DTC.
DTC. DTC has advised GATC that it is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Exchange Act. DTC was created to hold securities for its participants
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC Participant
either directly or indirectly ("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Pass Through Certificates may do so only through DTC Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal, premium, if any, and interest from the Pass Through
Trustee through DTC Participants or Indirect Participants, as the case may be.
Under a book-entry format, Certificate Owners may experience some delay in their
receipt of payments, because such payments will be forwarded by the Pass Through
Trustee to Cede, 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.
GATC 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, GATC understands that DTC will take such actions with respect to
any specified percentage of the beneficial interest of Certificateholders held
in each Trust only at the direction
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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 GATC nor the Pass Through Trustee will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Pass Through Certificates held by Cede, as nominee
for DTC, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The information contained in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
DEFINITIVE CERTIFICATES. With respect to each Trust, the related 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) GATC advises the Pass Through Trustee in
writing that DTC is no longer willing or able to properly discharge its
responsibilities as depository with respect to such Pass Through Certificates
and the Pass Through Trustee or GATC is unable to locate a qualified successor,
(ii) GATC, 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 aggregate percentage interest in such Trust
of not less than a majority advise the Pass Through Trustee through DTC in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the Certificate Owners' best interest. (Section 3.09)
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. (Section 3.09)
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 Basic Agreement and the
applicable Trust Supplements, 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 applicable 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. (Section 4.02)
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 Basic Agreement and the applicable Trust Supplements. 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. (Section 3.04)
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 GATC to the Indenture Trustees, as assignees of the Owner
Trustees' rights under the Leases, in the case of Leased Equipment Notes, or on
the Owned Equipment Notes, in the case of Owned Equipment Notes, 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
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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 of, premium, if
any, and interest on the Equipment Notes held in each Trust will be distributed
by the Pass Through Trustee to the Certificateholders of such Trust on the date
such receipt is confirmed, except in certain cases when some or all of such
Equipment Notes are in default. See "Description of the Pass Through
Certificates -- Events of Default and Certain Rights Upon an Event of Default."
Payments of principal of, and interest on the unpaid principal amount of,
the Equipment Notes held in each Trust will be scheduled to be received by the
Pass Through Trustee on the dates specified in the applicable Prospectus
Supplement (such scheduled payments of principal of, and interest on, the
Equipment Notes are herein referred to as "Scheduled Payments," and the dates
specified therefor in the applicable Prospectus Supplement are herein referred
to as "Regular Distribution Dates"). The Pass Through Trustee of each Trust will
distribute on each Regular Distribution Date to the Certificateholders of such
Trust all Scheduled Payments, the receipt of which is confirmed by the Pass
Through Trustee on such Regular Distribution Date. Each such distribution of
Scheduled Payments will be made by the Pass Through Trustee to the holders of
record of the Pass Through Certificates of such Trust on the fifteenth day
immediately preceding such Regular Distribution Date, subject to certain
exceptions. (Sections 4.01 and 4.02) If a Scheduled 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 of each Trust will be entitled to receive a pro rata
share of any distribution in respect of Scheduled Payments of principal and
interest made on the Equipment Notes held in such Trust. Scheduled Payments of
principal on the Equipment Notes held in each Trust will be set forth in the
applicable Prospectus Supplement. 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 such Trust reported periodically by the Pass Through Trustee. See
"Description of the Pass Through Certificates -- Pool Factors" and "Description
of the Pass Through Certificates -- Statements to Certificateholders."
Payments of principal, premium, if any, and interest received by the Pass
Through Trustee on account of a partial or full prepayment, if any, of the
Equipment Notes held in a Trust, and payments received by the Pass Through
Trustee following a default in respect of the Equipment Notes held in a Trust
(including, in the case of Leased Equipment Notes, payments received by the Pass
Through Trustee on account of their purchase by the related Owner Trustee or
payments received on account of the sale of such Equipment Notes by the Pass
Through Trustee) ("Special Payments") will be distributed on the dates specified
therefor in the applicable Prospectus Supplement (a "Special Distribution
Date"). In general, the Pass Through Trustee will mail notice to the
Certificateholders of record of any Trust not less than 20 days prior to the
Special Distribution Date on which any Special Payment is scheduled to be
distributed by the Pass Through Trustee stating such anticipated Special
Distribution Date. (Section 4.02) Each distribution of a Special Payment, other
than a final distribution, on a Special Distribution Date for any Trust will be
made by the Pass Through Trustee to the holders of record of the Pass Through
Certificates of such Trust 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 Basic Agreement requires that the Pass Through Trustee establish and
maintain, for each Trust and for the benefit of the Certificateholders of such
Trust, one or more non-interest bearing accounts (the "Certificate Account") for
the deposit of payments representing Scheduled Payments on the Equipment Notes
held in such Trust. (Section 4.01) The Basic Agreement also requires that the
Pass Through Trustee establish and maintain, for each Trust and for the benefit
of the Certificateholders of such Trust,
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one or more accounts (the "Special Payments Account") for the deposit of
payments representing Special Payments.
Pursuant to the terms of the Basic Agreement, the Pass Through Trustee is
required to deposit any Scheduled Payments relating to the applicable Trust
received by it in the Certificate Account of such Trust and to deposit any
Special Payments so received by it in the Special Payments Account of such
Trust. (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 of any Trust are
issued in the form of Definitive Certificates and not to Cede, as nominee for
DTC, distributions by the Pass Through Trustee from the Certificate Account or
the Special Payments Account of such Trust on a Regular Distribution Date or a
Special Distribution Date, as appropriate, will be made by check mailed to each
Certificateholder of such Trust of record on the applicable record date at its
address appearing on the register maintained with respect to such Trust.
(Section 4.02) The final distribution for each Trust, however, will be made only
upon presentation and surrender of the Pass Through Certificates for such Trust
at the office or agency of the Pass Through Trustee specified in the notice
given by the Pass Through Trustee of such final distribution. The Pass Through
Trustee will mail such notice of the final distribution to the
Certificateholders of such Trust, specifying the date set for such final
distribution and the amount of such distribution. (Section 11.01) See
"Description of the Pass Through Certificates -- Termination of the Trusts."
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding Business
Day without additional interest. (Section 12.10)
POOL FACTORS
Unless there has been a prepayment, or a default in respect of one or more
issues of the Equipment Notes held in a Trust, as described in the applicable
Prospectus Supplement or below in "Description of the Pass Through Certificates
- -- Events of Default and Certain Rights Upon an Event of Default," the Pool
Factor for such Trust will decline in proportion to the scheduled repayments of
principal on the Equipment Notes held in such Trust as described in the
applicable Prospectus Supplement. In the event of a partial or full prepayment
or default, the Pool Factor and the Pool Balance of each Trust so affected will
be recomputed after giving effect thereto and notice thereof will be mailed to
Certificateholders of such Trust. Each Trust will have a separate Pool Factor
and Pool Balance.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Trust indicates, as of any date, the aggregate unpaid
principal amount of the Equipment Notes held in such Trust on such date plus any
amounts in respect of principal on such Equipment Notes held by the Pass Through
Trustee and not yet distributed plus the amount of any moneys held in the
related escrow account (other than earnings thereon). The Pool Balance for each
Trust as of any Regular Distribution Date or Special Distribution Date shall be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes held in such Trust and distribution thereof to be made on that
date.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Trust, as of any date, is 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 for each Trust as of any Regular Distribution Date
or Special Distribution Date shall be computed after giving effect to the
payment of principal, if any, on the Equipment Notes held in such Trust and
distribution thereof to be made on that date. The Pool Factor for each Trust
will initially be 1.0000000; thereafter, the Pool Factor for each Trust will
decline as described above to reflect reductions in the Pool Balance of such
Trust. The amount of a Certificateholder's pro rata share of the Pool Balance of
a Trust can be determined by multiplying the original denomination of the
Certificateholder's Pass Through Certificate of such Trust by the Pool Factor
for such Trust as of the applicable Regular Distribution Date or Special
Distribution Date. The Pool Factor and the Pool Balance
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for each Trust will be mailed to Certificateholders of record of such Trust on
each Regular Distribution Date and Special Distribution Date.
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 Scheduled
Payment or Special Payment to Certificateholders of record of the related Trust
a statement, giving effect to such distribution to be made on such Regular
Distribution Date or Special Distribution Date, if any, setting forth the
following information (per $1,000 in aggregate principal amount of Pass Through
Certificates for such Trust, 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 for such Trust. (Section 4.03)
So long as the Pass Through Certificates of any Trust are registered in the
name of Cede, as nominee for DTC, on the applicable record date prior to each
Regular Distribution Date and Special Distribution Date, the Pass Through
Trustee will request from DTC a Securities Position Listing setting forth the
names of all DTC Participants reflected on DTC's books as holding interests in
the Pass Through Certificates of such Trust on such record date. On each Regular
Distribution Date and Special Distribution Date, the Pass Through Trustee will
mail to each such DTC Participant the statement described above, and will make
available additional copies as requested by such DTC Participant, to be
available for forwarding to Certificate Owners. (Section 3.09)
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each Certificateholder of record of each Trust at any time
during the preceding calendar year a report containing the sum of the amounts
determined pursuant to clauses (i) and (ii) above with respect to the Trust for
such calendar year or, in the event such person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such calendar year, and such other items as are readily available to the Pass
Through Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholder's preparation of its federal
income tax returns. (Section 4.03) Such report and such other items shall be
prepared on the basis of information supplied to the Pass Through Trustee by the
DTC Participants, and shall be delivered by the Pass Through Trustee to such DTC
Participants to be available for forwarding by such DTC Participants to
Certificate Owners in the manner described above.
At such time, if any, as the Pass Through Certificates of a Trust are
issued in the form of Definitive Certificates, the Pass Through Trustee will
prepare and deliver the information described above to each Certificateholder of
record of such Trust 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 held in each
Trust, has the right to vote and give consents and waivers in respect of such
Equipment Notes under the applicable Indenture. The Basic Agreement sets forth
the circumstances in which the Pass Through Trustee shall direct any action or
cast any vote as the holder of the Equipment Notes held in the applicable Trust
at its own discretion and the circumstances in which the Pass Through Trustee
shall seek instructions from the Certificateholders of such Trust. Prior to an
Event of Default with respect to any Trust, the principal amount of the
Equipment Notes held in such Trust 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 of such Trust taking the
corresponding position. (Sections 6.01 and 10.01)
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EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Basic Agreement defines an event of default with respect to a Trust (an
"Event of Default") as the occurrence and continuance of an event of default
under one or more of the related Indentures (an "Indenture Event of Default").
The Indenture Events of Default will be described in the applicable Prospectus
Supplement and, in the case of Leased Equipment Notes, will include events of
default under the related Lease. Because the Equipment Notes issued under an
Indenture may be held in more than one Trust, a continuing Indenture Event of
Default under such Indenture would result in an Event of Default with respect to
each such Trust. There will be, however, 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 occurring under any
other Indenture. If an Indenture Event of Default occurs in fewer than all of
the Indentures related to a Trust, the Equipment Notes issued pursuant to the
related Indentures with respect to which an Indenture Event of Default has not
occurred will continue to be held in such Trust and payments of principal and
interest on such Equipment Notes will continue to be distributed to the holders
of the Pass Through Certificates of such Trust as originally scheduled.
In the case of Leased Equipment, the Owner Trustee and the Owner
Participant under each Indenture will each have the right under certain
circumstances to cure an Indenture Event of Default that results from the
occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the Owner Participant chooses to exercise such cure right, the
Indenture Event of Default and consequently the Event of Default with respect to
the related Trust or Trusts will be deemed to be cured.
The Basic Agreement provides that, as long as an Indenture Event of Default
under any Indenture relating to Equipment Notes held in a Trust shall have
occurred and be continuing, the Pass Through Trustee of such Trust may vote all
of the Equipment Notes issued under such Indenture that are held in such Trust,
and upon the direction of the holders of Pass Through Certificates evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Trust, 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 thereon to be due and payable. The Basic
Agreement also provides that, if an Indenture Event of Default under any
Indenture relating to Equipment Notes held in a Trust shall have occurred and be
continuing, the Pass Through Trustee of such Trust may, and upon the direction
of the holders of Pass Through Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of such Trust shall,
subject to certain conditions, vote all of the Equipment Notes issued under such
Indenture that are held in such Trust 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)
The ability of the holders of the Pass Through Certificates issued with
respect to any one Trust to cause the Indenture Trustee with respect to any
Equipment Notes held in such Trust to accelerate the payment on such Equipment
Notes under the related Indenture or to direct the exercise of remedies by such
Indenture Trustee under the related Indenture will depend, in part, upon the
percentage of the aggregate principal amount of all Equipment Notes outstanding
under such Indenture that are represented by the Equipment Notes outstanding
under such Indenture and held in such Trust. Each Trust will hold Equipment
Notes with different terms from those of the Equipment Notes held in the other
Trusts and therefore the Certificateholders of a Trust may have divergent or
conflicting interests from those of the Certificateholders of the other Trusts
holding Equipment Notes relating to the same Equipment Group. In addition, so
long as the same institution acts as Pass Through Trustee of each Trust, in the
absence of instructions from the Certificateholders of any such Trust, the Pass
Through Trustee for such Trust could for the same reason be faced with a
potential conflict of interest upon an Indenture Event of Default. In such
event, the Pass Through Trustee has indicated that it would resign as trustee of
one or all such Trusts, and a successor trustee for one or all of such Trusts
would be appointed in accordance with the terms of the Basic Agreement.
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As an additional remedy, if an Indenture Event of Default shall have
occurred and be continuing, the Basic Agreement provides that the Pass Through
Trustee of a Trust holding Equipment Notes issued under such Indenture may, and
upon the direction of the holders of Pass Through Certificates evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Trust shall, sell all or part of such Equipment Notes 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
for such Trust and shall be distributed to the Certificateholders of such Trust
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. Furthermore, so long as the same
institution acts as Trustee of each Trust, it may be faced with a conflict in
deciding from which Trust to sell Equipment Notes to available buyers. 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 of such Trust will receive a smaller amount of
principal distributions than anticipated and will not have any claim for the
shortfall against GATC, the related Owner Trustee or the related Owner
Participant, in the case of any Leased Equipment, or the Pass Through Trustee.
Furthermore, neither the Pass Through Trustee nor the Certificateholders of such
Trust could take any action with respect to any remaining Equipment Notes held
in such Trust so long as no Indenture Event of Default existed with respect
thereto.
Any amount distributed to the Pass Through Trustee of any Trust by the
Indenture Trustee under any Indenture on account of the Equipment Notes held in
such Trust following an Indenture Event of Default under such Indenture shall be
deposited in the Special Payments Account for such Trust and shall be
distributed to the Certificateholders of such Trust on a Special Distribution
Date. In addition, if, following an Indenture Event of Default under any
Indenture relating to Leased Equipment, the related Owner Trustee exercises its
option, if any, to purchase the outstanding Leased Equipment Notes issued under
such Indenture as described in the related Prospectus Supplement, the price paid
by such Owner Trustee to the Pass Through Trustee of any Trust for the Leased
Equipment Notes issued under such Indenture and held in such Trust shall be
deposited in the Special Payments Account for such Trust and shall be
distributed to the Certificateholders of such Trust on a Special Distribution
Date. (Sections 4.01 and 4.02)
Any funds held by the Pass Through Trustee in the Special Payments Account
for a Trust representing either payments received with respect to any Equipment
Notes held in such Trust 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. Permitted Government Investments are defined as being
obligations of the United States and agencies thereof maturing in not more than
60 days or such lesser time as is required for the distribution of any such
funds on a Special Distribution Date. (Sections 4.01 and 4.04)
The Basic Agreement provides that the Pass Through Trustee of each Trust
shall, within 90 days after the occurrence of a default (as defined below) in
respect of such Trust, give to the Certificateholders of such Trust notice,
transmitted by mail, of all uncured or unwaived defaults with respect to such
Trust known to it; provided that, except in the case of default in the payment
of principal of, premium, if any, or interest on any of the Equipment Notes held
in such Trust, 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," for the purpose of
the provision described in this paragraph only, shall mean the occurrence of any
Event of Default with respect to a Trust as specified above, except that in
determining whether any such Event of Default has occurred any grace period or
notice in connection therewith shall be disregarded. (Section 7.02)
The Basic Agreement contains a provision entitling the Pass Through Trustee
of each Trust, 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 of such Trust before proceeding to exercise any
right or power under the Basic Agreement at the request of such
Certificateholders. (Section 7.03)
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In certain cases, the holders of Pass Through Certificates of a Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Trust may on behalf of the holders of all Pass Through
Certificates of such Trust waive any past default or Event of Default with
respect to such Trust 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 Scheduled Payment or Special
Payment or in the distribution of any such payment, (ii) a default in payment of
the principal of, premium, if any, or interest on any of the Equipment Notes
held in such Trust, and (iii) a default in respect of any covenant or provision
of the Basic Agreement or the related Trust Supplement that cannot be modified
or amended without the consent of each Certificateholder of such Trust affected
thereby. (Section 6.05) Each Indenture will provide that, with certain
exceptions, the holders of a majority in aggregate unpaid principal amount of
the Equipment Notes issued thereunder may on behalf of all such holders waive
any past default or Indenture Event of Default thereunder. In the event of a
waiver with respect to a Trust as described above, the principal amount of the
Equipment Notes issued under the related Indenture held in such Trust shall be
counted as waived in the determination of the majority in aggregate unpaid
principal amount of Equipment Notes required to waive a default or an Indenture
Event of Default under such Indenture. Therefore, if the Certificateholders of a
Trust waive a past default or Event of Default such that the principal amount of
the Equipment Notes held in such Trust constitutes the required majority in
aggregate unpaid principal amount under the applicable Indenture, such past
default or Indenture Event of Default under such Indenture shall be waived. For
a discussion of waivers of Indenture Events of Default under the Indentures, see
"Description of the Equipment Notes -- Indenture Events of Default and
Remedies."
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting GATC and the Pass
Through Trustee of each Trust to enter into supplemental trust agreements,
without the consent of the holders of any of the Pass Through Certificates of
such Trust, (i) to evidence the succession of another corporation to GATC and
the assumption by such corporation of GATC's obligations under the Basic
Agreement and the applicable Trust Supplement, (ii) to add to the covenants of
GATC for the benefit of the holders of such Pass Through Certificates, (iii) to
cure any ambiguity, to correct any manifest error or to correct or supplement
any defective or inconsistent provision of such Basic Agreement, the applicable
Trust Supplement 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 such Pass
Through Certificates, (iv) to evidence and provide for a successor Trustee for
some or all of the Trusts, or (v) to make any other amendments or modifications
which shall only apply to Pass Through Certificates of one or more series to be
issued thereafter. (Section 9.01)
The Basic Agreement also contains provisions permitting GATC and the Pass
Through Trustee of each Trust, with the consent of the Certificateholders of
such Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, to execute supplemental trust agreements
adding any provisions to or changing or eliminating any of the provisions of the
Basic Agreement, to the extent relating to such Trust, and the applicable Trust
Supplement, or modifying the rights 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 held in such Trust, or distributions in respect of any
Pass Through Certificate of such Trust, 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 of such Trust to institute suit for
the enforcement of any such payment when due, (b) permit the disposition of any
Equipment Note held in such Trust, except as provided in the Basic Agreement or
the applicable Trust Supplement, or (c) reduce the percentage of the aggregate
fractional undivided interests of the Trust provided for in the Basic Agreement
or the applicable Trust Supplement, the consent of the holders of which is
required for any such supplemental trust agreement or for any waiver provided
for in the Basic Agreement or such Trust Supplement. (Section 9.02)
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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 held in a Trust, receives a request for its consent to any amendment,
modification or waiver under the Indenture, Lease, if any, or other document
relating to such Equipment Notes, which requires the consent of the
Certificateholders of such Trust, the Pass Through Trustee shall mail a notice
of such proposed amendment, modification or waiver to each Certificateholder of
such Trust as of the date of such notice. The Pass Through Trustee shall request
instructions from the Certificateholders of such Trust as to whether or not to
consent to such amendment, modification or waiver. The Pass Through Trustee
shall vote or consent with respect to such Equipment Notes in such Trust in the
same proportion as the Pass Through Certificates of such Trust were actually
voted by the holders thereof by a certain date. Notwithstanding the foregoing,
if an Event of Default in respect of such Trust 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 or waiver, and may so notify the
Indenture Trustee to which such consent relates. (Section 10.01)
TERMINATION OF THE TRUSTS
The obligations of GATC and the Pass Through Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to the Basic
Agreement and the applicable Trust Supplement and the disposition of all
property held in such Trust. The Pass Through Trustee will mail to each
Certificateholder of record of such Trust notice of the termination of such
Trust, the amount of the proposed final payment and the proposed date for the
distribution of such final payment for such Trust. The final distribution to any
Certificateholder of such Trust will be made only upon surrender of such
Certificateholder's Pass Through Certificates at the office or agency of the
Pass Through Trustee specified in such notice of termination. (Section 11.01)
DELAYED PURCHASE
In the event that, on the date of issuance of any Pass Through
Certificates, all of the proceeds from the sale of such Pass Through
Certificates are not used to purchase the Equipment Notes contemplated to be
held in the related Trust, such Equipment Notes may be purchased by the Pass
Through Trustee at any time on or prior to the date specified in the applicable
Prospectus Supplement. In such event, the Pass Through Trustee will hold the
proceeds from the sale of such Pass Through Certificates not used to purchase
Equipment Notes in an escrow account pending the purchase of the Equipment Notes
not so purchased. Such proceeds will be invested in Specified Investments at the
direction and risk of, and for the account of, GATC. Earnings on Specified
Investments in the escrow account for each Trust will be paid to GATC
periodically, and GATC will be responsible for any losses realized on such
Specified Investments. (Section 2.02)
On the Regular Distribution Date occurring after the issuance of such Pass
Through Certificates, GATC will pay to the Pass Through Trustee an amount equal
to the interest that would have accrued on any Equipment Notes which are
purchased after the date of the issuance of such Pass Through Certificates from
the date of the issuance of such Pass Through Certificates to, but excluding,
the date of the purchase of such Equipment Notes by the Pass Through Trustee.
(Section 2.02)
To the extent that Equipment Notes are not purchased by the Pass Through
Trustee on or prior to the date specified in the applicable Prospectus
Supplement, the unexpended proceeds from the sale of such Pass Through
Certificates, together with interest thereon at the rate applicable to such Pass
Through Certificates, will be distributed to the holders of such Pass Through
Certificates as a Special Payment.
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MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
GATC 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 unless any successor or transferee corporation shall be a
corporation organized and existing under the laws of the United States or any
state or the District of Columbia and shall expressly assume all of the
obligations of GATC contained in the Basic Agreement, and, in the case of Leased
Equipment Notes held in a Trust, both immediately prior to and after giving
effect to such consolidation, merger or transfer, no Lease Event of Default
shall have occurred and be continuing. (Section 5.02)
THE PASS THROUGH TRUSTEE
Unless otherwise specified in the applicable Prospectus Supplement, The
First National Bank of Chicago will be the Pass Through Trustee for each of the
Trusts. 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 Basic Agreement, the Trust Supplements, the Pass Through Certificates,
the Equipment Notes, the Indentures, the Leases, if any, or other related
documents. (Section 7.04) Unless otherwise specified in a Prospectus Supplement,
The First National Bank of Chicago will also be the Indenture Trustee of the
Indentures under which the Equipment Notes are issued. The Company maintains
banking relationships in the ordinary course of business with The First National
Bank of Chicago.
The Pass Through Trustee may resign with respect to any or all of the
Trusts at any time, in which event GATC will be obligated to appoint a successor
trustee. If the Pass Through Trustee ceases to be eligible to continue as
Trustee with respect to a Trust or becomes incapable of acting as Trustee or
becomes insolvent, GATC may remove such Trustee. In addition, any holder of Pass
Through Certificates of such Trust for at least six months may in such
circumstances, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of such Trustee and the
appointment of a successor trustee. Any resignation or removal of the Pass
Through Trustee with respect to a Trust and appointment of the successor trustee
for such Trust does not become effective until acceptance of the appointment by
the successor trustee. (Section 7.09) Pursuant to such resignation and successor
trustee provisions, it is possible that a different trustee could be appointed
to act as the successor trustee with respect to each Trust. All references in
this Prospectus to the Pass Through Trustee are to the trustee acting in such
capacity under each of the Trusts and should be read to take into account the
possibility that each of the Trusts could have a different successor trustee in
the event of such a resignation or removal.
The Basic Agreement provides that GATC 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 GATC with respect to such taxes, the Pass Through Trustee may be
entitled to be reimbursed by the applicable Trust. (Section 7.07)
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are summaries and do not purport to be
complete. Except as otherwise indicated below or as described in the applicable
Prospectus Supplement, the following summaries will apply to the Equipment
Notes, the Indenture, the Lease, if any, and the Participation Agreement
relating to each Equipment Group. Additional provisions with respect to the
Equipment Notes, the Indentures, the Leases, if any, and the Participation
Agreements relating to any particular Equipment Group will be described in the
applicable Prospectus Supplement.
GENERAL
Each Equipment Note issued under the same Indenture will relate to a single
Equipment Group. The Equipment Notes with respect to each Equipment Group will
be issued under a separate Indenture
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between the related Indenture Trustee and GATC (in the case of Owned Equipment
Notes) or the related Indenture Trustee and the Owner Trustee of a trust for the
benefit of the Owner Participant which is the beneficial owner of such Equipment
Group (in the case of Leased Equipment Notes).
GATC's obligations under each Indenture relating to Owned Equipment and
under the related Owned Equipment Notes will be direct obligations of GATC,
secured by a security interest in such Owned Equipment. The Leased Equipment
Notes will be nonrecourse obligations of the related Owner Trustee. Except in
certain circumstances involving GATC's purchase of Leased Equipment and the
assumption of the Leased Equipment Notes related thereto, the Leased Equipment
Notes will not be direct obligations of, or guaranteed by, GATC; however. GATC
will be obligated to make or cause to be made rental and other payments to the
related Owner Trustee under the Lease of the related Equipment Group in amounts
that will be at least sufficient to pay when due all payments required to be
made on the Leased Equipment Notes issued with respect to such Equipment Group.
GATC's rental obligations under each Lease will be general obligations of GATC.
PRINCIPAL AND INTEREST PAYMENTS
Interest paid on the Equipment Notes held in each Trust will be passed
through to the Certificateholders of such Trust on the dates and at the rate per
annum set forth in the applicable Prospectus Supplement until the final
distribution date for such Trust. Principal paid on the Equipment Notes held in
each Trust will be passed through to the Certificateholders of such Trust in
scheduled amounts on the dates set forth in the applicable Prospectus Supplement
until the final distribution date for such Trust.
If any date scheduled for any payment of principal of, premium, if any, or
interest on the Equipment Notes is not a Business Day, such payment may be made
on the next succeeding Business Day without any additional interest.
PREPAYMENTS
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Notes may be
prepaid or purchased, the premium (if any) related to certain prepayments or
purchases and other terms applying to prepayments or purchases of such Equipment
Notes.
SECURITY
The Leased Equipment Notes issued with respect to an Equipment Group will
be secured by (i) an assignment by the related Owner Trustee to the related
Indenture Trustee of such Owner Trustee's rights (except for certain limited
rights described in the Prospectus Supplement) under the Lease with respect to
such Equipment Group, including the right to receive payments of rent thereunder
and (ii) a perfected security interest to such Indenture Trustee in such
Equipment Group, subject to the rights of GATC under such Lease. Unless and
until an Indenture Event of Default with respect to an Equipment Group has
occurred and is continuing, the Indenture Trustee may not exercise the rights of
the Owner Trustee under the related Lease, except the right to receive payments
of rent due thereunder.
The Owned Equipment Notes issued with respect to an Equipment Group will be
secured by a perfected security interest from GATC to the related Indenture
Trustee in such Equipment Group.
The Equipment Notes issued under different Indentures will not be
cross-collateralized and consequently the Equipment Notes issued in respect of
any one Equipment Group will not be secured by any other Equipment Group or, in
the case of Leased Equipment Notes, the Lease related to any other Equipment
Group.
GATC will be required to file each Indenture, any indenture supplement,
each Lease, if any, and any lease supplement with respect to each Equipment
Group under the Interstate Commerce Act (or successor law) 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
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Act. The filing under the Interstate Commerce Act (or successor law) 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
Lease, if any. Such deposit and publication in Canada will be done in order to
protect the lien of the Indenture Trustee in and to the Lease, if any, 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 GATC 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, if any,
relating thereto, will be invested and reinvested by such Indenture Trustee, at
the direction of GATC (except in the case of a Lease Event of Default under the
applicable Lease, if any), in Specified Investments. GATC will pay the amount of
any loss resulting from any such investment directed by it.
GATC will be obligated, at its cost and expense, to maintain, repair and
keep each Equipment Unit in accordance with prudent industry maintenance
practices and in compliance in all material respects with all laws and
regulations.
LIMITATION OF LIABILITY
The Owned Equipment Notes will be direct obligations of GATC. Except in
certain circumstances involving GATC's purchase of Leased Equipment and the
assumption of the Leased Equipment Notes related thereto, the Leased Equipment
Notes will not be direct obligations of, or guaranteed by, GATC or the Owner
Trustees. None of the Owner Trustees, the Owner Participants or the Indenture
Trustees, or any affiliates thereof, shall be personally liable to any holder of
a Leased Equipment Note or, in the case of the Owner Trustees and the Owner
Participants, to the Indenture Trustees for any amounts payable under the Leased
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, premium, if any, and interest on Leased 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 GATC 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 Leased Equipment Notes 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 Leased Equipment
Notes to the Indenture Trustees or to any holder of any Leased Equipment Note.
INDENTURE EVENTS OF DEFAULT AND REMEDIES
The applicable Prospectus Supplement will describe the Indenture Events of
Default under the related Indentures, the remedies that the Indenture Trustee
may exercise with respect to the related Equipment Group, either at its own
initiative or upon instruction from holders of the related Equipment Notes, and
other provisions relating to the occurrence of an Indenture Event of Default and
the exercise of remedies. There will be 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.
In the case of Leased Equipment Notes, 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,
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such Equipment Group and the Lease and the Leased Equipment Notes related
thereto might become part of the bankruptcy proceeding. In such event, payments
on such Leased 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 estate might seek
court approval to reject the related Lease as an executory contract. 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 estate.
THE LEASES
In the case of Leased Equipment Notes, the following provisions will be
applicable unless otherwise disclosed in the Prospectus Supplement.
TERM AND RENTALS. In the case of Leased Equipment, each Equipment Group
will be leased separately by the related Owner Trustee to GATC for a term
commencing on the delivery date thereof to such Owner Trustee and expiring on a
date not earlier than the latest maturity date of the Leased Equipment Notes
issued with respect to such Equipment Group unless previously terminated as
permitted by the related Lease. The basic rental payments by GATC under each
Lease will be payable on the dates specified in the applicable Prospectus
Supplement, and will be assigned by the Owner Trustee under the related
Indenture to provide the funds necessary to make payments of principal and
interest due from such Owner Trustee on the Leased Equipment Notes issued under
such Indenture. Although in certain cases the basic rental payments under the
Leases may be adjusted, under no circumstances will rental payments be less than
the scheduled payments of principal and interest on the Leased Equipment Notes
issued under the Indenture relating to such Lease. The balance of any basic
rental payments under each Lease, after payment of the scheduled principal and
interest on the Leased Equipment Notes issued under the Indenture relating to
such Lease, will be paid over to the related Owner Trustee. GATC's obligation to
pay rent and to cause other payments to be made under each Lease will be a
general obligation of GATC.
NET LEASE. GATC's obligations in respect of each Equipment Group leased by
an Owner Trustee will be those of a lessee under a "net lease." Accordingly,
GATC will be obligated, at its cost and expense, to maintain, repair and keep
each Equipment Unit in any such Equipment Group in accordance with prudent
industry maintenance practices and in compliance in all material respects with
all laws and regulations and consistent with maintenance practices used by GATC
in respect of equipment owned or leased by GATC similar in type to such
Equipment Unit. Subject to certain exceptions, GATC will, at its expense, make
all alterations, replacements or modifications required to be made by the
Association of American Railroads, the United States Department of
Transportation, or any other United States, state or local governmental agency.
GATC reserves the right to contest the validity or applicability of any required
alterations, replacements or modifications. GATC shall have the right to make
alterations, modifications and improvements with respect to each Equipment Unit
in any such Equipment Group, provided that no such alteration, modification or
improvement shall materially diminish the fair market value, utility or
remaining economic useful life of such Unit.
INSURANCE. Unless waived or otherwise excused by the terms of any Lease,
GATC will be required to procure from reputable insurance companies, property
damage and public liability insurance, and, subject to certain limited
exceptions, maintain such insurance in such amounts and for such risks and with
such insurance companies and subject to such deductibles and self insurance no
less comprehensive in amounts and against risks customarily insured against by
GATC in respect of equipment owned or leased by it similar in type to the
related Equipment Units and consistent with prudent industry standards for
companies engaged in full service leasing of railcars, if any.
LEASE EVENTS OF DEFAULT; REMEDIES. The applicable Prospectus Supplement
will describe the Lease Events of Default under the related Lease, the remedies
that the Owner Trustee, or Indenture
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Trustee as assignee of the Owner Trustee, may exercise with respect to an
Equipment Group, and other provisions relating to the occurrence of a Lease
Event of Default and the exercise of remedies.
Lease Events of Default under each Lease will include, among other things,
(a) failure by GATC to make rental payments under the Lease, (b) failure to
maintain insurance as required by the Lease, (c) use of the Equipment Group in
contravention of the Lease, (d) breach of any representation or warranty made by
GATC in the Lease or in the related Participation Agreement and (e) the
occurrence of certain events of bankruptcy, reorganization or insolvency of
GATC. Upon the occurrence of a Lease Event of Default under any Lease, the
related Indenture Trustee, as assignee of the related Owner Trustee's rights
under such Lease, will be entitled to repossess the Equipment Units and use or
sell such Equipment Units free and clear of GATC's rights therein.
If GATC were to become a debtor in a bankruptcy or reorganization case
under the Bankruptcy Code, GATC or its bankruptcy trustee could reject any or
all Leases to which it is a party. In such event, there could be no assurance
that the amount of any claim for damages under such Leases that would be allowed
in such bankruptcy case would be in an amount sufficient to provide for the
repayment of the related Leased Equipment Notes. In any case, rejection of a
Lease by GATC or its bankruptcy trustee would not deprive the related Indenture
Trustee of its security interest in the related Equipment Group.
GATC 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 an Indenture Trustee upon
the occurrence of a Lease Event of Default.
THE PARTICIPATION AGREEMENTS
GATC will be required to indemnify each Indenture Trustee and the Pass
Through Trustee and, in the case of Leased Equipment, each Owner Participant and
Owner Trustee for certain losses and claims and for certain other matters. Each
Owner Participant will be required to discharge certain liens or claims on or
against the assets subject to the lien of the related Indenture that arise out
of any act of or failure to act by or claim against such Owner Participant.
Subject to certain restrictions, each Owner Participant may transfer its
interest in the related Equipment Group.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, Pass
Through Certificates may be purchased by an employee benefit plan (a "Plan")
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). A fiduciary of a Plan must determine that the purchase of a Pass
Through Certificate is consistent with its fiduciary duties under ERISA and does
not result in a non-exempt prohibited transaction as defined in Section 406 of
ERISA or Section 4975 of the Code. Employee benefit plans which are governmental
plans (as defined in Section 3(32) of ERISA) and certain church plans (as
defined in Section 3(33) of ERISA) are not subject to the fiduciary
responsibility provisions of ERISA.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion by GATC of the anticipated material
federal income tax consequences of the purchase, ownership and disposition of
Pass Through Certificates. The summary is based on laws, regulations, rulings
and decisions now in effect, all of which are subject to change, possibly with
retroactive effect, or different interpretation. The discussion below does not
purport to address federal income tax consequences applicable to particular
categories of investors, some of which (for example, insurance companies,
dealers in securities, financial institutions or foreign investors) may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Pass Through Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Investors
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should consult their own tax advisors in determining the federal, state, local,
and any other tax consequences to them of the purchase, ownership and
disposition of Pass Through Certificates, including the advisability of making
any election discussed below. Prospective investors should note that no rulings
have been or will be sought from the Internal Revenue Service (the "IRS") with
respect to any of the federal income tax consequences discussed below, and no
assurance can be given that the IRS will not take contrary positions. It is
anticipated that the Trusts will not be indemnified for any federal income taxes
that may be imposed upon them, and the imposition of any such taxes on any Trust
could result in a reduction in the amounts available for distribution to the
Certificateholders of such Trust.
Mayer, Brown & Platt, counsel to GATC, has advised GATC that, in its
opinion, based upon its interpretation of analogous authorities under currently
applicable law, the Trusts will not be classified as associations taxable as
corporations, but, rather will be classified as grantor trusts under subpart E,
Part I of Subchapter J of the Code, and that each Certificateholder of a Trust
will be treated as the owner of a pro rata undivided interest in each of the
Equipment Notes or any other property held in such Trust.
GENERAL
GATC believes that each Certificateholder in a Trust will be required to
report on its federal income tax return its pro rata share of the entire income
from the Equipment Notes or any other property held in such Trust, in accordance
with such Certificateholder's method of accounting. A Certificateholder using
the cash method of accounting should take into account its pro rata share of
income as and when received by the Pass Through Trustee of such Trust. A
Certificateholder using an accrual method of accounting should take into account
its pro rata share of income as it accrues or is received by such Trustee,
whichever is earlier.
A purchaser of a Pass Through Certificate will be treated as purchasing an
interest in each Equipment Note and any other property in a Trust at a price
determined by allocating the purchase price paid for the Pass Through
Certificate among such Equipment Notes and other property in proportion to their
fair market values at the time of purchase of such Pass Through Certificate.
GATC believes that at the time of formation of a particular Trust, the purchase
price paid for a Pass Through Certificate with respect to such Trust by an
original purchaser of a Pass Through Certificate will be allocated among the
Equipment Notes in such Trust in proportion to their respective principal
amounts. The portion of such Certificateholder's purchase price allocated to
each Equipment Note will constitute such Certificateholder's initial tax basis
in such Equipment Note.
SALES OF PASS THROUGH CERTIFICATES
A Certificateholder's tax basis in a Pass Through Certificate will equal
its cost of such Pass Through Certificate, reduced by any amortized premium (as
described below) and any payments other than interest made on such Pass Through
Certificate and increased by any market discount or original issue discount
included in the Certificateholder's income. A Certificateholder that sells a
Pass Through Certificate will recognize gain or loss (in the aggregate) in an
amount equal to the difference between its adjusted tax basis in the Pass
Through Certificate and the amount realized on the sale (except to the extent
attributable to accrued interest, which should be taxable as interest income)
and, if an Equipment Note or other asset of the related Trust is disposed of, or
an Equipment Note of the related Trust is prepaid, a Certificateholder will
recognize gain or loss (in the aggregate) in an amount equal to the difference
between such Certificateholder's adjusted tax basis in such Equipment Note or
other asset and the Certificateholder's pro rata portion of the amount realized
on the disposition by the Trust or upon such prepayment (except to the extent
attributable to accrued interest, which should be taxable as interest income).
Subject to the market discount provisions of the Code (described below), any
such gain or loss will be capital gain or loss if the Pass Through Certificate
was held as a capital asset and, if the Pass Through Certificate was held for
more than one year, will be long-term capital gain or loss to the extent the
Equipment Notes have been held by a Trust for more than one year. Any long-term
capital gains realized will be taxable under current law to corporate taxpayers
at the rates applicable to ordinary income, and to individual taxpayers at a
maximum marginal rate of 28%. Any capital losses realized will
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be deductible by a corporate taxpayer only to the extent of capital gains and by
an individual taxpayer only to the extent of capital gains plus $3,000 of other
income.
MARKET DISCOUNT
A purchaser of a Pass Through Certificate will be considered to have
acquired an interest in an Equipment Note held in a Trust at a "market discount"
to the extent the remaining principal amount of such Equipment Note allocable to
the Pass Through Certificate exceeds the Certificateholder's tax basis allocable
to such Equipment Note, unless the excess does not exceed a prescribed de
minimis amount. In the event such excess exceeds the de minimis amount, the
Certificateholder will be subject to the market discount rules of Sections 1276
and 1278 of the Code with regard to its interest in the Equipment Note.
In the case of a sale or other disposition of a Certificateholder's
interest in an Equipment Note subject to the market discount rules, Section 1276
of the Code requires that gain, if any, from such sale or disposition be treated
as ordinary income to the extent such gain represents market discount that has
accrued during the period in which the interest was held by such
Certificateholder. In addition, a disposition of a Certificateholder's interest
in an Equipment Note by gift (and in certain other circumstances), could result
in the recognition of market discount income, computed as if such Note had been
sold for its fair market value.
In the case of a partial principal payment on a Certificateholder's
interest in an Equipment Note subject to the market discount rules, Section 1276
of the Code requires that such payment be included in gross income as ordinary
income to the extent such payment does not exceed the market discount that has
accrued during the period such interest was held by such Certificateholder. The
amount of any accrued market discount later required to be included in income
upon a disposition or subsequent partial principal payment, will be reduced by
the amount of accrued market discount previously included in income.
Generally, market discount accrues under a straight line method, or, at the
election of the taxpayer, under a constant interest rate method. However, in the
case of bonds the principal of which may be paid in two or more installments
(such as the Equipment Notes), the manner in which market discount is to be
accrued will be described in Treasury regulations that have yet to be issued.
Until such Treasury regulations are issued, the explanatory Conference Committee
Report to the Tax Reform Act of 1986 (the "Conference Report") indicates that
holders of such obligations may elect to accrue market discount either on the
basis of a constant interest rate or as follows: (1) for those obligations that
have OID, market discount shall be deemed to accrue in proportion to the accrual
of OID for any accrual period, and (2) for those obligations which do not have
OID, the amount of market discount that is deemed to accrue is the amount of
market discount that bears the same ratio to the total amount of remaining
market discount that the amount of stated interest paid in the accrual period
bears to the total amount of stated interest remaining to be paid on the
obligation as of the beginning of such period.
Under Section 1277 of the Code, if in any taxable year interest paid or
accrued by a Certificateholder on indebtedness incurred or continued to purchase
or carry its interest in an Equipment Note subject to the market discount rules
exceeds the interest (including OID) currently includible in income with respect
to such interest in an Equipment Note, deduction of such interest must be
deferred to the extent of the market discount allocable to the taxable year. The
deferred portion of any interest expense will generally be deductible when such
market discount is included in income upon the sale or other disposition
(including repayment) of the indebtedness.
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in its gross income currently. If such election is made, the
rules of Sections 1276 and 1277 (described above) will not apply to the
taxpayer.
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Due to the complexity of the market discount rules, prospective
Certificateholders are advised to consult their tax advisors as to the
applicability and operation of the market discount rules as they may apply to a
Certificateholder's interest in the Equipment Notes held by a Trust.
PREMIUM
A Certificateholder will generally be considered to have acquired an
interest in an Equipment Note at a premium to the extent the Certificateholder's
tax basis allocable to such interest exceeds the remaining principal amount of
the Equipment Note allocable to such interest. In that event, a
Certificateholder who holds a Pass Through Certificate as a capital asset may
amortize that premium as an offset to interest income under Section 171 of the
Code, with corresponding reductions in the Certificateholder's tax basis in its
interest in the Equipment Note if an election under Section 171 of the Code is
or has been made with respect to all debt instruments held by the taxpayer
(including the Pass Through Certificates). Generally, such amortization is on a
constant yield basis. However, in the case of bonds the principal of which may
be paid in two or more installments (such as the Equipment Notes), the
Conference Report indicates a Congressional intent that amortization will be in
accordance with the same rules that will apply to the accrual of market discount
on such obligations (see the discussion of market discount above).
In the case of obligations which may be called at a premium prior to
maturity, amortizable bond premium may be determined by reference to an early
call date. Due to the complexities of the amortizable premium rules,
particularly where there is more than one possible call date and the amount of
any premium is uncertain, Certificateholders are urged to consult their own tax
advisors as to the amount of any amortizable premium and the advisability of
making the election.
BACKUP WITHHOLDING
Payments made on the Pass Through Certificates and proceeds from the sale
of the Pass Through Certificates to or through certain brokers may be subject to
a "backup" withholding tax of 31% unless the Certificateholder complies with
certain reporting procedures or is an exempt recipient under Section 6049(b)(4)
of the Code. Any such withheld amounts will be allowed as a credit against the
Certificateholder's federal income tax.
CERTAIN ILLINOIS TAXES
Mayer, Brown & Platt has advised GATC that, in its opinion, under existing
Illinois law as of the date hereof (i) the Trusts will not be classified as
associations taxable as corporations 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 Trusts for purposes of franchise and income taxation by the State
of Illinois and any political subdivision thereof; (iii) the Trusts 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
Trusts 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 a Trust directly.
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Neither the Trusts nor the Certificateholders will be indemnified for any
state or local taxes imposed on them, and the imposition of any such taxes on a
Trust could result in a reduction in the amounts available for the distribution
to the Certificateholders of such Trust. In general, should a Certificateholder
or a Trust be subject to any state or local tax which would not be imposed if
the Pass Through Trustee were located in a different jurisdiction in the United
States, the Pass Through Trustee will resign and a new Trustee in such other
jurisdiction will be appointed.
PLAN OF DISTRIBUTION
The Company may sell the Pass Through Certificates being offered hereby:
(i) through agents, (ii) to or through underwriters, (iii) through dealers, (iv)
directly to purchasers or (v) through a combination of any such methods of sale.
The distribution of the Pass Through Certificates may be effected from time
to time in one or more transactions either (i) at a fixed price or prices, which
may be changed, or (ii) at market prices prevailing at the time of sale, or
(iii) at prices related to such prevailing market prices, or (iv) at negotiated
prices.
Offers to purchase the Pass Through Certificates may be solicited directly
by the Company or by agents designated by the Company from time to time. Any
such agent, which may be deemed to be an underwriter as that term is defined in
the Securities Act, involved in the offer or sale of the Pass Through
Certificates in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company to such agent will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
If an underwriter or underwriters are utilized in the sale, the Company
will execute an underwriting agreement with such underwriters at the time of
sale to them and the names of the underwriters and the terms of the transaction,
including commissions, discounts and other compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement, which will be
used by the underwriters to make resales of the Pass Through Certificates in
respect of which this Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Pass Through Certificates in
respect of which this Prospectus is delivered, the Company or the Pass Through
Trustee, as the case may be, will sell such Pass Through Certificates to the
dealer, as principal. The dealer may then resell such Pass Through Certificates
to the public at varying prices to be determined by such dealer at the time of
resale.
Underwriters, dealers, agents and other persons may be entitled, under
agreements which may be entered into with the Company, to indemnification
against certain civil liabilities, including liabilities under the Securities
Act.
Underwriters, dealers and agents may be customers of, engage in
transactions with or perform services for the Company in the ordinary course of
business.
LEGAL OPINIONS
The validity of the Pass Through Certificates will be passed upon for GATC
by Mayer, Brown & Platt, Chicago, Illinois, and for any underwriters or agents,
by Winston & Strawn, Chicago, Illinois. Both Mayer, Brown & Platt and Winston &
Strawn will rely on the opinion of the Law Department of The First National Bank
of Chicago, as to basic matters relating to the authorization, execution and
delivery of the Pass Through Certificates under the Basic Agreement. From time
to time, Winston & Strawn has acted as special counsel to GATX Capital
Corporation, a wholly owned subsidiary of GATX.
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EXPERTS
The consolidated financial statements and related schedules of GATC
appearing in GATC's Annual Report (Form 10-K) for the year ended December 31,
1994, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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APPENDIX I
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, Trust Supplements,
Indentures, Leases or Participation Agreements are qualified in their entirety
by reference to the definitions of such terms contained therein. Additional
terms or changes in the terms defined below may appear in the applicable
Prospectus Supplement.
"Basic Agreement" means the Pass Through Trust Agreement, dated as of
August 1, 1992, between GATC and the Pass Through Trustee.
"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.
"Certificate Account" means the one or more non-interest-bearing accounts
established and maintained by the Pass Through Trustee pursuant to the Basic
Agreement on behalf of the Certificateholders of each Trust for the deposit of
payments representing Scheduled Payments on the Equipment Notes held in such
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.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"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 Owned Equipment Notes and the Leased Equipment
Notes.
"Equipment Unit" or "Unit" means an individual railcar.
"Event of Default" means, with respect to the Equipment Notes held in any
Trust, the occurrence and continuance of an Indenture Event of Default under one
or more of the related Indentures.
"Indenture" means each of the separate trust indenture and security
agreements entered into from time to time between (a) GATC and an Indenture
Trustee with respect to the issuance of Owned Equipment Notes or (b) an Owner
Trustee and an Indenture Trustee with respect to the issuance of Leased
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 the applicable Prospectus
Supplement.
"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.
"Lease" means each of the lease agreements entered into with respect to
Leased Equipment between an Owner Trustee and GATC, as each such lease agreement
may from time to time be amended or supplemented.
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"Lease Event of Default" means each of the events designated as an event of
default in a Lease, as described in the applicable Prospectus Supplement.
"Leased Equipment" means each Equipment Group leased by an Owner Trustee to
GATC pursuant to a Lease.
"Leased Equipment Notes" means the equipment notes issued on a nonrecourse
basis by the Owner Trustees pursuant to the Indentures relating to Leased
Equipment.
"Owned Equipment" means each Equipment Group that is security for the
obligations of GATC under the Owned Equipment Notes.
"Owned Equipment Notes" means the equipment notes issued, with recourse to
GATC, by GATC pursuant to the Indentures relating to Owned Equipment.
"Owner Participant" means each of the owner participants for whose benefit
an Owner Trustee owns an Equipment Group leased to GATC pursuant to a Lease and
its permitted successors and assigns.
"Owner Trustee," when used with respect to any Leased Equipment Note or the
Indenture applicable thereto or the Lease related thereto, means the "Owner
Trustee" referred to in the applicable Indenture, not in its individual capacity
but solely as trustee; and each other Person which may from time to time be
acting as Owner Trustee in accordance with the provisions of the applicable
Indenture, Lease or Participation Agreement.
"Participation Agreement" when used with respect to any Equipment Note,
means the note purchase, participation, refinancing or similar agreement or
agreements referred to in the related Indenture, providing for, among other
things, the purchase of Equipment Notes by the Pass Through Trustee.
"Pass Through Certificate" means each of the Pass Through Certificates to
be issued by each of the Trusts pursuant to the Basic Agreement and the related
Trust Supplement.
"Pass Through Trustee" means, unless otherwise specified in a Prospectus
Supplement, The First National Bank of Chicago, in its capacity as Pass Through
Trustee under each Trust, and each other person which may from time to time act
as successor Pass Through Trustee under such Trust.
"Pool Balance" means, for each Trust, as of any date, the aggregate unpaid
principal amount of the Equipment Notes held in such Trust on such date plus any
amounts in respect of principal on such Equipment Notes held by the Pass Through
Trustee and not yet distributed plus the amount of any moneys held in the
related escrow account (other than earnings thereon). The Pool Balance for each
Trust as of any Regular Distribution Date or Special Distribution Date shall be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes held in such Trust and distribution thereof to be made on that
date.
"Pool Factor" means, for each Trust, 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 for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes held in such
Trust and distribution thereof to be made on that date.
"Regular Distribution Date" means each date on which a Scheduled Payment
will be distributed, as specified in the applicable Prospectus Supplement.
"Scheduled Payment" means each payment of interest or principal on an
Equipment Note scheduled to be received by the Pass Through Trustee on the
Regular Distribution Dates specified in the applicable Prospectus Supplement.
"Special Distribution Date" means each date on which a Special Payment will
be distributed, as specified in the applicable Prospectus Supplement.
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"Special Payment" means (i) any payment of principal, premium, if any, and
interest resulting from the prepayment or purchase of an 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
held in a Trust upon an Indenture Event of Default in respect of, or upon
acceleration relating to, such Equipment Note, (iii) any payment of principal,
premium, if any, and interest on an Equipment Note which is not in fact paid
within five days of a Regular Distribution Date, (iv) any proceeds from the sale
of any Equipment Note upon an Event of Default, or (v) the amounts available for
distribution from a Trust as a result of the failure to apply such amounts to
the purchase of Equipment Notes on or prior to the date specified in the
applicable Prospectus Supplement.
"Special Payments Account" means the one or more accounts established and
maintained by the Pass Through Trustee pursuant to the Basic Agreement on behalf
of the Certificateholders of each Trust for the deposit of payments representing
Special Payments on the Equipment Notes held in such Trust.
"Specified Investments" when used with respect to any Trust, means, unless
otherwise specified in the related Prospectus Supplement, (i) direct obligations
of the United States of America and agencies thereof for which the full faith
and credit of the United States of America is pledged, (ii) obligations fully
guaranteed by the United States of America, (iii) certificates of deposit issued
by, or bankers' acceptances of, or time deposits with, any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States of America or one of the states thereof having combined
capital and surplus and retained earnings of at least $500,000,000 (including
any Indenture Trustee or Owner Trustee if such conditions are met) and (iv)
repurchase agreements with any financial institution having a combined capital
and surplus of at least $750,000,000 fully collateralized by obligations of the
type described in clauses (i) through (iii) above; provided that if all of the
above investments are unavailable, the entire amounts to be invested may be used
to purchase Federal funds from an entity described in clause (iii) above; and
provided further that no investment shall be eligible as a "Specified
Investment" unless the final maturity or date of return of such investment is 91
days or less from the date of purchase thereof.
"Trust" means each of the General American Transportation Corporation Pass
Through Trusts to be formed pursuant to the Basic Agreement and a Trust
Supplement.
"Trust Property" means the Equipment Notes held as the property of a 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 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
GATC and the Pass Through Trustee, pursuant to each of which a 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 Trust.
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