EXHIBIT 10.52
Equipment Lease Agreement
(KCSR 2007-1)
dated as of September 27, 2007
between
KCSR 2007-1 Statutory Trust, acting through
U.S. Bank Trust National Association,
not in its individual capacity, but solely as Owner Trustee,
Lessor
and
The Kansas City Southern Railway Company,
Lessee
30 SD70ACe Locomotives
30 GE ES44AC Locomotives
     Certain of the right, title and interest of Lessor in and to this Lease,
the Equipment covered hereby and the Rent due and to become due hereunder have
been assigned as collateral security to, and are subject to a security interest
in favor of, Wilmington Trust Company, as Indenture Trustee under a Trust
Indenture and Security Agreement (KCSR 2007-1), dated as of September 27, 2007
between said Indenture Trustee, as secured party, and Lessor, as debtor.
Information concerning such security interest may be obtained from Indenture
Trustee at its address set forth in Section 20 of this Lease. This Lease
Agreement has been executed in several counterparts, but only that counterpart
shall be deemed the original counterpart for chattel paper purposes that
contains the receipt therefor executed by Wilmington Trust Company, as Indenture
Trustee, on the signature page thereof. See Section 26.2 for information
concerning the rights of the original holder and the holders of the various
counterparts hereof.
     Memorandum of Equipment Lease Agreement (KCSR 2007-1) filed with the
Surface Transportation Board pursuant to 49 U.S.C. § 11301 on September 26, 2007
at 1:00 p.m., Recordation Number 27172, and deposited in the Office of the
Registrar General of Canada pursuant to Section 105 of the Canada Transportation
Act on September 26, 2007 at 3:05 p.m.

 

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Table of Contents

          Section   Heading   Page

         
Section 1. Definitions
    1  
 
       
Section 2. Acceptance and Leasing of Equipment
    1  
 
       
Section 3. Term and Rent
    1  
 
       
Section 3.1. Lease Term
    1  
Section 3.2. Interim Rent and Basic Rent
    2  
Section 3.3. Supplemental Rent
    4  
Section 3.4. Adjustment of Rent
    4  
Section 3.5. Manner of Payments
    4  
 
       
Section 4. Ownership and Marking of Equipment
    5  
 
       
Section 4.1. Retention of Title
    5  
Section 4.2. Duty to Number and Mark Equipment
    5  
Section 4.3. Prohibition against Certain Designations
    5  
 
       
Section 5. Disclaimer of Warranties; Right of Quiet Enjoyment
    6  
 
       
Section 5.1. Disclaimer of Warranties
    6  
Section 5.2. Quiet Enjoyment
    6  
 
       
Section 6. Return of Equipment; Storage
    7  
 
       
Section 6.1. General
    7  
Section 6.2. Condition of Equipment
    7  
Section 6.3. Storage
    8  
Section 6.4. Termination of Lease
    9  
 
       
Section 7. Liens
    9  
 
       
Section 8. Maintenance; Operation; Sublease
    9  
 
       
Section 8.1. Maintenance
    9  
Section 8.2. Operation
    9  
Section 8.3. Sublease
    10  
 
       
Section 9. Modifications
    10  
 
       
Section 9.1. Required Modifications
    10  
Section 9.2. Optional Modifications
    11  
Section 9.3. Removal of Proprietary and Communications Equipment
    11  
Section 9.4. Retention of Equipment by Lessor
    11  

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          Section   Heading    Page
Section 10. Voluntary Termination
    12  
 
       
Section 10.1. Right of Termination
    12  
Section 10.2. Sale of Equipment
    13  
Section 10.3. Retention of Equipment by Lessor
    13  
Section 10.4. Termination of Lease
    14  
 
       
Section 11. Loss, Destruction, Requisition, Etc.
    14  
 
       
Section 11.1. Event of Loss
    14  
Section 11.2. Replacement or Payment upon Event of Loss
    15  
Section 11.3. Rent Termination
    16  
Section 11.4. Disposition of Equipment; Replacement of Unit
    16  
Section 11.5. Eminent Domain
    17  
 
       
Section 12. Insurance
    17  
 
       
Section 12.1. Property Damage and Public Liability Insurance
    17  
Section 12.2. Proceeds of Insurance
    19  
Section 12.3. Additional Insurance
    19  
 
       
Section 13. Reports; Inspection
    19  
 
       
Section 13.1. Duty of Lessee to Furnish
    19  
Section 13.2. Lessor’s Inspection Rights
    19  
 
       
Section 14. Events of Default
    20  
 
       
Section 15. Remedies
    21  
 
       
Section 15.1. Remedies
    21  
Section 15.2. Cumulative Remedies
    24  
Section 15.3. No Waiver
    24  
Section 15.4. Lessee’s Duty to Return Equipment Upon Default
    24  
Section 15.5. Specific Performance; Lessor Appointed Lessee’s Agent
    25  
 
       
Section 16. Filings; Further Assurances
    25  
 
       
Section 16.1. Filings
    25  
Section 16.2. Further Assurances
    25  
Section 16.3. Expenses
    25  
 
       
Section 17. Lessor’s Right to Perform
    25  
 
       
Section 18. Assignment
    26  
 
       
Section 18.1. Assignment by Lessor
    26  
Section 18.2. Assignment by Lessee
    26  
Section 18.3. Sublessee’s Performance and Rights
    26  

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          Section   Heading    Page
Section 19. Net Lease, etc.
    27  
 
       
Section 20. Notices
    27  
 
       
Section 21. Concerning Indenture Trustee
    29  
 
       
Section 21.1. Limitation of Indenture Trustee’s Liabilities
    29  
Section 21.2. Right, Title and Interest of Indenture Trustee under Lease
    29  
 
       
Section 22. Termination Upon Purchase by Lessee; Options to Renew
29  
 
       
Section 22.1. Termination upon Purchase by Lessee
    29  
Section 22.2. Renewal Options
    30  
Section 22.3. [Reserved]
    30  
Section 22.4. Determination of Fair Market Rental Value
    30  
Section 22.5. Stipulated Loss Value During Renewal Term
    31  
 
       
Section 23. Lessee’s Options to Purchase Equipment; Purchase of Beneficial
Interest 
31  
 
       
Section 24. Limitation of Lessor’s Liability
    33  
 
       
Section 25. Filing in Mexico
    33  
 
       
Section 26. Miscellaneous
    33  
 
       
Section 26.1. Governing Law; Severability
    33  
Section 26.2. Execution in Counterparts
    33  
Section 26.3. Headings and Table of Contents; Section References
    34  
Section 26.4. Successors and Assigns
    34  
Section 26.5. True Lease
    34  
Section 26.6. Amendments and Waivers
    34  
Section 26.7. Survival
    34  
Section 26.8. Business Days
    34  
Section 26.9. Directly or Indirectly
    34  
Section 26.10. Incorporation by Reference
    35  
Section 26.11. Entitlement to §1168 Benefits
    35  
Section 26.12. Waiver of Jury Trial
    35  

Attachments to Equipment Lease Agreement:

         
Exhibit A
  -   Form of Lease Supplement
Appendix A
  -   Definitions

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Equipment Lease Agreement
(KCSR 2007-1)
     This Equipment Lease Agreement (KCSR 2007-1), dated as of September 27,
2007 (this "Lease”), between the KCSR 2007-1 Statutory Trust, a Connecticut
statutory trust (“Lessor”), acting through U.S. Bank Trust National Association,
a national banking association, not in its individual capacity except as
expressly stated herein, but solely as trustee created under the Trust Agreement
(as hereinafter defined) (in its individual capacity "Trust Company” and as
Owner Trustee, together with its permitted successors and assigns, called the
“Owner Trustee”), and The Kansas City Southern Railway Company, a Missouri
corporation (“Lessee”),
Witnesseth:
Section 1. Definitions.
     Unless the context otherwise requires, all capitalized terms used herein
without definition shall have the respective meanings set forth in Appendix A
hereto for all purposes of this Lease.
Section 2. Acceptance and Leasing of Equipment.
     Lessor hereby agrees (subject to satisfaction or waiver of the conditions
applicable to each Delivery Date set forth in Article IV of the Participation
Agreement), simultaneously with the delivery of each Unit of Equipment from the
Seller to Lessor to accept delivery of such Unit of Equipment from Seller, as
evidenced by the execution and delivery by an authorized representative of
Lessor of a Certificate of Acceptance with respect to such Unit and thereafter
to lease such Unit to Lessee hereunder. Lessee further agrees (subject to
satisfaction or waiver of the conditions applicable to each Delivery Date for
such Unit set forth in Article IV of the Participation Agreement) to execute and
deliver a Lease Supplement covering such Unit. Lessor hereby authorizes one or
more employees or agents of Lessee, designated by Lessee, to act on behalf of
Lessor as its authorized representative or representatives to accept delivery of
the Equipment and to execute and deliver such Certificate of Acceptance, all in
accordance with Sections 2.1(a) and 2.3(b) of the Participation Agreement.
Lessee hereby agrees that such acceptance of delivery by such authorized
representative or representatives on behalf of Lessor shall, without further
act, irrevocably constitute acceptance by Lessee of such Unit for all purposes
of this Lease.
Section 3. Term and Rent.
     Section 3.1. Lease Term. The interim term of this Lease (the “Interim
Term”) shall commence for each Unit on the Delivery Date for such Unit and shall
terminate at 11:59 P.M. (New York City time) on the date set forth as Item C to
Schedule 3 of the Participation Agreement (the “Interim Term Expiration Date”)
for such Unit. The basic term of this Lease (the “Basic Term”) for each Unit
shall commence on the day (the “Basic Term Commencement

 

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Date”) immediately following the Interim Term Expiration Date for such Unit and,
subject to earlier termination pursuant to Sections 10, 11, 15, 22.1 and 23,
shall expire at 11:59 P.M. (New York City time) on the date set forth as Item D
to Schedule 3 of the Participation Agreement (the “Basic Term Expiration Date”)
for such Unit. Subject and pursuant to Section 22.2, Lessee may elect one or
more Renewal Terms with respect to any Unit.
     Section 3.2. Interim Rent and Basic Rent. (a) Lessee and Lessor hereby
agree that no Rent (other than Supplemental Rent, if any) shall be payable to
Lessor during the Interim Term. Lessee hereby agrees to pay Lessor Basic Rent
for each Unit throughout the Basic Term applicable thereto on the first Rent
Payment Date and in consecutive semi-annual installments thereafter payable on
each Rent Payment Date. Each such payment of Basic Rent shall be in an amount
equal to the product of the Equipment Cost for such Unit multiplied by the Basic
Rent percentage for such Unit set forth opposite such Rent Payment Date on
Schedule 2 to the applicable Lease Supplement for such Type of Equipment (as
such Schedule 2 shall be adjusted pursuant to Section 2.6 of the Participation
Agreement for the applicable Type of Equipment). Basic Rent shall be payable on
the Rent Payment Dates as set forth in Schedule 2 to the applicable Lease
Supplement for the applicable Type of Equipment. Basic Rent shall be allocated
and accrued for use of the Units as specified in Schedule 5 to the applicable
Lease Supplement for the applicable Type of Equipment (“Allocated Rent"). For
the avoidance of doubt, and notwithstanding anything to the contrary herein, the
parties agree that irrespective of Lessee’s payment obligation on each Rent
Payment Date, Lessee’s liability on account of the use of each Unit shall be
allocated to each Lease Period in the amount of Allocated Rent set forth in
Schedule 5 to the applicable Lease Supplement for the applicable Type of
Equipment. Basic Rent allocated to any Lease Period shall be further allocated
ratably to each day within such Lease Period. Basic Rent shall be allocated to
each calendar year in the Lease Term based upon the assumption that each
calendar year in the Lease Term is 360 days, consisting of four 90-day quarters
and twelve 30-day months.
     (b) It is the intention of Lessor and Lessee that: (i) for purposes of
Section 467 of the Code the Allocated Rent derived by multiplying Equipment Cost
by the percentage set forth for each Lease Period on Schedule 5 to the
applicable Lease Supplement under the caption “Allocated Rent” constitutes a
specific allocation of “fixed rent” within the meaning of Treasury Regulation
Section 1.467-1(c)(2)(ii) with the effect that each of Lessor and Lessee shall
accrue rental income and rental expense, respectively, in the amount equal to
Equipment Cost multiplied by the percentage as set forth for each Lease Period
under the column with the heading “Allocated Rent” on Schedule 5 to the
applicable Lease Supplement.
     (c) Lessor and Lessee agree that a prepaid or deferred rent balance may
exist at certain times during the Basic Term. It is the intention of Lessor and
Lessee that any such prepaid or deferred rent balance shall (A) in the case of a
prepaid rent balance, give rise to a loan from Lessee to Lessor in the amount of
any positive loan balance (the “Lessor Loan Balance”) computed by multiplying
the percentage set forth in Schedule 6 to the applicable Lease Supplement under
the caption “Loan Balance” by the Equipment Cost, and in the case of a deferred
rent balance, shall give rise to a loan from Lessor to Lessee in the amount of
any negative loan balance (the “Lessee Loan Balance”) computed by multiplying
the percentage set forth in Schedule 6 to the applicable Lease Supplement under
the caption “Loan Balance” by the

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Equipment Cost and (B) such loan shall provide for “adequate stated interest”
within the meaning of Treasury Regulation Section 1.467-2(b)(ii). If there shall
be an outstanding Lessor Loan Balance, Lessor shall deduct interest expense and
Lessee shall include interest income, in each case, in an amount equal to the
product of Equipment Cost multiplied by the percentage set forth under the
caption “Interest Amount” for the applicable period identified on Schedule 6 to
the applicable Lease Supplement. If there shall be an outstanding Lessee Loan
Balance, Lessee shall deduct interest expense and Lessor shall include interest
income, in each case, in an amount equal to the product of Equipment Cost
multiplied by the percentage set forth under the caption “Interest Amount” for
the applicable period identified on Schedule 6 to the applicable Lease
Supplement.
     (d) The obligations of Lessor to Lessee under this Section 3.2 (including
Lessor’s obligation with respect to any loan from Lessee as represented by any
Lessor Loan Balance) (i) are subject and subordinate to the obligations of
Lessor under the Indenture and of Lessee to Lessor under any other Operative
Agreement, (ii) are payable exclusively from amounts distributable under clause
“second” of Section 3.01 of the Indenture or clause “fourth” of Section 3.03 of
the Indenture, (iii) shall be suspended at any time a Specified Default or an
Event of Default is continuing (unless all amounts payable to the Loan
Participants under Section 3.03 of the Indenture shall have been satisfied in
full and Lessee has paid Lessor all amounts due to Lessor and Owner Participant
under the Operative Agreements), and (iv) shall not be enforceable by Lessee
other than by written demand unless all amounts payable to the Loan Participants
under Section 3.03 of the Indenture shall have been satisfied in full and Lessee
has paid Lessor all amounts due to Lessor and Owner Participant under the
Operative Agreements. Lessee acknowledges, consents and agrees to the
subordination and other terms set forth in the previous sentence.
     The EBO Fixed Purchase Price, each Stipulated Loss Value and each
Termination Value, as of any Determination Date, reflects the subtraction of any
Lessor Loan Balance and accrued interest thereon and the addition of any Lessee
Loan Balance, accrued interest thereon and accrued Basic Rent; and the payment
thereof, or any amount calculated by reference thereto, by Lessee as and when
due hereunder in connection with a termination of this Lease with respect to any
Unit pursuant to Sections 10, 11, 15 or 22.1 shall effect a repayment, by
offset, of the Lessor Loan Balance or a repayment of the Lessee Loan Balance, as
the case may be.
     (e) In the event that the amount of fixed rent payable under the Lease is
deemed to be less than or more than the aggregate amount of Basic Rent
identified on Schedule 2 to the applicable Lease Supplement (and such increase
is deemed to be fixed rent within the meaning of Treasury
Regulation Section 1.467-1(h)(3) or such decrease is deemed to be a decrease of
fixed rent within the meaning of Treasury Regulation Section 1.467-1(h)(3)), the
amount of Allocated Rent for each Lease Period shall be increased or decreased,
as the case may be, by an amount equal to the deemed increase or decrease in
Basic Rent payments multiplied by a fraction, the numerator of which is equal to
the amount of Allocated Rent for such Lease Period and the denominator of which
is the aggregate amount of Allocated Rent for all Lease Periods. The adjusted
Allocated Rent shall constitute Allocated Rent for all purposes of this Lease.

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     (f) Anything contained herein or in the Participation Agreement to the
contrary notwithstanding, each installment of Basic Rent (both before and after
any adjustment pursuant to Section 2.6 of the Participation Agreement) shall be,
under any circumstances and in any event, in an amount at least sufficient for
Lessor to pay in full as of the due date of such installment, any payment of
principal of and interest on the Equipment Notes required to be paid by Lessor
pursuant to the Indenture on such due date.
     Section 3.3. Supplemental Rent. Lessee also agrees to pay to Lessor, or to
whomsoever shall be entitled thereto, any and all Supplemental Rent, promptly as
the same shall become due and owing, or where no due date is specified, promptly
after demand by the Person entitled thereto, and in the event of any failure on
the part of Lessee to pay any Supplemental Rent, Lessor shall have all rights,
powers and remedies provided for herein or by law or equity or otherwise as in
the case of nonpayment of Basic Rent. Without limiting the generality of the
foregoing, Lessee will pay, as Supplemental Rent, (i) on demand, to the extent
permitted by applicable law, an amount equal to interest at the applicable Late
Rate on any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due or demanded, as the case may be, for the period from such
due date or demand until the same shall be paid, (ii) an amount equal to any
Positive Make-Whole Amount due under Section 2.10(a) or Section 2.10(c) of the
Indenture, (iii) in the case of the termination of this Lease with respect to
any Unit pursuant to Section 10, on the applicable Termination Date, an amount
equal to the Positive Make-Whole Amount, if any, with respect to the principal
amount of each Equipment Note to be prepaid as a result of such termination and
any Positive Make-Whole Amount due on the Equipment Notes upon their
acceleration pursuant to Section 4.02 of the Indenture by reason of a Lease
Event of Default, (iv) in the case of a termination of this Lease with respect
to any Unit pursuant to Section 22.1, on the date such Unit is purchased, an
amount equal to the Positive Make-Whole Amount, if any, with respect to any
Equipment Note to be prepaid on such date, (v) in the case of any refunding or
refinancing pursuant to Section 11.2 of the Participation Agreement or any
prepayment pursuant to Section 2.10(d) of the Indenture, on the date specified
in the agreement referred to in Section 11.2(a) of the Participation Agreement
or Section 2.10(d) of the Indenture, as applicable, an amount equal to the
Positive Make-Whole Amount, if any, with respect to the principal amount of each
Equipment Note outstanding on the Refunding Date, (vi) on demand, any payments
required under the Tax Indemnity Agreement or Article VII of the Participation
Agreement and (vii) all amounts payable by Lessor under Section 7.02 of the
Indenture. All Supplemental Rent to be paid pursuant to this Section 3.3 shall
be payable in the type of funds and in the manner set forth in Section 3.5.
     Section 3.4. Adjustment of Rent. Lessee and Lessor agree that the Basic
Rent, Stipulated Loss Value and Termination Value percentages shall be adjusted
to the extent provided in Section 2.6 of the Participation Agreement.
     Section 3.5. Manner of Payments. All Rent (other than Supplemental Rent
payable to Persons other than Lessor, which shall be payable to such other
Persons in accordance with written instructions furnished to Lessee by such
Persons, as otherwise provided in any of the Operative Agreements or as required
by law) shall be paid by Lessee to Lessor at its office at Goodwin Square, 225
Asylum Street, 23rd Floor, Hartford, Connecticut 06103, Attention:

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Corporate Trust- Administration (KCSR 2007-1). All Rent shall be paid by Lessee
in funds consisting of lawful currency of the United States of America, which
shall be immediately available to the recipient not later than 12:00 noon (New
York City time) on the date of such payment, provided that so long as the
Indenture shall not have been discharged pursuant to the terms thereof, Lessor
hereby directs, and Lessee agrees, that all Rent (excluding Excepted Property)
payable to Lessor and assigned to Indenture Trustee shall be paid directly to
Indenture Trustee at the times and in funds of the type specified in this
Section 3.5 at the office of Indenture Trustee at Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, or at such other location in the United States of America as
Indenture Trustee may otherwise direct.
Section 4. Ownership and Marking of Equipment.
     Section 4.1. Retention of Title. Lessor shall and hereby does retain full
legal title to and ownership of the Equipment notwithstanding the delivery of
the Equipment to Lessee hereunder.
     Section 4.2. Duty to Number and Mark Equipment. On or before the applicable
Delivery Date with respect to each Unit, Lessee shall cause each Unit to be
numbered with the reporting mark shown on the Lease Supplement for such Unit
dated such Delivery Date and, within 30 days of such Delivery Date and at all
times thereafter, shall cause each Unit to be plainly, distinctly, permanently
and conspicuously marked by a plate or stencil printed in contrasting colors
upon each side of each Unit, in letters not less than one inch in height, a
legend substantially as follows:
“Subject to a Security Agreement recorded
with the Surface Transportation Board”
or
“Ownership subject to a Security Agreement filed
with the Surface Transportation Board”
with appropriate changes thereof and additions thereto as from time to time may
be required by law in order to protect Lessor’s right, title and interest in and
to such Unit, its rights under this Lease and the rights of Indenture Trustee.
Except as provided hereinabove, Lessee will not place any such Units in
operation or exercise any control or dominion over the same until the required
legend shall have been so marked on both sides thereof, and will replace
promptly any such word or words in such legend which may be removed, defaced,
obliterated or destroyed. Lessee will not change the reporting mark of any Unit
except in accordance with a statement of new reporting marks to be substituted
therefor, which statement shall be delivered to Lessor by Lessee and a
supplement to this Lease and the Indenture with respect to such new reporting
marks shall be filed or recorded by Lessee in all public offices where this
Lease and the Indenture shall have been filed or recorded, in each case promptly
after a Responsible Officer of Lessee obtains actual knowledge of such change.
     Section 4.3. Prohibition against Certain Designations. Except as above
provided, Lessee will not allow the name of any Person to be placed on any Unit
as a designation that

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might reasonably be interpreted as a claim of ownership; provided, however, that
subject to the delivery of the statement specified in the last sentence of
Section 4.2, Lessee may cause the Equipment to be lettered with the names or
initials or other insignia customarily used by Lessee or any permitted
sublessees or any of their respective Affiliates on railroad equipment used by
it of the same or a similar type.
Section 5. Disclaimer of Warranties; Right of Quiet Enjoyment.
     Section 5.1. Disclaimer of Warranties. Without waiving any claim Lessee may
have against any seller, supplier or manufacturer, Lessee acknowledges and
agrees that, (i) each Unit is of a size, design, capacity and manufacture
selected by and acceptable to Lessee, (ii) Lessee is satisfied that each Unit is
suitable for its purposes, (iii) neither Lessor, Trust Company nor Owner
Participant is a manufacturer of property of such kind, (iv) each Unit is leased
hereunder subject to all applicable laws and governmental regulations now in
effect or hereinafter adopted, and (v) Lessor leases and Lessee takes each Unit
“as-is”, “where-is” and “with all faults”, and Lessee acknowledges that neither
Lessor, Trust Company nor Owner Participant makes nor shall be deemed to have
made, and each expressly disclaims, any and all rights, claims, warranties or
representations either express or implied, as to the value, condition, fitness
for any particular purpose, design, operation, merchantability thereof or as to
the title of the equipment, the quality of the material or workmanship thereof
or conformity thereof to specifications, freedom from patent, copyright or
trademark infringement, the absence of any latent or other defect, whether or
not discoverable, or as to the absence of any obligations based on strict
liability in tort or any other express or implied representation or warranty
whatsoever with respect thereto, except that Trust Company represents and
warrants that on each Delivery Date, Lessor shall have received whatever title
to the Equipment delivered on such Delivery Date as was conveyed to Lessor by
the Seller and each Unit will be free of Lessor’s Liens attributable to Trust
Company. During the Lease Term so long as no Event of Default shall have
occurred and be continuing, Lessor hereby appoints and constitutes Lessee its
agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole cost and expense of Lessee,
whatever claims and rights Lessor may have as owner of the Equipment against the
manufacturers or any prior owner thereof.
     Section 5.2. Quiet Enjoyment. Each party to this Lease acknowledges notice
of, and consents in all respects to, the terms of this Lease, and expressly,
severally and as to its own actions only, agrees that, notwithstanding any other
provision of any of the Operative Agreements, so long as no Lease Event of
Default has occurred and is continuing, it shall not take or cause to be taken
any action inconsistent with Lessee’s rights under this Lease or otherwise
through its own actions in any way to interfere with or interrupt the quiet
enjoyment of the use, operation and possession of any Unit by Lessee or any
sublessee (it being understood that no sublessee shall have any third party
beneficiary rights under this Lease or any other Operative Agreement), assignee
or transferee under any sublease, assignment or transfer then in effect and
permitted by the terms of this Lease.

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Section 6. Return of Equipment; Storage.
     Section 6.1. General. (a) On the expiration of the Lease Term with respect
to any Unit which has not been purchased by Lessee, Lessee will, at its own cost
and expense, deliver possession of such Unit to Lessor at not more than three
interchange points on the tracks of Lessee in the U.S., f.o.b. such interchange
point, as Lessor may reasonably designate to Lessee in writing at least 90 days
before the end of the Lease Term or, in the absence of such designation, as
Lessee may select or, if Lessor has requested storage pursuant to Section 6.3,
to the location determined in accordance with Section 6.3. To the extent that
any maintenance logs are kept by Lessee in its ordinary course of business with
respect to any Unit returned pursuant to this Section 6.1 and such maintenance
logs are customarily made available to the purchaser of equipment of a type
similar to such Unit, such maintenance logs shall be provided to Lessor or its
designee upon the return of such Unit. Upon expiration of the Lease Term with
respect to such Unit, compliance with the terms hereof (including without
limitation the return conditions) and tender of such Unit at the location
determined in accordance with this Section 6.1(a), this Lease and the obligation
to pay Basic Rent and all other Rent for such Unit accruing subsequent to such
expiration (except for Supplemental Rent obligations with respect to such Unit
surviving pursuant to the Participation Agreement or the Tax Indemnity Agreement
or which have otherwise accrued but not been paid as of the date of the
expiration of the Lease Term) shall terminate.
     (b) In the event any Unit is not returned as hereinabove provided at the
expiration of the Lease Term with respect to such Unit, Lessee may retain
custody and control of such Unit so long as Lessee is attempting to remedy any
condition delaying such return, and in any case the covenants of Lessee (other
than with respect to Basic Rent) under this Lease (including those pertaining to
indemnities, Liens, maintenance and insurance) shall continue with respect to
such Unit until such return of such Unit and, regardless of whether such delay
shall be attributable to Lessee or any permitted sublessee, Lessee shall pay
holdover rent to Lessor for the first 30 days in an amount equal to the daily
equivalent of rent during the preceding term, and thereafter in an amount equal
to 120% of the daily equivalent of the greater of (i) the arithmetic average of
the Basic Rent during the Basic Term for such Unit (or, if the failure to return
occurs after a Renewal Term, the arithmetic average of the Basic Rent paid
during the Renewal Term for such Unit) and (ii) the Fair Market Rental Value for
such Unit. The provision for payment pursuant to the immediately preceding
sentence shall not be in abrogation of Lessor’s right under Section 6.1 (a) to
have such Unit returned to it hereunder.
     Section 6.2. Condition of Equipment. Each Unit when returned to Lessor
pursuant to Section 6.1(a) shall (i) be capable of performing the functions for
which it was designed, at its originally rated horsepower without material
degradation, with all mechanical and electrical components in good working
order, ordinary wear and tear excepted, (ii) have no broken glass or material
corrosion, (iii) have installed all required operational software (with
paid-in-full site licenses) necessary for the operation of the Unit in
compliance with the return provisions of this Lease, (iv) otherwise be in the
condition required by Sections 8.1 and 9.3 and (v) be free and clear of all
Liens except Lessor’s Liens and Permitted Liens, provided that Lessee agrees to
promptly discharge any such Permitted Lien upon return of the Unit with Lessor’s
sole remedy for any breach of this clause (v) being damages at law or specific
performance at equity. Except

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as expressly provided in this Section 6.2, there will be no further requirements
imposed upon Lessee with respect to the condition of any Unit upon its return in
accordance with the provisions of Section 6.1 hereof and this Section 6.2.
     Section 6.3. Storage. Upon the expiration of the Lease Term with respect to
each Unit, upon written request of Lessor received at least 90 days prior to the
end of the Lease Term with respect to such Unit, Lessee shall permit Lessor to
store each such Unit, free of charge, except as provided below, at such location
on the tracks of Lessee used by Lessee for the storage of surplus rolling stock
or locomotives or rolling stock or locomotives available for sale as shall be
reasonably designated by Lessor (taking into account, among other things,
Lessee’s storage capacity, security and access) in its request for storage
pursuant to this Section 6.3 for a period (the “Storage Period”) beginning on
the expiration of the Lease Term and ending not more than 60 days after the
later of the expiration of the Lease Term with respect to Units of such Type of
Equipment or the date on which 50% of all Units to be returned at the expiration
of the Lease Term have been returned; provided that with respect to any Unit
returned after the expiration of the Lease Term for such Unit, the Storage
Period for such Unit shall begin on the date of return of such Unit and end
60 days thereafter. Any storage facilities provided by Lessee pursuant to this
Section 6.3 shall, in all cases, be at the cost to Lessor of insurance and
Lessee’s out-of-pocket costs in connection with providing any services not
contemplated hereby to be provided during the Storage Period and at the risk of
Lessor, including but not limited to any deterioration of any Unit caused by
moisture or any weather-related cost to the extent such cost arises during such
period of storage and not as a result of Lessee’s violation of its obligations
under this Lease (except, with respect to any injury to, or death of, any person
exercising, either on behalf of Lessor or any prospective purchaser or user, the
inspection rights granted pursuant to this Section 6.3, Lessee’s gross
negligence or willful misconduct). With respect to the Units stored pursuant
hereto, Lessee will carry and maintain with respect to stored Units, during the
Storage Period, under Lessee’s insurance policies, property damage insurance and
public liability insurance with respect to third party personal and property
damage as Lessee then maintains in respect of equipment owned or leased by it
similar in type to the Equipment; provided that (i) Lessor pays all incremental
costs associated with such insurance coverage, (ii) such insurance coverage does
not negatively impact upon Lessee’s loss insurance rating and (iii) any coverage
provided is above Lessee’s deductibles or self-insurance retention amounts. On
not more than one occasion with respect to each stored Unit and upon not less
than 15 days’ prior written notice from Lessor to Lessee (which notice shall
specify the transportation of no less than all of the Units of any or each Type
of Equipment), Lessee will, during the Storage Period, transport such Units, at
Lessee’s cost and expense, to a destination or interchange point, f.o.b., such
destination or interchange point, on Lessee’s lines in the U.S. reasonably
specified by Lessor, whereupon Lessee shall have no further liability or
obligation with respect to such Units. During the Storage Period, Lessee will
permit Lessor or any person designated by it, including the authorized
representative or representatives of any prospective purchaser or user of such
Unit, to inspect the same; provided, however, that such inspection shall not
interfere with the normal conduct of Lessee’s business and such person shall be
insured to the reasonable satisfaction of Lessee with respect to any risks
incurred in connection with any such inspections and Lessee (except in the case
of Lessee’s gross negligence or willful misconduct) shall not be liable for any
injury to, or the death of, any person exercising, either on behalf of Lessor or
any prospective purchaser or user, the rights of inspection granted pursuant
hereto. Lessee shall not

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be required to store the Equipment after the Storage Period. If Lessee stores
any Unit after the Storage Period, such storage shall be at the sole expense and
risk of Lessor.
     Section 6.4. Termination of Lease. Upon the later of (i) expiration of the
Lease Term with respect to such Unit and payment of all sums due from Lessee
hereunder and under the Operative Agreements, (ii) tender of such Unit at the
location determined in accordance with Section 6.1(a) or, as applicable, the
tender of such Unit for storage in accordance with Section 6.3, and
(iii) compliance by such Unit with Section 6.2, except for the provisions hereof
that expressly survive the termination of this Lease, this Lease and the
obligation to pay Rent for such Unit accruing subsequent to the expiration of
the Lease Term with respect to such Unit shall terminate.
Section 7. Liens.
     Lessee will not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to any Units or Lessee’s leasehold interest
therein under this Lease or on the Trust Estate, except Permitted Liens, and
Lessee shall promptly, at its own expense, take such action as may be necessary
to duly discharge (by bonding or otherwise) any such Lien not excepted above if
the same shall arise at any time.
Section 8. Maintenance; Operation; Sublease.
     Section 8.1. Maintenance. Lessee, at its own cost and expense, shall
service, maintain, repair and keep each Unit (i) in good repair and operating
condition, ordinary wear and tear excepted, (ii) in accordance with (a) prudent
Class I railroad industry maintenance practices in existence from time to time
and (b) manufacturer’s recommendations to the extent required to maintain such
manufacturer’s warranties in effect with respect to such Unit, (iii) in a manner
consistent with service, maintenance, overhaul and repair practices used by
Lessee in respect of equipment owned or leased by Lessee similar in type to such
Unit and without discrimination between owned and leased equipment, (iv) in
compliance, in all material respects, with all applicable laws and regulations,
including any applicable United States EPA Regulations and any applicable AAR
Mechanical Standards and Federal Railroad Administration regulations as
applicable to continued use by Lessee; provided, however, that Lessee may, in
good faith and by appropriate proceedings diligently conducted, contest the
validity or application of any such law, regulation, requirement or rule in any
reasonable manner which does not materially adversely affect the rights or
interests of Lessor and Indenture Trustee in the Equipment or hereunder or
otherwise expose Lessor, Indenture Trustee or any Participant to criminal
sanctions or release Lessee from the obligation to return the Equipment in
compliance with the provisions of Section 6.2.
     Section 8.2. Operation. Lessee shall be entitled to the possession of the
Equipment and to the use of the Equipment by it or any Affiliate in the general
operation of Lessee’s or any such Affiliate’s freight rail business upon lines
of railroad owned or operated by it or any such Affiliate, upon lines of
railroad over which Lessee or any such Affiliate has trackage or other operating
rights or over which railroad equipment of Lessee or any such Affiliate is
regularly operated pursuant to contract and on railroad lines of other railroads
(including in connection

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with barge-related rail transportation) in the United States, Canada and Mexico,
in the usual interchange of traffic or in through or run-through service and
shall be entitled to permit the use of the Equipment upon lines of railroad of
connecting and other carriers in the usual interchange of traffic or pursuant to
through or run-through agreements; provided Lessee shall use the Equipment only
for the purpose and in the manner for which it was designed and intended and in
compliance, in all material respects, with all laws, regulations and guidelines
of any governmental body, the Association of American Railroads, the Federal
Railroad Administration and the Surface Transportation Board and their
successors and assigns. Nothing in this Section 8.2 shall be deemed to
constitute permission by Lessor to any Person that acquires possession of any
Unit to take any action inconsistent with the terms and provisions of this Lease
and any of the other Operative Agreements. The rights of any person that
acquires possession of any Unit pursuant to this Section 8.2 shall be subject
and subordinate to the rights of Lessor hereunder.
     Section 8.3. Sublease. So long as no Specified Default or Event of Default
shall have occurred and be continuing, Lessee shall have the right, without the
prior written consent of Lessor, to sublease any Unit to or permit its use by a
user incorporated under the federal laws or the laws of any state of the United
States, organized under the federal laws or the laws of any province of Canada
or organized under the federal laws or the laws of any state of Mexico, for use
by such sublessee or user upon lines of railroad owned or operated by Lessee,
any Affiliate of Lessee, such sublessee or user or by a railroad company or
companies incorporated under the federal laws or laws of any state of the United
States, organized under the federal laws or the laws of any province in Canada
or organized under the federal laws or the laws of any state of Mexico, over
which Lessee, such Affiliate of Lessee, such sublessee or user or such railroad
company or companies has trackage or other operating rights, and upon lines of
railroad of connecting and other carriers in the usual interchange of traffic or
pursuant to through or run-through service agreements; provided such sublessee
shall not, at the time of such sublease, be insolvent or subject to insolvency
or bankruptcy proceedings. Each sublease shall be subject and subordinate to
this Lease (including the duration of the sublease term, which term may not
expire after the expiration of the Basic Term or any Renewal Term then in
effect) and no such sublease shall contain a purchase option. Lessee shall give
Lessor and Indenture Trustee reasonably contemporaneous notice upon entering
into a sublease for a period in excess of one year. No sublease shall in any way
discharge or diminish any of Lessee’s obligations hereunder, and Lessee shall
remain primarily liable hereunder for the performance of all the terms,
conditions and provisions of this Lease and the other Lessee Agreements to the
same extent as if such sublease had not been entered into. Nothing in this
Section 8.3 shall be deemed to constitute permission to any Person in possession
of any Unit pursuant to any such sublease to take any action inconsistent with
the terms and provisions of this Lease or any of the other Operative Agreements.
Section 9. Modifications.
     Section 9.1. Required Modifications. In the event the Association of
American Railroads, the United States Department of Transportation, or any other
United States, Canadian or Mexican federal, state or local governmental
authority having jurisdiction over the operation, safety or use of any Unit
requires that such Unit be altered, replaced or modified (a “Required

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Modification”), Lessee agrees to make such Required Modification at its own
expense; provided, however, that Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any
such law, regulation, requirement or rule in any reasonable manner which does
not materially adversely affect the rights or interests of Lessor and Indenture
Trustee in the Equipment or hereunder or otherwise expose Lessor, Indenture
Trustee or any Participant to criminal sanctions or relieve Lessee of the
obligation to return the Equipment in compliance with the provisions of
Section 6.2. Subject to Section 9.3, title to any Required Modification shall
immediately vest in Lessor. Notwithstanding anything herein to the contrary, if
Lessee determines in good faith that any Required Modification to a Unit would
be economically impractical, it shall provide written notice of such
determination to Lessor and the parties hereto shall treat such Unit as if an
Event of Loss had occurred as of the date of such written notice with respect to
such Unit and the provisions of Sections 11.2, 11.3 and 11.4 with respect to
rent, termination and disposition shall apply with respect to such Unit unless
Lessor, within 15 Business Days of such notice, elects to retain such Unit
pursuant to Section 9.4.
     Section 9.2. Optional Modifications. Lessee at any time may modify, alter
or improve any Unit (a “Modification”); provided that no Modification shall
diminish in more than a de minimis respect the current fair market value,
estimated residual value, utility, or remaining useful life of such Unit below
the current fair market value, estimated residual value, utility, or remaining
useful life thereof immediately prior to such Modification, assuming such Unit
was then in the condition required to be maintained by the terms of this Lease.
Title to any Non-Severable Modifications shall be immediately vested in Lessor.
Title to any Severable Modifications shall remain with Lessee. If Lessee shall
at its cost cause such Severable Modifications to be made to any Unit and such
Severable Modifications are reasonably necessary for the economic operation of
any such Unit, Lessor shall have the right, prior to the return of such Unit to
Lessor hereunder, to purchase such Severable Modifications (other than Severable
Modifications consisting of proprietary or communications equipment) at their
then Fair Market Sales Value (taking into account their actual condition). If
Lessor does not elect to purchase such Severable Modifications, Lessee may
remove, and shall remove if requested by Lessor, such Severable Modifications at
Lessee’s cost and expense.
     Section 9.3. Removal of Proprietary and Communications Equipment.
Notwithstanding anything to the contrary contained herein, Lessee shall at all
times own and be entitled to remove at Lessee’s cost and expense, any Severable
Modification consisting of proprietary or communications equipment from any Unit
prior to the return of such Unit; provided that if Lessee removes such Severable
Modification that is (i) a Required Modification and (ii) such equipment is not
customarily provided by the user, Lessee shall replace such proprietary or
communications equipment with non-proprietary equipment of comparable utility.
     Section 9.4. Retention of Equipment by Lessor. Notwithstanding the
provisions of the last sentence of Section 9.1, Lessor may irrevocably elect by
written notice to Lessee, no later than 15 Business Days after receipt of
Lessee’s notice of determination of economic impracticality pursuant to
Section 9.1, not to declare an Event of Loss as provided in Section 9.1,
whereupon Lessee shall not be liable for the Stipulated Loss Value for the
affected Unit but shall (i) deliver the affected Units to Lessor in the same
manner and in the same condition as if delivery were made pursuant to Section 6
(except that Lessee shall not be required to correct the

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conditions which gave rise to the notice of economic impracticality), treating
the applicable date for payment specified in Section 11.2(ii) as the termination
date of the Lease Term with respect to the affected Units, and (ii) pay to
Lessor, or to the Persons entitled thereto, all Basic Rent and Supplemental Rent
due and owing on such termination date and unpaid; provided, at such time that
the aggregate number of Units that have suffered an Event of Loss exceeds 6,
Lessee shall pay with respect to each additional Unit that suffers an Event of
Loss, in addition to the amounts required to be paid under this paragraph (ii),
a Positive Make-Whole Amount with respect to the prepayment of the Equipment
Notes on account of such Event of Loss. If Lessor elects to retain the affected
Units as provided in this Section 9.4, then Lessor shall pay, or cause to be
paid, to Indenture Trustee in funds of the type and in an amount equal to the
outstanding principal amount of the Equipment Notes issued in respect of such
affected Units and all accrued interest to the date of prepayment of such
Equipment Note on such termination date plus any Positive Make-Whole Amount in
respect of the principal amount of the Equipment Notes to be prepaid in
accordance with Section 2.10(b) of the Indenture. In addition, Lessor shall pay
to Lessee any Lessor Loan Balance as of such termination date and accrued
interest thereon; provided that in no event shall the Lessor be obligated to pay
any such amount due to Lessee unless all amounts due and payable by the Lessee
hereunder and under the other Operative Agreements to the Lessor shall have been
paid in full. If Lessor shall fail to perform any of its obligations pursuant to
this Section 9.4 on the scheduled termination date for any affected Unit, the
parties hereto shall treat such Unit as if an Event of Loss had occurred as of
the date of Lessee’s written notice with respect to such Unit pursuant to
Section 9.1 and the provisions of Sections 11.2, 11.3 and 11.4 with respect to
rent, termination and disposition shall apply with respect to such Unit and
Lessor shall thereafter no longer be entitled to exercise its election to retain
such affected Units.
Section 10. Voluntary Termination.
     Section 10.1. Right of Termination. So long as no Specified Default or
Event of Default shall have occurred and be continuing, Lessee shall have the
right, at its option at any time or from time to time on or after the fifth
anniversary of the applicable Delivery Date, to terminate this Lease with
respect to, at the sole discretion of Lessee, either all or a Minimum Number of
Units of Equipment of any or each Type of Equipment (the “Terminated Units”), if
Lessee determines in good faith (as evidenced by a certificate executed by the
Chief Financial Officer of Lessee), that such Units have become obsolete or
surplus to Lessee’s requirements, by delivering at least 90 days’ prior notice
to Lessor and Indenture Trustee specifying a proposed date of termination for
such Units (the "Termination Date”), which date shall be a Determination Date,
any such termination to be effective on the Termination Date. Except as
expressly provided herein, there will be no conditions to Lessee’s right to
terminate this Lease with respect to the Terminated Units pursuant to this
Section 10.1. So long as Lessor shall not have given Lessee a notice of election
to retain the Terminated Units in accordance with Section 10.3, Lessee may
withdraw the termination notice referred to above not later than ten
(10) Business Days before the scheduled Termination Date, whereupon this Lease
shall continue in full force and effect; provided that Lessee shall pay all
reasonable costs of Lessor, Indenture Trustee, Loan Participant and Owner
Participant incurred in connection with any proposed or withdrawn termination;
provided further that Lessee may not withdraw a termination notice hereunder
more than twice.

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     Section 10.2. Sale of Equipment. During the period from the date of such
notice given pursuant to Section 10.1 to the Termination Date, Lessee, as
exclusive agent for Lessor and at Lessee’s sole cost and expense, shall use
reasonable efforts to obtain bids from Persons other than Lessee or Affiliates
thereof for the cash purchase of the Terminated Units, and Lessee shall
promptly, and in any event at least five Business Days prior to the proposed
date of sale, certify to Lessor in writing the amount and terms of each such
bid, the proposed date of such sale and the name and address of the party
submitting such bid. Unless Lessor shall have elected to retain the Terminated
Units in accordance with Section 10.3, on the Termination Date: (i) Lessee
shall, subject to receipt (x) by Lessor of all amounts owing to Lessor pursuant
to the next sentence, and (y) by the persons entitled thereto of all unpaid
Supplemental Rent due on or before the Termination Date, deliver the Terminated
Units to the bidder, if any, which shall have submitted the highest all cash bid
prior to such date (or to such other bidder as Lessee and Lessor shall agree),
in the same manner and condition as if delivery were made to Lessor pursuant to
Section 6 and (ii) Lessor shall, without recourse or warranty (except as to the
absence of any Lessor’s Lien) simultaneously therewith sell the Terminated Units
to such bidder. The total selling price realized at such sale shall be paid to
Lessor for distribution pursuant to Section 3.02 of the Indenture and, in
addition and anything to the contrary notwithstanding, on the Termination Date,
Lessee shall pay to Lessor, or to the Persons entitled thereto, (A) all unpaid
Basic Rent with respect to such Terminated Units due and payable prior to the
Termination Date, (B) the excess, if any, of (1) the Termination Value for the
Terminated Units computed as of the Termination Date, over (2) the net cash
sales proceeds (after deduction of applicable transaction expenses and sales or
transfer taxes, if any, due or to become due as a consequence of such sale) of
the Terminated Units, (C) an amount equal to the Positive Make-Whole Amount, if
any, in respect of the principal amount of the Equipment Notes to be prepaid in
accordance with Section 2.10(a) of the Indenture and (D) any other Supplemental
Rent due and payable as of such Termination Date. If no sale shall have
occurred, this Lease shall continue in full force and effect with respect to
such Units; provided that if such sale shall not have occurred solely because of
Lessee’s failure to pay the amounts required to be paid pursuant to the
immediately preceding sentence, Lessee shall have no further right to terminate
this Lease with respect to such Units, and such failure to pay such amounts
shall be deemed a withdrawal of the termination notice referred to in
Section 10.1. If Lessor elects not to exercise its right to retain the
Terminated Units as provided in Section 10.3, Lessee, in acting as agent for
Lessor, shall have no liability to Lessor for failure to obtain the best price,
shall act in its sole discretion and shall be under no duty to solicit bids
publicly or in any particular market. Lessee’s sole interest in acting as agent
shall be to sell the Units at a price that reduces or eliminates Lessee’s
obligation to pay the amount provided in this Section 10.2. On the Termination
Date, upon receipt by Lessor of the amounts owing to Lessor pursuant to the
third sentence of this Section 10.2, Lessor shall pay, or cause to be paid, to
Indenture Trustee in immediately available funds an amount equal to the
outstanding principal amount of the Equipment Notes issued in respect of such
Terminated Units, all accrued interest to the date of prepayment of such
Equipment Notes and the Positive Make-Whole Amount, if any, in respect of such
Equipment Notes on such Termination Date.
     Section 10.3. Retention of Equipment by Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, no later than 30 days after receipt of Lessee’s notice of
termination, not to sell the Terminated Units on the

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Termination Date, whereupon Lessee shall (i) deliver the Terminated Units to
Lessor in the same manner and condition as if delivery were made to Lessor
pursuant to Section 6, treating the Termination Date as the termination date of
the Lease Term with respect to the Terminated Units, and (ii) pay to Lessor, or
to the Persons entitled thereto, all Basic Rent and Supplemental Rent due and
owing on the Termination Date and unpaid including an amount equal to any
Positive Make-Whole Amount in respect of the principal amount of the Equipment
Notes to be prepaid in accordance with Section 2.10(a) of the Indenture. If
Lessor elects not to sell the Terminated Units as provided in this Section 10.3,
then Lessor shall pay, or cause to be paid, to Indenture Trustee in immediately
available funds an amount equal to the outstanding principal amount of the
Equipment Notes issued in respect of such Terminated Units and all accrued
interest to the date of prepayment of such Equipment Note on such Termination
Date. In addition, Lessor shall pay to Lessee any Lessor Loan Balance as of such
Termination Date and accrued interest thereon; provided that in no event shall
the Lessor be obligated to pay any such amount due to Lessee unless all amounts
due and payable by the Lessee hereunder and under the other Operative Agreements
to the Lessor shall have been paid in full. If Lessor shall fail to perform any
of its obligations pursuant to this Section 10.3 and as a result thereof this
Lease shall not be terminated with respect to the Terminated Units on a proposed
Termination Date, Lessor shall thereafter no longer be entitled to exercise its
election to retain such Terminated Units and Lessee may at its option at any
time thereafter submit a new termination notice pursuant to Section 10.1 with
respect to such Terminated Units specifying a proposed Termination Date
occurring not earlier than five days from the date of such notice.
     Section 10.4. Termination of Lease. In the event of any such sale and
receipt by Lessor and Indenture Trustee of all of the amounts provided herein,
and upon compliance by Lessee with the other provisions of this Section 10, the
Lease Term for the Terminated Units shall end and the obligation to pay Basic
Rent and all other Rent for such Terminated Units (except for (i) Supplemental
Rent obligations with respect to such Terminated Units surviving pursuant to the
Participation Agreement or the Tax Indemnity Agreement or which have otherwise
accrued but not been paid as of the date of the expiration of the Lease Term and
(ii) the provisions hereof that expressly survive any termination of this Lease)
shall terminate.
Section 11. Loss, Destruction, Requisition, Etc.
     Section 11.1. Event of Loss. In the event that any Unit (i) shall suffer
destruction, damage, contamination or wear which, in Lessee’s good faith
opinion, makes repair uneconomic or renders such Unit unfit for commercial use,
(ii) shall suffer theft or disappearance, (iii) shall be permanently returned to
the manufacturer pursuant to any warranty or patent indemnity provisions,
(iv) shall have title thereto taken or appropriated by any governmental
authority under the power of eminent domain or otherwise, (v) shall be taken or
requisitioned for use by any governmental authority (other than the United
States government or any agency or instrumentality thereof) under the power of
eminent domain or otherwise and such taking or requisition is continuing in
excess of 180 days or, if earlier, on the last day of the Basic Term or any
Renewal Term then in effect, or (vi) shall be taken or requisitioned for use by
the United States government or any agency or instrumentality thereof and such
taking or requisition is continuing on the last day of the Basic Term or any
Renewal Term then in effect (any such occurrence being hereinafter called an
“Event of Loss”), Lessee, in accordance with the terms of

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Section 11.2, shall promptly and fully inform Lessor and Indenture Trustee of
such Event of Loss.
     Section 11.2. Replacement or Payment upon Event of Loss. Upon the
occurrence of an Event of Loss or the deemed occurrence of an Event of Loss
pursuant to Section 9.1 with respect to any Unit, Lessee shall within 60 days
after a Responsible Officer of Lessee shall have actual knowledge of such
occurrence or deemed occurrence give Lessor and Indenture Trustee notice of such
occurrence or deemed occurrence of such Event of Loss and of its election to
perform one of the following options (it being agreed that if Lessee shall not
have given notice of such election within such 60 days after such actual
knowledge of such occurrence or deemed occurrence, Lessee shall be deemed to
have elected to perform the option set forth in the following paragraph (ii)):
               (i) So long as no Specified Default or Event of Default shall
have occurred and be continuing, as promptly as practicable, and in any event on
or before the Business Day next preceding the 175th day next following the date
on which a Responsible Officer of Lessee shall have actual knowledge of the
occurrence or deemed occurrence of such Event of Loss, Lessee shall comply with
Section 11.4(b) and shall convey or cause to be conveyed to Lessor a Replacement
Unit to be leased to Lessee hereunder, such Replacement Unit to be free and
clear of all Liens (other than Permitted Liens) and to have a current fair
market value, estimated residual value, utility, and remaining useful life at
least equal to the Unit so replaced (assuming such Unit was in the condition
required to be maintained by the terms of this Lease); provided that, if Lessee
shall not perform its obligation to effect such replacement under this paragraph
(i) during the period of time provided herein, then Lessee shall pay on a
Determination Date selected by Lessee that is within 180 days after a
Responsible Officer of Lessee shall have actual knowledge of the occurrence or
deemed occurrence of such Event of Loss to Lessor, or in the case of
Supplemental Rent, to the Person entitled thereto, the amounts specified in
paragraph (ii) below; or
               (ii) on or before a Determination Date selected by Lessee that is
within 180 days after a Responsible Officer of Lessee shall have actual
knowledge of the occurrence or deemed occurrence of such Event of Loss, Lessee
shall pay or cause to be paid on the applicable Determination Date to Lessor or,
in the case of Supplemental Rent, to the Persons entitled thereto, in funds of
the type specified in Section 3.5, (A) an amount equal to the Stipulated Loss
Value of each such Unit determined as of such Determination Date, (B) all unpaid
Basic Rent with respect to each such Unit due prior to such Determination Date,
and (C) without duplication, all Supplemental Rent due and payable as of such
Determination Date, it being understood that until such Stipulated Loss Value is
paid, there shall be no abatement or reduction of Basic Rent; provided, at such
time that the aggregate number of Units that have suffered an Event of Loss
exceeds 6, Lessee shall pay with respect to each additional Unit that suffers an
Event of Loss, in addition to the amounts required to be paid under this
paragraph (ii), a Positive Make-Whole Amount with respect to the prepayment of
the Equipment Notes on account of such Event of Loss.

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     Section 11.3. Rent Termination. Upon the replacement of any Unit or Units
in accordance with Section 11 or upon the payment of all sums required to be
paid pursuant to Section 11.2(ii) hereof in respect of any Unit or Units for
which Lessee has elected to pay or deemed to have elected to pay pursuant to the
proviso to Section 11.2(i) the amounts specified in paragraph 11.2(ii), the
Lease Term with respect to such Unit or Units and the obligation to pay Rent for
such Unit or Units (except for (i) Supplemental Rent obligations with respect to
such Unit or Units surviving pursuant to the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not been paid as of the
date of the expiration of the Lease Term and (ii) the provisions hereof that
expressly survive any termination of this Lease) shall terminate; provided that
Lessee shall be obligated to pay all Rent in respect of such Unit or Units which
has accrued up to and including the date of payment of Stipulated Loss Value
pursuant to Section 11.2.
     Section 11.4. Disposition of Equipment; Replacement of Unit. (a) Upon the
payment of all sums required to be paid pursuant to Section 11.2 in respect of
any Unit or Units, Lessor will convey to Lessee or its designee all right, title
and interest of Lessor in and to such Unit or Units, “as is”, “where is”,
without recourse or warranty, except for a warranty against Lessor’s Liens, and
shall execute and deliver to Lessee or its designee such bills of sale and other
documents and instruments as Lessee or its designee may reasonably request to
evidence such conveyance. As to each separate Unit so disposed of, Lessee or its
designee shall be entitled to any amounts arising from such disposition, plus
any awards, insurance (other than insurance maintained by Lessor or Owner
Participant for its own account in accordance with Section 12.3) or other
proceeds and damages (including any Association of American Railroads interline
settlement paid upon an Event of Loss) received by Lessee, Lessor or Indenture
Trustee by reason of such Event of Loss after having paid the Stipulated Loss
Value attributable thereto.
     (b) At the time of or prior to any replacement of any Unit, Lessee, at its
own expense, will (A) furnish Lessor with a full warranty bill of sale and an
assignment of warranties with respect to the Replacement Unit, (B) cause a Lease
Supplement substantially in the form of Exhibit A hereto, subjecting such
Replacement Unit to this Lease, duly executed by Lessee, to be delivered to
Lessor for execution and, upon such execution, to be filed for recordation in
the same manner as provided for in the original Lease Supplement in
Section 16.1, (C) so long as the Indenture shall not have been satisfied and
discharged, cause an Indenture Supplement substantially in the form of Exhibit A
to the Indenture for such Replacement Unit, to be delivered to Lessor and to
Indenture Trustee for execution and, upon such execution, to be filed for
recordation in the same manner as provided for the original Indenture Supplement
in Section 16.1, (D) furnish Lessor with an opinion of Lessee’s counsel (which
may be Lessee’s internal counsel), to the effect that (w) Lessor (and Indenture
Trustee, as assignee of Lessor) shall be entitled to the benefits of
Section 1168 of the Bankruptcy Code in respect of such Replacement Unit to the
same extent that Lessor (and Indenture Trustee, as assignee of Lessor) was
entitled to such benefits in respect of the Unit being replaced, (x) the bill of
sale referred to in clause (A) above constitutes an effective instrument for the
conveyance of title to the Replacement Unit to Lessor, (y) good and marketable
title to the Replacement Unit has been delivered to Lessor, free and clear of
all Liens (other than Permitted Liens), and (z) all filings, recordings and
other action necessary or appropriate to perfect and protect Lessor’s and
Indenture Trustee’s respective interests in the Replacement Unit have been
accomplished, and

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(E) furnish Lessor with a certificate of a qualified engineer (who may be the
system chief mechanical officer of Lessee) certifying that the Replacement Unit
has a fair market value, utility and remaining useful life at least equal to the
Unit so replaced (assuming such Unit was in the condition required to be
maintained by the terms of this Lease). For all purposes hereof, upon passage of
title thereto to Lessor, the Replacement Unit shall be deemed part of the
property leased hereunder and the Replacement Unit shall be deemed a “Unit” of
Equipment as defined herein. Upon such passage of title, Lessor will transfer to
Lessee, without recourse or warranty (except as to Lessor’s Liens), all Lessor’s
right, title and interest in and to the replaced Unit, and upon such transfer,
Lessor will request in writing that Indenture Trustee execute and deliver to
Lessee an appropriate instrument releasing such replaced Unit from the lien of
the Indenture.
     Section 11.5. Eminent Domain. In the event that during the Lease Term the
use of any Unit is requisitioned or taken by any governmental authority under
the power of eminent domain or otherwise for a period which does not constitute
an Event of Loss, Lessee’s obligation to pay all installments of Basic Rent
shall continue for the duration of such requisitioning or taking. Lessee shall
be entitled to receive and retain for its own account all sums payable for any
such period by such governmental authority as compensation for requisition or
taking of possession. Any amount referred to in this Section 11.5 which is
payable to Lessee shall not be paid to Lessee, or if it has been previously paid
directly to Lessee, shall not be retained by Lessee, if at the time of such
payment a Specified Default or an Event of Default shall have occurred and be
continuing, but shall be paid to and held by Lessor as security for the
obligations of Lessee under this Lease, and upon the earlier of (i) 200 days
after Lessor shall have received such amount provided Lessor has not proceeded
to exercise remedies under Section 15 and (ii) such time as there shall not be
continuing any Specified Default or Event of Default, such amount shall be paid
to Lessee.
Section 12. Insurance.
     Section 12.1. Property Damage and Public Liability Insurance.
        (a) Coverages. Lessee will, at all times prior to the return of the
Units to Lessor, at its own expense, cause to be carried and maintained (i) all
risk property insurance in respect of the Units in an amount not less than
Stipulated Loss Value for such Units and (ii) public liability insurance against
loss or damage for personal injury, death or property damage suffered upon, in
or about any premises occupied by Lessee or occurring as a result of the use,
maintenance or operation of the Units in an amount not less than $200,000,000,
and otherwise against such risks, with such insurance companies and with such
terms (including co-insurance, deductibles, limits of liability and loss payment
provisions) as are customary under Lessee’s risk management program and in
keeping with risks assumed by Class I railroads generally; provided, however,
that Lessee may self insure with respect to any or all of the above risks if
customary under such risk management program and in keeping with risks assumed
by Class I railroads generally; provided that in no event shall such
self-insurance or policy deductibles exceed $10,000,000 per occurrence in the
case of property insurance and $15,000,000 per deductible in the case of public
liability insurance. Notwithstanding the foregoing, all insurance coverages
(including, without limitation, self-insurance) with respect to the Units
required under this Lease shall be comparable to, and no less favorable than,
insurance coverages applicable to equipment owned

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or leased by Lessee which is comparable to the Units. Lessee shall, at its own
expense, be entitled to make all proofs of loss and take all other steps
necessary to collect the proceeds of such insurance.
        If any insurance required by this Lease shall not be available to Lessee
at renewal on a commercially reasonable basis on substantially the same terms
and conditions as then carried by Lessee and the obtaining of such insurance is,
in Lessee’s reasonable judgment, commercially impracticable (taking into account
both terms and premiums), Lessee shall obtain a written report of an independent
insurance advisor of recognized national standing, chosen by Lessee and
reasonably acceptable to Lessor confirming in reasonable detail that such
insurance, in respect of amount or scope of coverage, is not so available on a
commercially reasonable basis from insurers of recognized standing who provide
insurance to the railroad industry. During any period with respect to which any
insurance is not so available, Lessee shall nevertheless maintain such insurance
to the extent, with respect to amount and scope of coverage, that is available
on a commercially reasonable basis from insurers of recognized standing who
provide insurance to the railroad industry. If any insurance which was
previously discontinued because of its commercial unavailability later becomes
available on a commercially reasonable basis, Lessee shall reinstate such
insurance.
        (b) Certificate of Insurance. Lessee shall, on or prior to the Delivery
Date for any Unit, furnish Lessor and Indenture Trustee with a certificate
signed by the insurer or an independent insurance broker showing the insurance
then maintained, if any, with respect to the Units delivered on the Delivery
Date. Lessor or Indenture Trustee may, but not more than once in any
twelve-month period, request from Lessee and Lessee shall promptly thereafter
furnish to Lessor and Indenture Trustee, an Officer’s Certificate or, at
Lessee’s option, such a certificate signed by an independent insurance broker,
setting forth all insurance maintained by Lessee pursuant to Section 12.1(a)
above and describing such policies, if any, including the amounts of coverage,
any deductible amounts and the names of the insurance providers. Such public
liability insurance and all risk property insurance shall name Owner
Participant, Loan Participant, Lessor, Trust Company and Indenture Trustee
(each, an “Insured Party”) as an additional insured with respect to such public
liability insurance then maintained as their respective interests may appear.
Lessee agrees that such insurer or such broker will provide written notice to
each Insured Party at least 30 days prior to the cancellation or lapse of any
insurance required to be maintained by Lessee in accordance with Section 12.1(a)
above. Any insurance maintained pursuant to this Section 12 shall (i) provide
insurer’s waiver of its right of subrogation with respect to public liability
insurance and all risk property insurance, set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability
against any additional insured except for claims as shall arise from the willful
misconduct or gross negligence of such additional insured, (ii) to the extent
commercially available, provide that such all risk property insurance as to the
interest of Lessor, Owner Participant, Loan Participant, Trust Company and
Indenture Trustee shall not be invalidated by any action or inaction of Lessee
or any other Person (other than such claimant), regardless of any breach or
violation of any warranty, declaration or condition contained in such policies
by Lessee or any other Person (other than such claimant), and (iii) provide that
all such insurance is primary without right of contribution from any other
insurance which might otherwise be maintained by Lessor, Indenture Trustee,
Trust Company or Owner Participant and shall expressly provide a severability of

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interest clause. Any insurance maintained by Lessor or Owner Participant shall
not be considered co-insurance with any insurance maintained by Lessee.
     Section 12.2. Proceeds of Insurance. The entire proceeds of any property
insurance or third-party payments for damages or an Event of Loss with respect
to any Unit (including any Association of American Railroads interline
settlements) received by Lessor or Indenture Trustee shall be promptly paid over
to, and retained by, Lessee; provided, however, any such amount which is payable
to Lessee shall not be paid to Lessee, or if it has been previously paid
directly to Lessee, shall not be retained by Lessee, if at the time of such
payment a Specified Default or an Event of Default shall have occurred and be
continuing, but shall be paid to and held by Lessor as security for the
obligations of Lessee under this Lease.
     Section 12.3. Additional Insurance. At any time Lessor (either directly or
in the name of Owner Participant), Indenture Trustee or Owner Participant may at
its own expense carry insurance with respect to its interest in the Units,
provided that such insurance does not interfere with Lessee’s ability to insure
the Units as required by this Section 12 or adversely affect Lessee’s insurance
or the cost thereof, it being understood that all salvage rights to each Unit
and all primary subrogation rights shall remain with Lessee’s insurers at all
times. Any insurance payments received from policies maintained by Lessor,
Indenture Trustee or Owner Participant pursuant to the previous sentence shall
be retained by Lessor, Indenture Trustee or Owner Participant, as the case may
be, without reducing or otherwise affecting Lessee’s obligations hereunder.
Section 13. Reports; Inspection.
     Section 13.1. Duty of Lessee to Furnish. On or before June 30, 2008, and on
or before each June 30 thereafter, Lessee will furnish to Lessor, Owner
Participant, Loan Participant and Indenture Trustee (i) an accurate statement,
as of the preceding December 31, showing the reporting marks of the Units then
leased hereunder, identifying each Unit that may have suffered an Event of Loss
during the 12 months ending on such December 31 (or since the First Delivery
Date, in the case of the first such statement) and (ii) such other information
regarding the condition or repair of the Equipment as Lessor or Owner
Participant may reasonably request.
     Section 13.2. Lessor’s Inspection Rights. Lessor, Owner Participant, Loan
Participant and Indenture Trustee each shall have the right, but not the
obligation, at their respective sole cost and expense (unless, in the case of
any such expense, a Specified Default or an Event of Default shall have occurred
and be continuing) and risk (including, without limitation, the risk of personal
injury or death), by their respective authorized representatives, to the extent
within Lessee’s control: on not more than one occasion in any 12-month period
with respect to each Type of Equipment (unless a Specified Default or an Event
of Default shall have occurred and be continuing) or during the last 12 months
of the Lease Term, to inspect the Equipment and Lessee’s records with respect
thereto, during Lessee’s normal business hours and upon reasonable prior notice
to Lessee; provided, however, that Lessee shall not be liable for any injury to,
or the death of, any Person exercising, either on behalf of Lessor, Owner
Participant, Indenture Trustee, Loan Participant or any prospective user, the
rights of inspection granted under this Section 13.2 except as may result or
arise from Lessee’s gross negligence or willful

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misconduct. No inspection pursuant to this Section 13.2 shall interfere with the
use, operation or maintenance of the Equipment or the normal conduct of Lessee’s
business, and Lessee shall not be required to undertake or incur any additional
liabilities in connection therewith.
Section 14. Events of Default.
     The following events shall constitute Events of Default hereunder (whether
any such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body) and each such Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have been remedied:
               (a) Lessee shall fail to make any payment of (i) Basic Rent
within 5 Business Days after the same shall have become due or (ii) EBO Fixed
Purchase Price, Stipulated Loss Value or Termination Value after the same shall
have become due and such failure shall continue unremedied for a period of 5
Business Days after receipt by Lessee of written notice of such failure from
Lessor, Owner Participant, Loan Participant or Indenture Trustee; or
               (b) Lessee shall fail to make any payment of any other
Supplemental Rent, including indemnity or tax indemnity payments, after the same
shall have become due and such failure shall continue unremedied for a period of
30 days after receipt by Lessee of written notice of such failure from Lessor,
Owner Participant, Loan Participant or Indenture Trustee (provided that notice
of non-payment of any Excepted Payment may only be given by Owner Participant);
or
               (c) Lessee shall (i) make or permit any unauthorized assignment
or transfer of this Lease in violation of Section 18.2 and such unauthorized
assignment or transfer shall continue unremedied for 30 days, (ii) permit any
Unit to be operated in service when insurance required by Section 12.1, if any,
with respect to such Unit shall not be in effect, or (iii) breach its covenant
set forth in Section 6.7 of the Participation Agreement;
               (d) any representation or warranty made by Lessee in this Lease
or in the Participation Agreement is untrue or incorrect in any material respect
as of the date of issuance or making thereof and such untruth or incorrectness
shall continue to be material and unremedied for a period of 30 days after
receipt by Lessee of written notice thereof from Lessor, Owner Participant, Loan
Participant or Indenture Trustee; provided that, if such untruth or
incorrectness is capable of being remedied (but only in a manner other than by
payment of money), no such untruth or incorrectness shall constitute an Event of
Default hereunder for a period of 180 days after receipt of such notice so long
as Lessee is diligently proceeding to remedy such untruth or incorrectness; or
               (e) Lessee shall (i) commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or

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any substantial part of its property, or (ii) consent to any such relief or to
the appointment of or taking possession by any such official in any voluntary
case or other proceeding commenced against it, or (iii) admit in writing its
inability to pay its debts generally as they come due, or (iv) make a general
assignment for the benefit of creditors, or (v) take any corporate action to
authorize any of the foregoing; or
     (f) an involuntary case or other proceeding shall be commenced against
Lessee seeking liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 90 days; or
     (g) other than as set forth in clauses (a), (b), or (c), Lessee shall fail
to observe or perform any other of the covenants or agreements to be observed or
performed by Lessee hereunder or under the Participation Agreement and such
failure shall continue unremedied for 30 days after notice from Lessor, Owner
Participant or Indenture Trustee to Lessee, specifying the failure and demanding
the same to be remedied; provided that, if such failure is capable of being
remedied (but only in a manner other than solely by payment of money), no such
failure shall constitute an Event of Default hereunder for a period of 180 days
after receipt of such notice so long as Lessee is diligently proceeding to
remedy such failure;
provided that, notwithstanding anything to the contrary contained in this Lease,
any failure of Lessee to perform or observe any covenant or agreement herein
shall not constitute an Event of Default if such failure is caused solely by
reason of an event referred to in the definition of “Event of Loss” so long as
Lessee is continuing to comply with the applicable terms of Section 11. Lessor
(or, for so long as rent payments are being made directly to it, Indenture
Trustee) shall notify Lessee promptly upon Lessee’s failure to make any payment
of Basic Rent, after the same shall have become due; provided that the giving of
such notice by Lessor or Indenture Trustee, as applicable, shall not be a
condition to the start of the 5 Business Days period referred to in
paragraph (a) of this Section 14 and the failure or delay in giving such notice
shall not affect the occurrence of an Event of Default under such Section 14(a)
and Lessee agrees Lessor and Indenture Trustee shall incur no liability nor be
in breach hereunder for failure or delay in giving such notice.
Section 15. Remedies.
     Section 15.1. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default by a written notice to Lessee
(provided that upon the occurrence of an Event of Default under Section 14(e) or
14(f), this Lease shall automatically be in default without the need for any
declaration by Lessor and any giving of notice); and at any time thereafter,
Lessor may do one or more of the following as Lessor in its sole discretion
shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect:

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     (a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for the breach thereof;
     (b) by notice in writing to Lessee, cancel this Lease, whereupon all right
of Lessee to the possession and use of the Equipment shall absolutely cease and
terminate, but Lessee shall remain liable as hereinafter provided; and
thereupon, Lessor may demand that Lessee, and Lessee shall, upon written demand
of Lessor and at Lessee’s expense forthwith return all of the Equipment to
Lessor or its order in the manner and condition required by, and otherwise in
accordance with all of the provisions of Section 6, except Section 6.1(b) and
those provisions relating to periods of notice; or Lessor may by its agents
enter upon the premises of Lessee or other premises where any of the Equipment
may be located and take possession of and remove all or any of the Units and
thenceforth hold, possess and enjoy the same free from any right of Lessee, or
its successor or assigns, to use such Units for any purpose whatever;
     (c) sell any Unit at public or private sale, as Lessor may determine, free
and clear of any rights of Lessee and without any duty to account to Lessee with
respect to such sale or for the proceeds thereof (except to the extent required
by paragraph (f) below if Lessor elects to exercise its rights under said
paragraph in which case such sale shall be conducted at arm’s length and on a
commercially reasonable basis), in which event Lessee’s obligation to pay Basic
Rent and Supplemental Rent (other than any Supplemental Rent owed with respect
to Lessee’s indemnification obligations under Section 7.1 or 7.2 of the
Participation Agreement, except for claims in respect of such Unit attributable
to acts or events occurring after the delivery of such Unit to the purchaser
thereof) with respect to such Unit hereunder due for any periods subsequent to
the date of such sale shall terminate;
     (d) hold, keep idle or lease to others any Unit as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and without any
duty to account to Lessee with respect to such action or inaction or for any
proceeds with respect thereto, except that Lessee’s obligation to pay Basic Rent
and Supplemental Rent (other than any Supplemental Rent owed with respect to
Lessee’s indemnification obligations under Section 7.1 or 7.2 of the
Participation Agreement, except for claims in respect of such Unit attributable
to acts or events occurring after the return of such Unit to Lessor in
accordance with the terms hereof) with respect to such Unit due for any periods
subsequent to the date upon which Lessee shall have been deprived of possession
and use of such Unit pursuant to this Section 15 and prior to the Determination
Date specified in paragraph (e) or (g) below shall be reduced by the net
proceeds, if any, received by Lessor from leasing such Unit to any Person other
than Lessee;
     (e) whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph (a), (b) or (c) above with
respect to any Unit, Lessor, by written notice to Lessee specifying a payment
date (which date shall be a Determination Date for the purposes of computing
Stipulated Loss Value) which shall be not earlier than 30 days after the date of
such notice, may demand that Lessee pay to

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Lessor, and Lessee shall pay to Lessor, on the payment date specified in such
notice, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of the Basic Rent for such Unit due on or after the Determination Date),
(x) any unpaid Basic Rent due prior to the Determination Date so specified, plus
(y) whichever of the amounts referred to in subparagraphs (i) and (ii) below as
Lessor, in its sole discretion, shall specify in such notice, plus (iii) all
other Supplemental Rent due as of the date of payment, including interest, to
the extent permitted by applicable law, at the Late Rate on such amounts from
the date due (and in the case of the amount referred to in subparagraphs (i) and
(ii) below, such Determination Date) to the date of actual payment:
     (i) an amount with respect to each Unit which represents the excess of the
present value, at the time of such payment date, of all rentals for such Unit
which would otherwise have accrued hereunder from such payment date for the
remainder of the Basic Term or any Renewal Term then in effect over the then
present value of the then Fair Market Rental Value of such Unit (taking into
account its actual condition) for such period computed by discounting from the
end of such Term to such payment date rentals which Lessor reasonably estimates
to be obtainable for the use of such Unit during such period, such present value
to be computed in each case on a basis of a rate per annum equal to the Debt
Rate, compounded semiannually from the respective dates upon which rentals
should have been payable hereunder had this Lease not been terminated; or
     (ii) an amount equal to the excess, if any, of the Stipulated Loss Value
for such Unit computed as of the payment date specified in such notice over the
Fair Market Sales Value of such Unit (taking into account its actual condition)
as of the payment date specified in such notice;
     (f) so long as any Unit has not been sold pursuant to paragraph (c) above,
by notice to Lessee, require Lessee to pay to Lessor on demand on any
Determination Date, and Lessee hereby agrees that it will so pay Lessor, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of Basic
Rent due on or after such Determination Date) (i) any unpaid Basic Rent due
prior to the Determination Date so specified, plus (ii) an amount equal to the
Stipulated Loss Value for such Unit computed as of such Determination Date, plus
(iii) all other Supplemental Rent due as of the date of payment, including
interest, to the extent permitted by applicable law, at the Late Rate on such
amounts from the date due (and in the case of the amount referred to in
clause (ii), such Determination Date) to the date of actual payment; and upon
such payment of liquidated damages, Lessor shall transfer, or cause to be
transferred, to Lessee, at Lessee’s cost and expense, on an “as-is, where-is”
basis and without recourse or warranty (except as to the absence of Lessor’s
Liens), the rights and interests of Lessor in and to the Equipment and the
Lease, and Lessor and Owner Participant, at Lessee’s cost and expense, shall
execute and deliver such documents evidencing such transfer and take such
further action as may be required to effect such transfer; and
     (g) if Lessor shall have sold any Unit pursuant to paragraph (c) above,
Lessor, in lieu of exercising its rights under paragraph (e) above with respect
to such Unit may, if

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it shall so elect, demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of Basic Rent due on or after the date of such sale) (i) any unpaid Basic
Rent due prior to the date of such sale, plus (ii) the amount, if any, by which
the Stipulated Loss Value of such Unit computed as of the Determination Date
immediately preceding the date of such sale or, if such sale occurs on a
Determination Date, then computed as of such Determination Date, exceeds the net
proceeds of such sale, plus (iii) all other Supplemental Rent due as of the date
of payment, including interest, to the extent permitted by applicable law, at
the Late Rate on such amounts from the date due (and in the case of the amount
referred to in clause (ii), such Determination Date) to the date of actual
payment.
     In addition, Lessee shall be liable, except as otherwise provided above,
for any and all unpaid Rent due hereunder before or during the exercise of any
of the foregoing remedies, and for legal fees and other costs and expenses
incurred by reason of the occurrence of any Event of Default or the exercise of
Lessor’s remedies with respect thereto, including without limitation the
repayment in full of any costs and expenses necessary to be expended in
repairing any Unit in order to cause it to be in compliance with all maintenance
and regulatory standards imposed by this Lease.
     Section 15.2. Cumulative Remedies. The remedies in this Lease provided in
favor of Lessor shall not be deemed exclusive, but shall be cumulative and shall
be in addition to all other remedies in its favor existing at law or in equity.
     Section 15.3. No Waiver. No delay or omission to exercise any right, power
or remedy accruing to Lessor upon any breach or default by Lessee under this
Lease shall impair any such right, power or remedy of Lessor, nor shall any such
delay or omission be construed as a waiver of any breach or default, or of any
similar breach or default hereafter occurring; nor shall any waiver of a single
breach or default be deemed a waiver of any subsequent breach or default.
     Section 15.4. Lessee’s Duty to Return Equipment Upon Default. If Lessor or
any assignee of Lessor shall terminate this Lease pursuant to this Section 15
and shall have provided to Lessee the written demand specified in
Section 15.1(b), Lessee shall forthwith deliver possession of such Units to
Lessor. For the purpose of delivering possession of any Unit to Lessor as above
required, Lessee shall at its own cost, expense and risk:
     (i) forthwith place such Equipment upon such storage tracks of Lessee or,
at the expense of Lessee, on any other storage tracks, as Lessee may select;
     (ii) permit Lessor to store such Equipment on such tracks without charge
for insurance, rent or storage until the earlier of (x) six months after such
demand for storage and (y) the date such Equipment is sold, leased or otherwise
disposed of by Lessor and during such period of storage Lessee shall continue to
maintain all insurance required by Section 12 hereof; and
     (iii) transport the Equipment to any point of interchange on Lessee’s lines
in the 48 contiguous United States with a railroad, when directed by Lessor.

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All Equipment returned shall be in the condition required by Section 6.2 hereof.
     Section 15.5. Specific Performance; Lessor Appointed Lessee’s Agent. The
assembling, delivery, storage and transporting of the Equipment as provided in
Section 15.4 are of the essence of this Lease, and upon application to any court
of equity having jurisdiction in the premises, Lessor shall be entitled to a
decree against Lessee requiring specific performance of the covenants of Lessee
so to assemble, deliver, store and transport the Equipment. Without in any way
limiting the obligation of Lessee under the provisions of Section 15.4, Lessee
hereby irrevocably appoints Lessor as the agent and attorney of Lessee, with
full power and authority, at any time while Lessee is obligated to deliver
possession of any Units to Lessor pursuant to this Section 15, to demand and
take possession of such Unit in the name and on behalf of Lessee from whosoever
shall be at the time in possession of such Unit.
Section 16. Filings; Further Assurances.
     Section 16.1. Filings. On or prior to the Delivery Date for each Unit,
Lessee will (i) cause this Lease, the Lease Supplement dated such Delivery Date,
the Indenture and the Indenture Supplement dated such Delivery Date, or
appropriate evidence thereof, to be duly filed and recorded with the STB in
accordance with 49 U.S.C. § 11301, (ii) cause this Lease, the Lease Supplement
dated such Delivery Date, the Indenture and the Indenture Supplement dated such
Delivery Date, or appropriate evidence thereof, to be deposited with the
Registrar General of Canada pursuant to Section 105 of the Canada Transportation
Act, and (iii) cause or permit such other filings and notices to be filed or
made as necessary or appropriate to perfect the right, title and interest of
Indenture Trustee in the Indenture Estate and to protect the interests of Owner
Participant, and will furnish Lessor and Indenture Trustee proof thereof.
     Section 16.2. Further Assurances. Lessee will duly execute and deliver to
Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request in order to effectively carry
out the intent and purpose of this Lease and to establish and protect the rights
and remedies created in favor of Lessor hereunder, including, without
limitation, if requested by Lessor, the execution and delivery of supplements or
amendments hereto, in recordable form, subjecting to this Lease any Replacement
Unit and the recording or filing of counterparts hereof or thereof in accordance
with the laws of such jurisdiction as Lessor may from time to time deem
advisable; provided that this sentence is not intended to impose upon Lessee any
additional liabilities not otherwise contemplated by this Lease.
     Section 16.3. Expenses. Except as provided in Section 2.5 of the
Participation Agreement, Lessee will pay all costs, charges and expenses
(including reasonable attorneys’ fees) incident to any such filing, refiling,
recording and rerecording or depositing and redepositing of any such instruments
or incident to the taking of such action.
Section 17. Lessor’s Right to Perform.
     If Lessee fails to make any payment required to be made by it hereunder or
fails to perform or comply with any of its other agreements contained herein and
such failure can be

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cured with the payment of money, Lessor or Indenture Trustee may itself make
such payment or perform or comply with such agreement, after giving not less
than five Business Days’ prior notice thereof to Lessee (except in the event
that an Indenture Event of Default resulting solely from an Event of Default
shall have occurred and be continuing, in which event Lessor or Indenture
Trustee may effect such payment, performance or compliance to the extent
necessary to cure such Indenture Event of Default with notice given concurrently
with such payment, performance or compliance) in a reasonable manner, but shall
not be obligated hereunder to do so, and the amount of such payment and of the
reasonable expenses of Lessor or Indenture Trustee, as the case may be, incurred
in connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Late Rate,
to the extent permitted by applicable law, shall be deemed to be Supplemental
Rent, payable by Lessee to Lessor or Indenture Trustee, as the case may be, on
demand.
Section 18. Assignment.
     Section 18.1. Assignment by Lessor. Lessee and Lessor hereby confirm that
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to Indenture Trustee the Indenture, which assigns as collateral
security and grants a security interest to Indenture Trustee in, to and under
this Lease and certain of the Rent payable hereunder, all as more explicitly set
forth in the Granting Clause of the Indenture. Lessor agrees that it shall not
otherwise assign or convey its right, title and interest in and to this Lease,
the Equipment or any Unit, except as expressly permitted by and subject to the
provisions of this Lease, the Participation Agreement, the Trust Agreement and
the Indenture.
     Section 18.2. Assignment by Lessee. Except as otherwise provided in
Section 8.3 or in the case of any requisition for use by an agency or
instrumentality of the United States government referred to in Section 11.1,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder, except as provided in Section 6.8 of the Participation
Agreement.
     Section 18.3. Sublessee’s Performance and Rights. Any obligation imposed on
Lessee in this Lease shall require only that Lessee perform or cause to be
performed such obligation, even if stated herein as a direct obligation, and the
performance of any such obligation by any permitted assignee, sublessee or
transferee under an assignment, sublease or transfer agreement then in effect
and permitted by the terms of this Lease shall constitute performance by Lessee
and discharge such obligation by Lessee. Except as otherwise expressly provided
herein, any right granted to Lessee in this Lease shall grant Lessee the right
to exercise such right or permit such right to be exercised by any such
assignee, sublessee or transferee, provided that Lessee’s renewal option set
forth in Section 22.2 may be exercised only by Lessee itself or by any assignee
or transferee of, or successor to, Lessee in a transaction permitted by
Section 6.8 of the Participation Agreement. The inclusion of specific references
to obligations or rights of any such assignee, sublessee or transferee in
certain provisions of this Lease shall not in any way prevent or diminish the
application of the provisions of the two sentences immediately preceding with
respect to obligations or rights in respect of which specific reference to any
such assignee, sublessee or transferee has not been made in this Lease.

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Section 19. Net Lease, etc.
     This Lease is a net lease and Lessee’s obligation to pay all Rent payable
hereunder shall be absolute and unconditional under any and all circumstances of
any character including, without limitation, any abatement of Rent or setoff
against Rent; nor, except as otherwise expressly provided herein, shall this
Lease terminate, or the respective obligations of Lessor or Lessee be otherwise
affected, by reason of any defect in, damage to or loss or destruction of, or
requisitioning of, any Unit, by condemnation or otherwise, the prohibition of
Lessee’s use of any Unit, the interference with such use by any Person or the
lack of right, power or authority of Lessor or any other Person to enter into
this Lease or any other Operative Agreement, or for any other cause, whether
similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, it being the intention of the parties hereto that the
Rent payable by Lessee hereunder shall continue to be payable in all events
unless the obligation to pay the same shall be terminated in accordance with the
terms of this Lease. To the extent permitted by applicable law, Lessee hereby
waives any and all rights which it may now have or which at any time hereafter
may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or
surrender this Lease with respect to any Unit, except in accordance with the
express terms hereof. If for any reason whatsoever this Lease shall be
terminated in whole or in part by operation of law or otherwise, except as
specifically provided herein, Lessee nonetheless agrees to the maximum extent
permitted by law, to pay to Lessor or to Indenture Trustee, as the case may be,
an amount equal to each installment of Basic Rent and all Supplemental Rent due
and owing, at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. Nothing contained herein shall be construed to waive any claim which
Lessee might have under any of the Operative Agreements or otherwise or to limit
the right of Lessee to make any claim it might have against Lessor or any other
Person or to pursue such claim in such manner as Lessee shall deem appropriate.
Section 20. Notices.
     Unless otherwise expressly specified or permitted by the terms hereof, all
communications and notices provided for herein shall be in writing or by a
telecommunications device capable of creating a written record (including
electronic mail), and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail and courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed in writing by either
of the methods set forth in clauses (a) and (b) above, in each case addressed to
the following Person at its respective address set forth below or at such other
address as such Person may from time to time designate by written notice to the
other Persons listed below:

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If to Lessor:
  KCSR 2007-1 Statutory Trust
 
  c/o U.S. Bank Trust National Association
 
  Goodwin Square
 
  225 Asylum Street, 23rd Floor
 
  Hartford, Connecticut 06103
 
  Attention: Corporate Trust Department (KCSR 2007-1)
 
  Facsimile No.: (860) 241-6897
 
  Telephone No.: (860) 241-6820
 
   
With copies to:
  GS Leasing (KCSR 2007-1) LLC
 
  c/o The Goldman Sachs Group Inc.
 
  85 Broad Street
 
  New York, New York 10004
 
  Attention: Robert D. Emer
 
  Facsimile: 212-256-4853
 
  Telephone No.: 212-902-0047
 
   
With a copy to:
  Archon Group L.P.
 
  6011 Connection Drive
 
  Irving, Texas 75039
 
  Attention: Matthew Lawler
 
   
If to Indenture Trustee:
  Wilmington Trust Company
 
  Rodney Square North
 
  1100 North Market Street
 
  Wilmington, Delaware 19890-0001
 
  Attention: Corporate Trust Administration
 
  Facsimile No.: (302) 636-4140
 
  Telephone No.: (302) 636-6000
 
   
If to Lessee:
  Address of Lessee for Mail Delivery:
 
  The Kansas City Southern Railway Company
 
  P.O. Box 219335
 
  Kansas City, Missouri 64121-9335
 
  Attention: Senior Vice President — Finance & Treasurer
 
  Facsimile No.: (816) 983-1198
 
  Telephone No.: (816) 983-1802

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  Address of Lessee for Courier and Similar Delivery:
 
  The Kansas City Southern Railway Company
 
  427 West 12th Street
 
  Kansas City, Missouri 64105
 
  Attention: Senior Vice President — Finance & Treasurer
 
  Facsimile No.: (816) 983-1198
 
  Telephone No.: (816) 983-1802
 
   
 
  with a copy to:
 
   
 
  The Kansas City Southern Railway Company
 
  427 West 12th Street
 
  Kansas City, Missouri 64105
 
  Attention: Senior Vice President & General Counsel
 
  Facsimile No.: (816) 983-1227
 
  Telephone No.: (816) 983-1303

Section 21. Concerning Indenture Trustee.
     Section 21.1. Limitation of Indenture Trustee’s Liabilities.
Notwithstanding any provision herein or in any of the other Operative Agreements
to the contrary, Indenture Trustee’s obligation to take or refrain from taking
any actions, or to use its discretion (including, but not limited to, the giving
or withholding of consent or approval and the exercise of any rights or remedies
under such Operative Agreements), and any liability therefor, shall, in addition
to any other limitations provided herein or in the other Operative Agreements,
be limited by the provisions of the Indenture, including, but not limited to,
Article VI thereof.
     Section 21.2. Right, Title and Interest of Indenture Trustee under Lease.
It is understood and agreed that the right, title and interest of Indenture
Trustee in, to and under this Lease and the Rent due and to become due hereunder
shall by the express terms granting and conveying the same be subject to the
interest of Lessee in and to the Equipment.
Section 22. Termination Upon Purchase by Lessee; Options to Renew.
     Section 22.1. Termination upon Purchase by Lessee. If Lessee shall have
exercised its option to purchase any Unit pursuant to Section 23 and shall not
have elected to purchase Owner Participant’s Beneficial Interest pursuant to
Section 23(c), upon payment by Lessee of the purchase price with respect to such
Unit as provided in Section 23, and upon payment by Lessee of all Rent then due
and payable under this Lease with respect to such Unit, the Lease Term shall end
with respect to such Unit and the obligations of Lessee to pay Rent hereunder
with respect to such Unit (except for (i) Supplemental Rent obligations
surviving pursuant to the Participation Agreement or the Tax Indemnity Agreement
or which have otherwise accrued but not been paid as of the date of such payment
and (ii) the provisions hereof that expressly survive any termination of this
Lease) shall cease.

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     Section 22.2. Renewal Options. (a) So long as no Specified Default or Event
of Default shall have occurred and be continuing and subject to Section 22.1,
Lessee shall have the right, upon not less than 90 days’ prior irrevocable
notice to Lessor prior to the end of the Basic Term for any Type of Equipment
for which a renewal option is being elected hereunder, to renew this Lease with
respect to, at the sole discretion of Lessee, either all of the Units or a
Minimum Number of any or each Type of Equipment, for one Renewal Term of, at
Lessee’s discretion, (i) one (1) year, (ii) two (2) years or (iii) not less than
three (3) years and not more than four (4) (the “Fixed Rate Renewal Term”),
commencing on the Renewal Term Commencement Date for such Units. All of the
provisions of this Lease, other than Section 10, shall be applicable during any
such Fixed Rate Renewal Term for such Units, except that the Stipulated Loss
Values for such Units shall be determined in accordance with Section 22.5
hereof, and Basic Rent for such Units shall be payable in semi-annual
installments in arrears and shall be equal to the lesser of Fair Market Rental
Value for such Units and amount set forth in Schedule 8 to the Lease Supplement
for such Units of such Type of Equipment.
     (b) So long as no Specified Default or Event of Default shall have occurred
and be continuing, Lessee shall have the right, upon not less than 180 days’
prior notice (which shall become irrevocable if not revoked at least 90 days
prior to the end of the Basic Term, the Fixed Rate Renewal Term or the current
Fair Market Renewal Term, as the case may be) to Lessor at the end of the Basic
Term, the Fixed Rate Renewal Term or any Fair Market Renewal Term with respect
to any Type of Equipment for which a renewal option is being elected hereunder,
as the case may be, pursuant to this Section, to renew this Lease with respect
to, at the sole discretion of Lessee, either all of the Units or a Minimum
Number of any or each Type of Equipment for one or more successive Renewal Terms
of not less than one year each (each a “Fair Market Renewal Term”), commencing
at the end of the Fixed Rate Renewal Term or the end of any Fair Market Renewal
Term for such Type of Equipment, as the case may be; provided that with respect
to Units of any Type of Equipment, the aggregate duration of the Fair Market
Renewal Terms for such Units, when added to the duration of the Interim Term for
such Units, the Basic Term, for such Units, the prior Fixed Rate Renewal Term
for such Units and all prior Fair Market Renewal Terms for such Units, shall not
in any event exceed either (i) 80% of the estimated useful life of such Units,
or (ii) the point at which such Units are estimated to have a Fair Market Sales
Value of 20% of the original Equipment Cost of such Units (without giving effect
to inflation or deflation since the Delivery Date for such Units), in each case
as determined by appraisal (in accordance with the procedures set forth in the
definition of “Fair Market Sales Value”), completed at a point prior to the end
of the Basic Term, the Fixed Rate Renewal Term or the current Fair Market
Renewal Term, as the case may be, selected by Lessee. Basic Rent for any such
Renewal Term shall be equal to the then Fair Market Rental Value for such Units
and shall be payable in semiannual installments in arrears. All other provisions
of this Lease, other than Section 10, shall be applicable during any such
Renewal Term for such Units, except that the Stipulated Loss Values for such
Units shall be determined in accordance with Section 22.5.
     Section 22.3. [Reserved].
     Section 22.4. Determination of Fair Market Rental Value. Lessee may notify
Lessor that Lessee desires a determination of the Fair Market Rental Value of
such Units for a Renewal Term commencing upon the Renewal Term Commencement
Date. Lessee’s request for a

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determination of Fair Market Rental Value shall not obligate Lessee to exercise
any of the options provided in Section 22.2.
     Section 22.5. Stipulated Loss Value During Renewal Term. During any Renewal
Term, the Stipulated Loss Value of any Unit shall be determined by amortizing
the Fair Market Sales Value of such Unit as of the first day of such Renewal
Term down to the Fair Market Sales Value of such Unit as of the last day of such
Renewal Term at the implicit interest rate imputed when discounting on a monthly
basis the renewal rents and the Fair Market Sales Value as of the last day of
such Renewal Term back to the Fair Market Sales Value as of the first day of
such Renewal Term.

Section 23.   Lessee’s Options to Purchase Equipment; Purchase of Beneficial
Interest.

     (a) So long as no Specified Default or Event of Default shall have occurred
and be continuing, Lessee shall have the option:
     (i) upon not less than 180 days’ prior notice (which shall become
irrevocable if not revoked at least 90 days prior to the end of the Basic Term)
to Lessor to purchase on the Basic Term Expiration Date or the Business Day next
following the expiration of any Renewal Term then in effect for any Type of
Equipment for which a purchase option is being elected hereunder, at the sole
discretion of Lessee, either all or a Minimum Number of Units of any or each
Type of Equipment at a price equal to the Fair Market Sales Value for such
Units;
     (ii) upon not less than 30 days’ prior notice to Lessor to purchase on the
EBO Fixed Purchase Price Date for any Type of Equipment for which a purchase
option is being elected hereunder, at the sole discretion of Lessee, either all
of the Units of Equipment or a Minimum Number of Units of any or each Type of
Equipment at a price equal to the EBO Fixed Purchase Price for such Type of
Equipment (as such EBO Fixed Purchase Price may be adjusted from time to time
pursuant to and in accordance with Section 2.6 of the Participation Agreement);
and
     (iii) upon not less than 30 days’ prior notice to Lessor to purchase, at
any time, any Unit of Equipment if Lessee determines and provides to Owner
Trustee and Owner Participant a certificate executed by the Chief Financial
Officer of Lessee to the effect that the cost of any improvements thereto
required by Section 8.1(iv) would exceed 15% of the Fair Market Sales Value of
such Unit as of such date, at a price equal to the Termination Value as of such
date for such Unit.
     (b) If Lessee shall have exercised its option to purchase any Unit pursuant
to Sections 23(a)(i) or 23(a)(iii) and shall have requested a determination of
Fair Market Sales Value at least 180 days prior to the date of such purchase,
Owner Trustee and Lessee shall comply in a timely manner with their respective
obligations set forth in the definition of “Fair Market Sales Value.” If Lessee
shall have exercised its option to purchase any Unit hereunder, and so long as
Lessee has not exercised its option to purchase the Beneficial Interest pursuant
to Section 23(c) below,

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on the date of such purchase (x) Owner Trustee shall, subject to the payment in
full of all amounts referred to in clauses (y) and (z) below, assign, transfer
and convey to Lessee all right, title and interest of Owner Trustee in and to
each Unit being purchased on such date on an “as is, where is” basis, without
recourse or warranty except as to Lessor’s Liens attributable to Owner Trustee
or Owner Participant other than Permitted Liens, (y) Lessee shall pay, by 12:00
noon (New York City time) on such date by wire transfer in immediately available
funds, to Owner Trustee the Fair Market Sales Value or the EBO Fixed Purchase
Price, as the case may be, with respect to the Units purchased on such date plus
any sales, use or other similar taxes imposed on such purchase or transfer, and
(z) Lessee shall pay pursuant to Section 22.1 (i) all Basic Rent due and payable
prior to such date of purchase plus all other Supplemental Rent due and payable
as of such date of purchase, including any Positive Make-Whole Amount with
respect to any Equipment Note due and payable on such date of purchase.
     (c) If Lessee shall have exercised its option pursuant to Section 23(a)(ii)
or 23(a)(iii) above and shall have elected to purchase all but not less than all
of the Units, Lessee shall have the option to purchase the Beneficial Interest
from Owner Participant instead of the individual Units and shall assume all of
the rights and obligations of Owner Participant under each of the Operative
Agreements to which Owner Participant is a party (other than any obligations or
liabilities of Owner Participant incurred on or prior to the applicable purchase
date, which obligations and liabilities shall remain the sole responsibility of
Owner Participant); provided, however, Lessee shall not be entitled to exercise
such option unless Indenture Trustee and Loan Participant shall have received an
opinion of counsel stating that Indenture Trustee and Loan Participant shall be
entitled to the benefits of Section 1168 of the Bankruptcy Code (or any
successor provision) to the same extent as immediately prior to Lessee’s
exercise of this option, such opinion to be reasonably satisfactory to Indenture
Trustee and Loan Participant. On the applicable purchase date (x) Lessee shall
pay any unpaid Basic Rent due and payable prior to such date of purchase and any
other Rent then due and payable and such amounts shall be distributed as
provided in the Indenture and the Trust Agreement and (y) Lessee shall pay to
Owner Participant, in immediately available funds, an amount equal to the excess
of the aggregate purchase price of such Units under Section 23(a)(i) or (iii),
as the case may be, over an amount equal to the sum of the principal of, and any
accrued and unpaid interest on, the outstanding Equipment Notes on such date
after taking into account any payments of principal or interest made in respect
of the outstanding Equipment Notes on such date plus any sales, use or other
similar taxes imposed on such purchase or transfer, and upon payment and (in the
case of clause (x) above) distribution of the amounts set forth in clauses (x)
and (y) above, Owner Participant will assign, transfer and convey to Lessee,
without recourse or warranty except as to Lessor’s Liens attributable to Owner
Trustee or Owner Participant other than Permitted Liens, all of Owner
Participant’s right, title and interest in and to the Beneficial Interest. If
Lessee shall have exercised the option to purchase the Beneficial Interest from
Owner Participant as described above, Owner Participant shall receive on the
applicable purchase date a release in form and substance satisfactory to it,
from all liabilities under the Operative Agreements (other than those
liabilities set forth in the parenthetical phrase of the first sentence of this
Section 23(c)).

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Section 24. Limitation of Lessor’s Liability.
     It is expressly agreed and understood that all representations, warranties
and undertakings of Lessor hereunder (except as expressly provided herein) shall
be binding upon Lessor only and in no case shall Trust Company be personally
liable for or on account of any statements, representations, warranties,
covenants or obligations stated to be those of Lessor hereunder, except that
Trust Company shall be personally liable for its gross negligence or willful
misconduct or for its breach of its covenants, representations and warranties
contained herein to the extent covenanted or made in its individual capacity.
Section 25. Filing in Mexico.
     In the event that during the Lease Term (A) a central filing system becomes
available in Mexico for the filing or recording of security interests or
ownership rights in railroad rolling stock, (B) Lessee elects as a business
practice to conduct such filings or recordings with respect to equipment owned
or leased by Lessee that is used in a manner similar to the Units and (C) Lessee
has not previously taken such action in accordance with the requirements of
Section 16.1 hereof, then Lessee will take, or cause to be taken, at Lessee’s
cost and expense, such action with respect to the filing or recording of this
Lease, the Indenture or any supplements hereto or thereto (or appropriate
evidence thereof) and any financing statements or other instruments as may be
necessary or reasonably required to maintain, so long as the Indenture or this
Lease is in effect and such central filing system remains available, the benefit
of such filing or recording in Mexico for the protection of the security
interest created by the Indenture and any security interest that may be claimed
to have been created by this Lease and the ownership interest of Lessor in each
Unit to the extent such protection is available pursuant to such filing or
recording in Mexico.
Section 26. Miscellaneous.
     Section 26.1. Governing Law; Severability. This Lease and any extensions,
amendments, modifications, renewals or supplements hereto shall be governed by
and construed in accordance with the internal laws and decisions (as opposed to
conflicts of law provisions) of the State of New York; provided, however, that
the parties shall be entitled to all rights conferred by any applicable Federal
statute, rule or regulation. Whenever possible, each provision of this Lease
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Lease shall be prohibited by or
invalid under the laws of any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Lease in any other jurisdiction.
     Section 26.2. Execution in Counterparts. This Lease may be executed in any
number of counterparts, each executed counterpart constituting an original and
in each case such counterparts shall constitute but one and the same instrument;
provided, however, that to the extent that this Lease constitutes chattel paper
(as such term is defined in the Uniform Commercial Code) no security interest in
this Lease may be created through the transfer or possession of any counterpart
hereof other than the counterpart bearing the receipt therefor

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executed by Indenture Trustee on the signature page hereof, which counterpart
shall constitute the only “original” hereof for purposes of the Uniform
Commercial Code.
     Section 26.3. Headings and Table of Contents; Section References. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this Lease.
     Section 26.4. Successors and Assigns. This Lease shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective permitted successors and assigns.
     Section 26.5. True Lease. It is the intent of the parties to this Lease
that it be, and this Lease shall be, a single and indivisible true lease of the
Equipment for all purposes, including, without limitation, for Federal income
tax purposes. Lessor shall at all times be the owner of each Unit which is the
subject of this Lease for all purposes, this Lease conveying to Lessee no right,
title or interest in any Unit except as lessee. Nothing contained in this
Section 26.5 shall be construed to limit Lessee’s use or operation of any Unit
or constitute a representation, warranty or covenant by Lessee as to tax
consequences.
     Section 26.6. Amendments and Waivers. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto; provided, however, that any breach or default, once waived in
writing, unless otherwise specified in such waiver, shall not be deemed
continuing for any purpose of the Operative Agreements.
     Section 26.7. Survival. All warranties, representations, indemnities and
covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on the behalf of any such party under
this Lease, shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date and on each Delivery Date regardless of any
investigation made by any such party or on behalf of any such party.
     Section 26.8. Business Days. If any payment is to be made hereunder or any
action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force and
effect as if made or taken on such scheduled date and as to any payment
(provided that any such payment is made on such succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.
     Section 26.9. Directly or Indirectly. Where any provision in this Lease
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.

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     Section 26.10. Incorporation by Reference. The payment obligations set
forth in the Tax Indemnity Agreement and Sections 7.1 and 7.2 of the
Participation Agreement are hereby incorporated by reference.
     Section 26.11. Entitlement to §1168 Benefits. It is the intent of the
parties that Lessor (and Indenture Trustee as assignee of Lessor under the
Indenture) shall be entitled to the benefits of Section 1168 of the Bankruptcy
Code with respect to the right to repossess any Unit and to enforce any of its
other rights or remedies as provided herein, and in any circumstances where more
than one construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of Section 1168 of the
Bankruptcy Code or any analogous section of the Bankruptcy Code or other
applicable law, it is hereby expressly agreed and provided that, notwithstanding
any other provision of the Bankruptcy Code, any right of Lessor to take
possession of any Unit and to enforce any of its other rights or remedies in
compliance with the provisions of this Lease shall not be affected by the
provisions of Section 362 or Section 363 of the Bankruptcy Code or any analogous
provision of any superseding statute or any power of a bankruptcy court to
enjoin such undertaking or possession.
     Section 26.12. Waiver of Jury Trial. The parties hereto voluntarily and
intentionally waive any rights they may have to a trial by jury in respect of
any litigation based hereon, or arising out of, under, or in connection with
this Lease or any other Operative Agreement, or any course of conduct, course of
dealing, statements (whether verbal or written) or actions of any of the parties
hereto and thereto. The parties hereto hereby agree that they will not seek to
consolidate any such litigation with any other litigation in which a jury trial
has not or cannot be waived.

-35-

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     In Witness Whereof, Lessor and Lessee have caused this Lease to be duly
executed and delivered on the day and year first above written.

            Lessor:

KCSR 2007-1 Statutory Trust, acting
        through U.S. Bank Trust National
        Association, not in its individual
        capacity, but solely as Owner Trustee
            By:           Name:           Title:             Lessee:

The Kansas City Southern Railway Company
      By:           Name:           Title:        

Receipt of the original counterpart
of the foregoing Lease is hereby
acknowledged this ___day of
September, 2007.
Wilmington Trust Company, as Indenture Trustee

         
By:
       
 
 
 
Name:    
 
  Title:    

 

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State of Connecticut
  )
 
  ) ss:
County of Hartford
  )

     On this ___ day of September, 2007, before me personally appeared
                                         to me personally known, who being by me
duly sworn, says that (s)he is a                                          of
U.S. Bank Trust National Association, that said instrument was signed on
September ___, 2007, on behalf of said association by authority of its Board of
Directors, and (s)he acknowledged that the execution of the foregoing instrument
was the free act and deed of said association.

         
 
  By    
 
       
 
      Notary Public

(SEAL)
My Commission Expires:                                         

     
State of Missouri
  )
 
  ) SS.:
County of Jackson
  )

     On this ___day of September, 2007, before me personally appeared
                                         to me personally known, who being by me
duly sworn, says that (s)he is the                                          of
The Kansas City Southern Railway Company, that said instrument was signed on
September ___, 2007, on behalf of said corporation by authority of its Board of
Directors, and (s)he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.

         
 
  By    
 
       
 
      Notary Public

(SEAL)
My Commission Expires: