exv10w48



 



Exhibit 10.48






 












PARTICIPATION AGREEMENT

(KCSR 2005-1)




dated as of December 20, 2005




among




THE KANSAS CITY SOUTHERN RAILWAY COMPANY,

as Lessee




KCSR TRUST 2005-1, acting through

WILMINGTON TRUST COMPANY,

not in its individual capacity, except as otherwise

expressly provided herein, but solely as Owner Trustee,




GS LEASING (KCSR 2005-1) LLC,

as Owner Participant




WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,




as Indenture Trustee




and




EXPORT DEVELOPMENT CANADA




and




KFW (also known as KREDITANSTALT FüR WIEDERAUFBAU),

as Loan Participants




SD70MAC Locomotives





 











 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 
	Section	 	 	 	Page
	Parties

	 	 	 	 	1	 
	 
	Recitals

	 	 	 	 	1	 
	 
	ARTICLE I. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT	 	 	3	 
	Section 1.1

	 	Definitions
	 	 	3	 
	Section 1.2

	 	Directly or Indirectly
	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE II. SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT COST;
CLOSING DATE; TRANSACTION COSTS; ADJUSTMENTS
	 	 	3	 
	Section 2.1

	 	Sale and Purchase
	 	 	3	 
	Section 2.2

	 	Participation in Equipment Cost
	 	 	3	 
	Section 2.3

	 	Closing Date; Procedure for Participation
	 	 	3	 
	Section 2.4

	 	Owner Participant’s Instructions to Owner Trustee; Satisfaction of
Conditions
	 	 	5	 
	Section 2.5

	 	Expenses
	 	 	5	 
	Section 2.6

	 	Calculation of Adjustments to Basic Rent, Stipulated Loss Value, Termination
Value and Fixed Purchase Price; Confirmation and Verification
	 	 	8	 
	Section 2.7

	 	Optional Postponement of Closing Date
	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE III. REPRESENTATIONS AND WARRANTIES	 	 	11	 
	Section 3.1

	 	Representations and Warranties of Trust Company and Owner Trustee
	 	 	11	 
	Section 3.2

	 	Representations and Warranties of Lessee
	 	 	13	 
	Section 3.3

	 	Representations and Warranties of Indenture Trustee
	 	 	16	 
	Section 3.4

	 	Representations, Warranties and Covenants Regarding Beneficial Interest
	 	 	17	 
	Section 3.5

	 	[Reserved]
	 	 	17	 
	Section 3.6

	 	Representations and Warranties of Owner Participant
	 	 	17	 
	Section 3.7

	 	Opinion Acknowledgment
	 	 	19	 
	Section 3.8

	 	Representations and Warranties of the Loan Participants
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE IV. CONDITIONS PRECEDENT	 	 	19	 
	Section 4.1

	 	Conditions Precedent to First Delivery Date; Conditions of Each Participant
and Indenture Trustee to any Closing Date
	 	 	19	 
	Section 4.2

	 	Additional Conditions Precedent to the Obligations of Loan Participants
	 	 	24	 
	Section 4.3

	 	Additional Conditions Precedent to the Obligations of Owner Participant
	 	 	25	 
	Section 4.4

	 	Conditions Precedent to the Obligation of Lessee
	 	 	25	 
	 
	ARTICLE V. FINANCIAL AND OTHER REPORTS OF LESSEE	 	 	26	 






	 				
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	Section	 	 	 	Page
	ARTICLE VI. CERTAIN COVENANTS OF THE PARTICIPANTS, TRUSTEES AND LESSEE	 	 	27	 
	Section 6.1

	 	Restrictions on Transfer of Beneficial Interest
	 	 	27	 
	Section 6.2

	 	Lessor’s Liens Attributable to Owner Participant
	 	 	29	 
	Section 6.3

	 	Lessor’s Liens Attributable to Trust Company
	 	 	30	 
	Section 6.4

	 	Liens Created by Indenture Trustee and Loan Participants
	 	 	30	 
	Section 6.5


	 	Covenants of Owner Trustee, Trust
Company, Owner Participant and Indenture Trustee
	 	 	31	 
	Section 6.6

	 	Amendments to Operative Agreements
	 	 	31	 
	Section 6.7

	 	Section 1168
	 	 	32	 
	Section 6.8

	 	Merger Covenant
	 	 	32	 
	Section 6.9

	 	Additional Filings
	 	 	32	 
	Section 6.10

	 	Owner Participant an Affiliate of Lessee
	 	 	33	 
	Section 6.11

	 	Taxes
	 	 	33	 
	Section 6.12

	 	Direct Loan
	 	 	33	 
	Section 6.13

	 	Transfers by KfW
	 	 	33	 
	 
	ARTICLE VII. LESSEE’S INDEMNITIES	 	 	34	 
	Section 7.1

	 	General Tax Indemnity
	 	 	34	 
	Section 7.2

	 	General Indemnification and Waiver of Certain Claims
	 	 	39	 
	 
	ARTICLE VIII. LESSEE’S RIGHT OF QUIET ENJOYMENT	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE IX. [RESERVED]	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE X. SUCCESSOR INDENTURE TRUSTEE	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE XI. MISCELLANEOUS
	 	 	44	 
	Section 11.1

	 	Consents	 	 	44	 
	Section 11.2

	 	Refinancing
	 	 	45	 
	Section 11.3

	 	Amendments and Waivers
	 	 	47	 
	Section 11.4

	 	Notices
	 	 	47	 
	Section 11.5

	 	Survival
	 	 	48	 
	Section 11.6

	 	No Guarantee of Debt
	 	 	48	 
	Section 11.7

	 	Successors and Assigns
	 	 	49	 
	Section 11.8

	 	Business Day
	 	 	49	 
	Section 11.9

	 	GOVERNING LAW
	 	 	49	 
	Section 11.10

	 	Severability
	 	 	49	 
	Section 11.11

	 	Counterparts
	 	 	49	 
	Section 11.12

	 	Headings and Table of Contents
	 	 	49	 
	Section 11.13

	 	Limitations of Liability
	 	 	49	 
	Section 11.14

	 	Reproduction of Documents
	 	 	50	 
	Section 11.15

	 	Tax Disclosure
	 	 	50	 
	Section 11.16

	 	Bankruptcy of Trust or Trust Estate
	 	 	51	 






	 				
	Participation Agreement (KCSR 2005-1)
	 	- ii -
	 	 






 









 






Attachments to Participation Agreement:




	 	 	 	 	 
	Schedule 1

	 	—
	 	Description of Equipment; Equipment Cost
	Schedule 2

	 	—
	 	Participants’ Commitments
	Schedule 3

	 	—
	 	Pricing Assumptions and Indicative Schedules
	Schedule 4

	 	—
	 	UCC Filings
	Exhibit A

	 	—
	 	Certificate of Acceptance






	 		 		 
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PARTICIPATION AGREEMENT

(KCSR 2005-1)




     This PARTICIPATION AGREEMENT (KCSR 2005-1), dated as of December 20, 2005 (this “Agreement” or
this “Participation Agreement”), among (i) THE KANSAS CITY SOUTHERN RAILWAY COMPANY, a Missouri
corporation (herein, together with its permitted successors and assigns, called the “Lessee” and
“Seller”), (ii) KCSR TRUST 2005-1, a Delaware statutory trust (the “Trust”), acting through
WILMINGTON TRUST COMPANY, a Delaware banking corporation, 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
successors and permitted assigns, called the “Owner Trustee”), (iii) GS LEASING (KCSR 2005-1) LLC,
a Delaware limited liability company (herein, together with its successors and permitted assigns,
called the “Owner Participant”), (iv) WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity as expressly provided herein but as trustee
under the Indenture (as hereinafter defined) (herein in such capacity, together with its successors
and permitted assigns, called the “Indenture Trustee”), and (v) EXPORT DEVELOPMENT CANADA, a
corporation established by an Act of Parliament of Canada (“EDC”), and KFW (also known as
KREDITANSTALT FüR WIEDERAUFBAU), a public law corporation organized under the laws of the Federal
Republic of Germany (“KfW”, and herein each of EDC and KfW, together with its successors and
permitted assigns, each a “Loan Participant” and collectively the “Loan Participants”).



WITNESSETH:




     WHEREAS, the following transactions have occurred prior to the date hereof:



     (i) On November 2, 2005, Lessee and its Affiliate, NAFTA Rail, S.A. de C.V. a Mexico
corporation (“NAFTA Rail”), owned all right, title and interest in and to twenty-five (25), in the
case of Lessee, and fifty (50) (now forty-eight due to two casualties), in the case of NAFTA Rail,
of the SD70MAC locomotives more particularly described on Schedule 1 hereto (the “Units”);



     (ii) On November 2, 2005, Lessee and NAFTA Rail, as borrowers, and Loan Participants, as
lenders, entered into an Amended and Restated Loan Agreement (the “Direct Loan Agreement”),
evidencing the joint and several borrowing by Lessee and NAFTA Rail of $63,962,452.85 from EDC and
$31,981,635.06 from KfW (the “Direct Loan”), which Direct Loan and other obligations under the
Direct Loan Agreement are secured by a lien on the Units created pursuant to a Mortgage and
Security Agreement, dated November 2, 2005, executed by Lessee and NAFTA Rail in favor of the Loan
Participants (the “Direct Mortgage”);



     (iii) On or prior to the Delivery Date of any Unit, NAFTA Rail will have transferred all of
its right, title and interest in such Unit to Seller;



     WHEREAS, concurrently with the execution and delivery of this Agreement, the parties
identified below are entering into the following agreements:



	 		
	Participation Agreement (KCSR 2005-1)
	 	 






 









 






     (i) the Trust Agreement, between Owner Participant and Trust Company creating the Trust;



     (ii) the Lease between the Trust and Lessee;



     (iii) the Indenture between the Trust and Indenture Trustee; and



     (iv) the Tax Indemnity Agreement between Owner Participant and Lessee;



     WHEREAS, subject to the terms and conditions herein provided, from time to time after the date
hereof, Lessee will (i) on behalf of the Trust, accept delivery of each Unit from Seller to the
Trust, subject to the lien of the Direct Mortgage, and (ii) lease such Unit from the Trust pursuant
to the Lease.



     WHEREAS, subject to the terms and conditions herein provided, the parties hereto will enter
into the following transactions on one or two Closing Dates, such transactions being deemed to
occur in the order listed, but each such transaction conditioned on the completion of each of the
other such transactions, and all such transactions to be consummated simultaneously:



     (i) Lessee will pay, or cause to be paid, all accrued interest and other accrued amounts,
other than principal, payable under the Direct Loan relating to each of the Units theretofore
delivered and accepted under the Lease but for which settlement of the purchase price has not
occurred;



     (ii) Owner Participant will contribute to the Trust an amount equal to Owner Participant’s
Commitment with respect to such Units;



     (iii) The Trust will (x) issue to each Loan Participant an Equipment Note as evidence of the
loan made by such Loan Participant to Owner Trustee on such Closing Date in an amount equal to such
Loan Participant’s Commitment with respect to such Units, and (y) execute and deliver an Indenture
Supplement granting to Indenture Trustee a security interest in such Units;



     (iv) The Trust, with the proceeds of the Equipment Notes and the equity contribution made by
Owner Participant, will pay to Seller a purchase price for such Units equal to their Equipment
Cost;



     (v) Seller shall pay in full all amounts due on the Direct Loan in respect of such Units;




     (vi) Loan Participants will execute and deliver an instrument, in recordable form, terminating
the Direct Mortgage in respect of such Units; and



     (vii) The Trust and Lessee will execute and deliver the Lease, and a Lease Supplement with
respect to such Units;



     Now, THEREFORE, in consideration of the mutual agreements herein contained and other good and
valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:



	 		 		 
	Participation Agreement (KCSR 2005-1)
	 	- 2 -
	 	 






 









 






ARTICLE I.

DEFINITIONS; INTERPRETATION OF THIS AGREEMENT




     Section 1.1 Definitions. The capitalized terms used in this Agreement (including the
foregoing recitals) and not otherwise defined herein shall have the respective meanings specified
in Appendix A to the Lease, unless the context hereof shall otherwise require. All references to
Sections, Schedules and Exhibits herein are to Sections, Schedules and Exhibits of this Agreement
unless otherwise indicated.



     Section 1.2 Directly or Indirectly. Where any provision in this Agreement 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.



ARTICLE II.

SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT COST;

CLOSING DATE; TRANSACTION COSTS; ADJUSTMENTS





	 	 	Section 2.1 Sale and Purchase.





          (a) Delivery and Acceptance. Subject to the terms and conditions hereof and on the
basis of the representations and warranties set forth herein, the Trust agrees to purchase each
Unit from Seller and Lessee agrees to accept delivery of such Unit under the Lease, such lease,
delivery and acceptance of the Units under the Lease to be conclusively evidenced by the execution
and delivery by Lessee of a Certificate of Acceptance covering such Unit in the form attached
hereto as Exhibit A (a “Certificate of Acceptance”) and dated the date of such delivery and
acceptance (the “Delivery Date” for such Unit), subject to the condition subsequent that Seller
shall receive the purchase price for such Unit as herein provided.



          (b) Settlement of Purchase Price. Subject to the terms and conditions hereof and on
the basis of the representations and warranties set forth herein, on the date specified in the
Closing Date Notice delivered by Lessee pursuant to Section 2.3 (each a “Closing Date”), the Trust
will pay to Seller a purchase price equal to the Equipment Cost with respect to each Unit
theretofor delivered by Seller and accepted under the Lease but which settlement of the purchase
price has not occurred; provided, however, that the Trust shall not be obligated to
pay the purchase price for any Unit that shall suffer an Event of Loss on or prior to such Closing
Date, and provided further, in the event that a Closing Date does not occur on or
before February 15, 2006 with respect to any Unit for which a Delivery Date shall have occurred,
the delivery and acceptance of such Unit under the Lease shall automatically, without further
action, be rescinded and all right, title and interest to such Unit shall revert to Seller. There
shall be no more than two Closing Dates. The first Closing Date shall occur on or prior to
December 31, 2005. The second Closing Date shall occur on or prior to February 15, 2006.



     Section 2.2 Participation in Equipment Cost.



          (a) Equity Participation. Subject to the terms and conditions hereof and on the basis
of the representations and warranties set forth herein, Owner Participant agrees to participate in
the payment of the Equipment Cost for each Unit on the applicable Closing Date by making an equity
investment in the beneficial ownership of the Trust in an amount equal to



	 		 		 
	Participation Agreement (KCSR 2005-1)
	 	- 3 -
	 	 






 









 





the product of the Equipment Cost of such Unit and the applicable percentage set forth on Schedule 2 hereto (which
product equals the excess of the Equipment Cost of such Unit over the Direct Loan Balance as of the
date hereof allocable to such Unit, and is herein referred to as the “Owner Participant’s
Commitment”). The aggregate amount of the Owner Participant’s Commitment required to be made as
above shall not exceed $31,755,000.00. In no event shall the Equipment Cost for any Unit exceed
the fair market value of such Unit as set forth in the Appraisal referred to in Section 4.3(a)
hereof. The Owner Participant’s Commitment to be paid by Owner Participant on each Closing Date
shall be paid to Owner Trustee at an account with Owner Trustee to be held and applied by Owner
Trustee as provided in Section 2.3.




          (b) Debt Participation. Subject to the terms and conditions hereof and on the basis
of the representations and warranties set forth herein, each Loan Participant severally agrees to
participate on the applicable Closing Date, in the payment of the Equipment Cost of each Unit by
making a secured loan, to be evidenced by an Equipment Note, to Owner Trustee in an amount equal to
the product of the Equipment Cost of such Unit and the applicable percentage set forth on Schedule
2 hereto (which product equals the Direct Loan Balance as of the date hereof allocable to such
Unit, and is herein referred to, with respect to a Loan Participant, as its “Loan Participant’s
Commitment” and collectively, the “Loan Participants’ Commitment”). The aggregate amount of each
Loan Participant’s Commitment required to be made as above provided in the payment of the Equipment
Cost on any Closing Date shall equal the Direct Loan Balance allocable to Units for which
settlement is made on such Closing Date, which amounts, in the aggregate, are set forth opposite
such Loan Participant’s name on Schedule 2 hereto.



     Section 2.3 Closing Date; Procedure for Participation.



          (a) Closing Date Notice. Not later than 1:00 P.M., New York City time, on the third
Business Day preceding each Closing Date, Lessee shall give Owner Participant, Indenture Trustee,
Owner Trustee and Loan Participants notice (a “Closing Date Notice”) by telex, telegraph, facsimile
or other form of telecommunication or telephone (to be promptly confirmed in writing) of such
Closing Date, which Closing Date Notice shall specify in reasonable detail the Units to be
delivered and accepted under the Lease for which settlement of the purchase price will be made on
such date, the aggregate Equipment Cost of such Units, and the respective amounts of the Owner
Participant’s Commitment and each Loan Participant’s Commitment required to be paid with respect to
such Units. Prior to 11:00 A.M., New York City time, on such Closing Date, Owner Participant shall
make the amount of the Owner Participant’s Commitment and each Loan Participant shall make the
amount of its Loan Participant’s Commitment required to be paid on such Closing Date available to
Owner Trustee, by transferring or delivering such amounts, in funds immediately available, to Owner
Trustee, at Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE
19890, Ph: (302) 636-6302, Fax: (302) 636-4140, Account Number: 074580-000, Account Name: KCSR
2005-1 Trust.



          (b) Closing. The settlement with respect to the payment of the purchase price of the
applicable Units on a Closing Date (a “Closing”) shall take place at 11:00 A.M., New York City time
on each Closing Date at the offices of Thelen Reid & Priest LLP, 875 Third Avenue, New York, New
York 10022 or at such other place or time as the parties hereto shall agree. Upon receipt by Owner
Trustee on such Closing Date of the full amount of the Owner Participant’s Commitment and each Loan
Participant’s Commitment in respect of the Units for which settlement will be made on such Closing
Date, and subject to the conditions set forth in Section 4 to be fulfilled on such Closing Date
having been fulfilled to the satisfaction of Owner Participant and Loan Participants or waived by
Owner



	 		 		 
	Participation Agreement (KCSR 2005-1)
	 	- 4 -
	 	 






 









 





Participant or Loan Participants, as the case may be, (i) the Trust shall, pay to, or to the
order of, Seller, from the funds then held by it, in immediately available funds, an amount equal
to the Equipment Cost for such Units purchased from such Seller, (ii) Seller shall direct the Trust
to pay such amount, on behalf of Seller, directly to the Loan Participants in payment of the Direct
Loan Balance allocable to such Units together with all other amounts due and payable to such Loan
Participants under the Direct Loan and (iii) each Loan Participant shall deliver to Lessee, and
Lessee shall cause to be filed promptly, where appropriate, a Direct Mortgage Termination and
Release with respect to such Units. Each of Owner Participant, Owner Trustee, Loan Participants,
Indenture Trustee, and Lessee shall take all actions required to be taken by it in connection
therewith and pursuant to this Section 2.3(b).




     Section 2.4 Owner Participant’s Instructions to Owner Trustee; Satisfaction of
Conditions. 



          (a) Owner Participant agrees that the making available to Owner Trustee of the amount of its
Commitment for the Units delivered on or prior to each Closing Date in accordance with the terms of
this Section 2 shall constitute, without further act, authorization and direction by Owner
Participant to Owner Trustee, subject, on such Closing Date, to the conditions set forth in Section
4 to be fulfilled on such Closing Date having been fulfilled on such Closing Date to the
satisfaction of Owner Participant or waived by Owner Participant, to take the applicable actions
specified in Section 3.01 of the Trust Agreement with respect to the Units on each Closing Date.



          (b) Owner Participant agrees, in the case of any Replacement Unit substituted pursuant to
Section 11.2 of the Lease, that Owner Trustee is authorized and directed to take the actions
specified in Section 11.4 of the Lease with respect to such Replacement Unit upon due compliance
with the terms and conditions set forth in such Section 11.4 of the Lease with respect to such
Replacement Unit.



          (c) Owner Participant agrees that the authorization by Owner Participant or its counsel to
Owner Trustee to release to Lessee, the Owner Participant’s Commitment with respect to the Units
delivered on or prior to each Closing Date shall constitute, without further act, notice and
confirmation that all conditions set forth in Section 4 to be fulfilled on such Closing Date were
either met to the satisfaction of Owner Participant or, if not so met, were in any event waived by
it with respect to such Units.



     Section 2.5 Expenses.



          (a) If Owner Participant shall have made its investment provided for in Section 2.2(a) and the
transactions contemplated by this Agreement are consummated, either Owner Participant will promptly
pay, or Owner Trustee will promptly pay, with funds Owner Participant hereby agrees to pay to Owner
Trustee, the following (the “Transaction Costs”):



	 		 		 
	Participation Agreement (KCSR 2005-1)
	 	- 5 -
	 	 






 









 






               (i) the cost of reproducing and printing the Operative Agreements, the Equipment Notes, if
any, including all costs and fees in connection with the initial filing and recording of
appropriate evidence of the Lease, the Indenture and any other document required to be filed or
recorded pursuant to the provisions hereof or of any other Operative Agreement;



               (ii) the reasonable fees and expenses of Thelen Reid & Priest LLP and Davis Polk & Wardwell,
special counsel to Owner Participant and OP Guarantor (in the amount separately agreed to by Owner
Participant and Lessee) and the reasonable fees and expenses of local counsel to Owner Participant,
if any, (in the amount separately agreed to by Owner Participant and Lessee), for their services
rendered in connection with the negotiation, execution and delivery of this Participation Agreement
and the Operative Agreements related hereto;



               (iii) the reasonable fees and expenses of Vedder Price Kaufman & Kammholz, P.C., special
counsel to the Loan Participants, for their services rendered in connection with the negotiation,
execution and delivery of this Participation Agreement and the Operative Agreements related hereto;



               (iv) the reasonable fees and expenses of Ray, Quinney & Nebeker, special counsel to Indenture
Trustee (up to the amount separately agreed to by Indenture Trustee and Lessee), for their services
rendered in connection with the negotiation, execution and delivery of this Participation Agreement
and the Operative Agreements related hereto;



               (v) the reasonable fees and expenses of DLA Piper Rudnick Gray Cary US LLP, special counsel to
Lessee, for their services rendered in connection with the negotiation, execution and delivery of
this Participation Agreement and the Operative Agreements related hereto;



               (vi) the reasonable fees and expenses of Morris, James, Hitchens, & Williams, LLP, special
counsel to Owner Trustee (up to the amount separately agreed to by Owner Trustee and Lessee), for
their services rendered in connection with the negotiation, execution and delivery of this
Participation Agreement and the Operative Agreements related hereto;



               (vii) the initial fees and expenses of Owner Trustee;



               (viii) the initial fees and expenses of Indenture Trustee;



               (ix) the fees of an equipment appraiser, for their services rendered in connection with
delivering the Appraisal required by Section 4.3(a);



               (x) the fees of AMA Capital Partners;



               (xi) the reasonable fees and expenses of Alvord and Alvord, special STB counsel, for their
services rendered in connection with the consummation of the transactions contemplated by the
Operative Agreements;




	 		 		 
	Participation Agreement (KCSR 2005-1)
	 	- 6 -
	 	 






 









 





               (xii) the reasonable fees and expenses of McCarthy Tétrault, special Canadian counsel, for
their services rendered in connection with the consummation of the transactions contemplated by the
Operative Agreements; and



               (xiii) the out-of-pocket expenses of Goldman Sachs & Co. and the fees of Cornerstone
Financial
Advisors L.P.;


provided, however, that if such Transaction Costs exceed the amount of Transaction
Costs used in calculating Basic Rent and other amounts pursuant to Section 2.6(a) hereof on each
Closing Date, Lessee shall pay such excess; provided further, however,
that, in such event, Owner Participant shall designate which Transaction Costs shall be payable by
Lessee.




     Notwithstanding the foregoing, Transaction Costs shall not include internal costs and expenses
such as salaries and overhead of whatsoever kind or nature nor costs incurred by parties to this
Participation Agreement pursuant to arrangements with third parties for services (other than those
expressly referred to above), such as computer time procurement, financial analysis and consulting,
advisory services, and costs of a similar nature.



          (b) Upon the consummation of the transactions contemplated by this Agreement, Lessee agrees to
pay when due: (i) the reasonable expenses of Owner Trustee, Indenture Trustee and the Participants
incurred subsequent to the delivery of the Equipment, including reasonable fees and expenses of
their counsel, in connection with any waivers, supplements, amendments, modifications or
alterations which are (A) requested by Lessee in connection with any of the Operative Agreements or
(B) necessary or required to comply with Applicable Law or to effectuate the purpose or intent of
any Operative Agreement (excluding costs incurred in connection with any adjustment pursuant to
Section 2.6, except as expressly provided in Section 2.6(b)); (ii) the reasonable ongoing fees and
expenses of Owner Trustee under the Trust Agreement, including fees and expenses incurred in
connection with the enforcement of obligations of Lessee under the Operative Agreements; and (iii)
the reasonable ongoing fees and expenses of Indenture Trustee under the Operative Agreements,
including fees and expenses incurred in connection with the enforcement of obligations of Lessee
under the Operative Agreements.



          (c) Notwithstanding the foregoing provisions of this Section 2.5, except as specifically
provided in Section 7.2, Lessee shall have no liability for any costs or expenses relating to any
voluntary transfer of Owner Participant’s interest in the Equipment including any transfer prior to
any Closing Date of Owner Participant’s obligation to fund its participation pursuant to Section 2
(other than during the continuance of an Event of Default or in connection with the exercise of
remedies as provided in Section 15 of the Lease, Lessee’s exercise of any purchase option pursuant
to Section 23 of the Lease, Lessee’s exercise of its termination rights pursuant to Section 10 of
the Lease or the transfer to Lessee of any Unit which has been the subject of an Event of Loss
pursuant to Section 11 of the Lease) and no such costs or expenses shall constitute Transaction
Costs and Lessee will not have any obligation with respect to the costs and expenses resulting from any voluntary transfer of any equity interest by any
transferee of Owner Participant, whenever occurring (other than during the continuance of an Event
of Default or in connection with the exercise of remedies as provided in Section 15 of the Lease,
Lessee’s exercise of any purchase option pursuant to Section 23 of the Lease, Lessee’s exercise



	 		 		 
	Participation Agreement (KCSR 2005-1)
	 	- 7 -
	 	 






 









 





of its termination rights pursuant to Section 10 of the Lease or the transfer to Lessee of any Unit
which has been the subject of an Event of Loss pursuant to Section 11 of the Lease).




     Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value, Termination
Value and Fixed Purchase Price; Confirmation and Verification.



          (a) Schedules. Basic Rent, Stipulated Loss Values, Termination Values and EBO Fixed
Purchase Price, amortization schedules for the Equipment Notes, and Pricing Assumptions for the
first Closing Date are set forth on Schedule 3 hereto, and such schedules shall operate as
indicative schedules for each Closing Date (the “Indicative Schedules”). Basic Rent, Stipulated
Loss Values, Termination Values and EBO Fixed Purchase Price, amortization schedules for the
Equipment Notes for each subsequent Closing Date will be adjusted as provided below. On each
Closing Date, (i) Lessee and Owner Trustee shall enter into a Lease Supplement which shall include
as exhibits thereto schedules in the forms of Schedule 3 hereto which include the actual Basic
Rent, Rent Payment Dates, Stipulated Loss Values, Termination Values, Allocated Rent, Lessee and
Lessor Loan Balances, EBO Fixed Purchase Price, EBO Fixed Purchase Price Date, and amortization
schedules for the Equipment Notes, in each case in respect of the Units to be settled on such
Closing Date, and shall attach a list of the Units to be financed on such date and (ii) Owner
Trustee shall enter into an Indenture Supplement which shall attach a list of the Units to be
financed on such date.



          (b) Calculation of Adjustments. In the event that (A) any Pricing Assumption relating
to the Units to be settled on any Closing Date is determined to be inaccurate with respect to such
Closing Date, or (B) prior to any Closing Date: (1) there shall have occurred a Change in Tax Law
and (2) after having been advised in writing by Owner Participant of such Change in Tax Law and the
proposed adjustment to the payments of Basic Rent resulting therefrom, Lessee shall have waived its
right under Section 4.4 of this Agreement to decline to proceed with the transaction, or (C) a
refinancing or refunding as contemplated by Section 11.2 occurs, or (D) any amount is paid by
Lessee to Owner Participant pursuant to Section 5.5(i) or 5.5(iii) of the Tax Indemnity Agreement,
or (E) Lessee elects to make payments to Owner Participant pursuant to Section 5.5(ii) of the Tax
Indemnity Agreement, then, in each case, Owner Participant shall recalculate the payments or
amounts, as the case may be, of Basic Rent, Stipulated Loss Values, Termination Values and EBO
Fixed Purchase Price (except that in the case of events described in clause (D) or (E) above, Owner
Participant shall recalculate the Stipulated Loss Values, Termination Values and EBO Fixed Purchase
Price only):




(i) to preserve the Net Economic Return that Owner Participant would have realized had there
been no change in the Pricing Assumptions or had such Change in Tax Law not occurred or had
such refunding or refinancing not occurred or had such amount not been paid by Lessee under
Section 5.5(i) or 5.5(iii) of the Tax Indemnity Agreement or had Lessee not elected to make
such payment under Section 5.5(ii) of the Tax Indemnity Agreement or had a reoptimization of
the debt not occurred, and




(ii) to minimize to the greatest extent possible, consistent with the foregoing clause (i),
the sum of the present value of the payments of Basic Rent through and including the EBO
Fixed Purchase Price Date, and the EBO Fixed Purchase Price (all present values



	 		 		 
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for purposes
of the foregoing being computed using the relevant Debt Rate, semiannually compounded, and
discounting to the date hereof).


In performing any such recalculation and in determining Owner Participant’s Net Economic Return,
Owner Participant shall utilize the same methods, tax constraints and assumptions originally used
to calculate the payments of Basic Rent, Stipulated Loss Values, Termination Values and EBO Fixed
Purchase Price with respect to the Basic Term (other than those assumptions changed as a result of
any of the events described in clauses (A) through (E) of the preceding sentence necessitating such
recalculation; it being agreed that such recalculation shall reflect solely any changes of
assumptions or facts resulting directly from the event or events necessitating such recalculation).
Such adjustments shall comply (to the extent the original structure complied) with section 467 of
the Code and the Regulations and the requirements of sections 4.02(5), 4.07(1) and (2) and 4.08(1)
of Revenue Procedure 2001-29, as amended ((and such that the Lease could not be treated as a
“disqualified leaseback” or “long term agreement” within the meaning of section 467 of the Code),
and in the case of any refinancing governed by Section 11.2, shall comply with Treasury Regulation
sections 1.467-1(f)(6)(i) and 1.861-10(T)(b)(9) or any successor thereto) whether the term of the
Lease is deemed to commence with respect to any Unit on the Closing Date therefor and end on the
Basic Term Expiration Date or is deemed to commence on the date of the refinancing and end on the
Basic Term Expiration Date.




          (c) Confirmation and Verification. Upon completion of any recalculation described
above in this Section 2.6, a duly authorized officer of Owner Participant shall provide a
certificate to Lessee either (x) stating that the payments of Basic Rent, Stipulated Loss Values,
Termination Values and EBO Fixed Purchase Price with respect to the Basic Term as are then set
forth in the Lease do not require change, or (y) setting forth such adjustments to the payments of
Basic Rent, Stipulated Loss Values, Termination Values or EBO Fixed Purchase Price with respect to
the Basic Term as have been calculated by Owner Participant in accordance with Section 2.6(a)
above. Such certificate shall describe in reasonable detail the basis for any such adjustments.
If Lessee shall so request, the recalculation of any such adjustments described in this Section 2.6
shall be verified by a nationally recognized firm of independent accountants selected by Owner
Participant and reasonably acceptable to Lessee and any such recalculation of such adjustment as so
verified shall be binding on Lessee and Owner Participant. Such accounting firm shall be requested
to make its determination within 30 days. Owner Participant shall provide to a representative of
such accounting firm, on a confidential basis, such information as it may reasonably require (but
excluding any books, records or tax returns), including the original assumptions used by Owner
Participant and the methods used by Owner Participant in the original calculation of, and any
recalculation of, Basic Rent, Stipulated Loss Values, Termination Values and EBO Fixed Purchase
Price and such other information as is necessary to determine whether the computation is accurate
and in conformity with the provisions of this Agreement. The reasonable costs of such verification
shall be borne by Lessee, unless as a result of such verification process (1) the payments of Basic
Rent certified by Owner Participant pursuant to this Section 2.6(b) are adjusted and such
adjustment causes the sum of the present value of the payments of Basic Rent through and including
the EBO Fixed
Purchase Price Date and the present value of the EBO Fixed Purchase Price (all present values
for purposes of the foregoing being computed using the relevant Debt Rate, semiannually compounded,
and discounting to the date hereof) to decline by 10 basis points or more from the



	 		 		 
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sum of the present value of the payments of Basic Rent through and including the EBO Fixed Purchase Price Date
and the present value of the EBO Fixed Purchase Price (all present values for purposes of the
foregoing being computed using the relevant Debt Rate, semiannually compounded, and discounting to
the date hereof) certified by Owner Participant pursuant to this Section 2.6(b), or (2) any payment
of Stipulated Loss Value, Termination Value or EBO Fixed Purchase Price is adjusted and such
adjustment causes such Stipulated Loss Value, Termination Value or EBO Fixed Purchase Price to
decline by 10 basis points or more from such Stipulated Loss Value, Termination Value or EBO Fixed
Purchase Price certified by Owner Participant pursuant to this Section 2.6(b), in which case Owner
Participant shall be responsible for the reasonable costs of such verification.




          (d) Notwithstanding the foregoing, any adjustment made to the payments of Basic Rent or to
Stipulated Loss Values or Termination Values or EBO Fixed Purchase Price with respect to the Basic
Term, pursuant to the foregoing, shall comply with the following requirements: (i) each installment
of Basic Rent, as so adjusted, under any circumstances and in any event, will be in an amount at
least sufficient for Owner Trustee to pay in full as of the due date of such installment any
payment of principal of and interest on the Equipment Notes required to be paid on the due date of
such installment of Basic Rent and (ii) Stipulated Loss Value and Termination Value, as so
adjusted, under any circumstances and in any event, will be an amount which, together with any
other amounts required to be paid by Lessee under the Lease in connection with a deemed Event of
Loss pursuant to Section 9.1 of the Lease or any other Event of Loss or a termination of the Lease,
as the case may be, will be at least sufficient to pay in full, as of the date of payment thereof,
the aggregate unpaid principal of the Equipment Notes, Make-Whole Amount, if any, and all unpaid
interest on the Equipment Notes, accrued to the date on which Stipulated Loss Value or Termination
Value, as the case may be, is paid in accordance with the terms of the Lease.



          (e) Invoices. All invoices in respect of Transaction Costs shall be directed to Owner
Participant at the address set forth herein, with a copy to Lessee.



     Section 2.7 Optional Postponement of Closing Date.



          (a) Any scheduled Closing Date may be postponed from time to time for any reason (but to no
later than February 15, 2006) if Lessee gives Owner Participant, Indenture Trustee, Loan
Participants and Owner Trustee telex, telegraphic, facsimile or telephonic (confirmed in writing)
notice of such postponement and notice of the date to which such Closing Date has been postponed,
such notice of postponement to be received by each party no later than 5:00 P.M., New York City
time, on the Business Day immediately before the originally scheduled Closing Date or subsequent
scheduled Closing Date, and in the event of such postponement, the term “Closing Date” as used in
this Agreement shall mean such postponed “Closing Date”.



     (b) In the event of any postponement of any Closing Date pursuant to this Section 2.7, or if
on the originally scheduled Closing Date or subsequent scheduled Closing Date
not postponed as above provided any Unit is not delivered or, if delivered, is not accepted by
Owner Trustee’s representative for any reason (the originally scheduled Closing Date being referred
to as the “Scheduled Closing Date” for the purposes of this Section 2.7): (i) Lessee will



	 		 		 
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reimburse each Participant for the loss of the use of its funds with respect to each such Unit occasioned by
such postponement or failure to deliver or accept (unless such failure to accept is caused by a
default by such Participant hereunder) by paying to such Participant on demand interest at an
interest rate equal to the Debt Rate for the period from and including the Scheduled Closing Date
to but excluding the earlier of the date upon which such funds are returned prior to 1:00 P.M. (New
York City time) or the actual date of delivery; provided that Lessee shall in any event pay
to such Participant at least one (1) day’s interest at such rate on the amount of such funds,
unless such Participant shall have received, prior to 12:00 P.M. (New York City time) on the
Business Day preceding the Scheduled Closing Date, a notice of postponement of the Scheduled
Closing Date pursuant to Section 2.7(a), and (ii) Owner Trustee will return on the earlier of the
second Business Day following the Scheduled Closing Date or February 15, 2006, or earlier, if so
instructed by Lessee, any funds which it shall have received from such Participant as its
Commitment for such Units payable to each Participant, absent joint instruction from Lessee and
such Participant to retain such funds until the specified date of postponement established under
Section 2.7(a).




          (c) Owner Trustee agrees that, in the event it has received telephonic notice (to be confirmed
promptly in writing) from Lessee on the Scheduled Closing Date for any Unit or Units that such Unit
or Units have not been tendered for delivery, it will if instructed in the aforementioned notice
from Lessee (which notice shall specify the Securities to be purchased) use reasonable best efforts
to invest, at the risk of Lessee (except as provided below with respect to Indenture Trustee’s
gross negligence or willful misconduct), the funds received by it from any Participant with respect
to such Unit or Units in Permitted Investments in accordance with Lessee’s instructions. Any such
Permitted Investments purchased by Owner Trustee upon instructions from Lessee shall be held in
trust by Owner Trustee for the benefit of such Participant. Lessee shall pay to Owner Trustee on
such Closing Date (if such Unit or Units are delivered and accepted pursuant hereto) the amount of
any net loss on the investment of such funds invested at the instruction of Lessee. If the funds
furnished by any Participant with respect to such Unit or Units are required to be returned to such
Participant, Lessee shall, on the date on which such funds are so required to be returned,
reimburse Owner Trustee, for the benefit of such Participant, for any net losses incurred on such
investments. Owner Trustee shall not be liable for failure to invest such funds or for any losses
incurred on such investments except for its own willful misconduct or gross negligence. In order
to obtain funds for the payment of the Equipment Cost for such Unit or Units or to return funds
furnished by such Participant to Owner Trustee for the benefit of such Participant with respect to
such Unit or Units, Owner Trustee is authorized to sell any Permitted Investments purchased as
aforesaid with the funds received by it from such Participant in connection with such Unit or
Units.



          (d) Notwithstanding the provisions of Section 2.7(a), no Participant shall be under any
obligation to make its Commitment available beyond 5:00 P.M. (New York City time) on February 15,
2006.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES




     Section 3.1 Representations and Warranties of Trust Company and Owner Trustee. Trust
Company (except with respect to clause (c) below) and as Owner Trustee, (with respect to



	 		 		 
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clause (c) below) represents and warrants to Owner Participant, Indenture Trustee, Loan Participants and
Lessee, notwithstanding the provisions of Section 11.13 or any similar provision in any other
Operative Agreement, that, as of the date hereof and as of each Closing Date (unless any such
representation is specifically made as of one date):




          (a) Trust Company is a Delaware banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and to enter into and perform its obligations hereunder and
under the Trust Agreement and (assuming due authorization, execution and delivery of the Trust
Agreement by Owner Participant) has full power and authority, as Owner Trustee and/or, to the
extent expressly provided herein or therein to enter into and perform its obligations under each of
the Owner Trustee Agreements;



          (b) Owner Trustee and, to the extent expressly provided therein, Trust Company, has duly
authorized, executed and delivered the Trust Agreement and (assuming the due authorization,
execution and delivery of the Trust Agreement by Owner Participant) has duly authorized, executed
and delivered, or in the case of the Lease Supplement and the Indenture Supplement will on each
Closing Date execute and deliver, each of the other Owner Trustee Agreements (other than the
Equipment Notes) and, as of each Closing Date, the Equipment Notes to be delivered on such Closing
Date; and the Trust Agreement constitutes a legal, valid and binding obligation of Trust Company,
enforceable against Trust Company or Owner Trustee, as the case may be, in accordance with its
terms except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by general equity principles;



          (c) assuming the due authorization, execution and delivery of the Trust Agreement by Owner
Participant, each of the Owner Trustee Agreements (other than the Trust Agreement) to which it is a
party constitutes, or when entered into will constitute, a legal, valid and binding obligation of
Trust Company or as Owner Trustee, as the case may be, enforceable against Trust Company or Owner
Trustee, as the case may be, in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general equity principles;



          (d) neither the execution and delivery by Trust Company or Owner Trustee, as the case may be,
of the Owner Trustee Agreements or the Equipment Notes to be delivered on each Closing Date, nor
the consummation by Trust Company or Owner Trustee, as the case may be, of any of the transactions
contemplated hereby or thereby, nor the compliance by Trust Company or Owner Trustee, as the case
may be, with any of the terms and provisions hereof and thereof, (i) requires or will require any
approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness
or obligations of it, or (ii) violates or will violate its Certificate of Incorporation or by-laws,
or contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, or
results or will result in the creation of any Lien (other than as permitted under the Lease) upon
its property under any indenture, mortgage, chattel mortgage, deed of trust, conditional sale
contract, bank loan or credit agreement, license or other agreement or instrument to which it is a
party or by which it is bound, or contravenes or will contravene any law, governmental rule or



	 		 		 
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regulation of the State of Delaware governing the banking or trust powers of Owner Trustee, or any
judgment or order applicable to or binding on it;




          (e) there are no pending or threatened actions or proceedings against Trust Company or Owner
Trustee before any court or administrative agency which individually or in the aggregate, if
determined adversely to it, would materially adversely affect the ability of Trust Company or Owner
Trustee, as the case may be, to perform its obligations under the Trust Agreement, the other Owner
Trustee Agreements or the Equipment Notes to be delivered on each Closing Date;



          (f) its location as such term is used in Section 9-307 of the Uniform Commercial Code is
located in Delaware and the place where its records concerning the Equipment and all its interest
in, to and under all documents relating to the Trust Estate, is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890, and Trust Company agrees to give Owner
Participant, Indenture Trustee and Lessee written notice of any relocation of said location or said
place from its present location within 60 days of the date thereof;



          (g) no consent, approval, order or authorization of, giving of notice to, or registration
with, or taking of any other action in respect of, governmental authority or agency or any State of
Delaware governmental authority or agency regulating the banking or trust powers of Trust Company,
is required for the execution and delivery of, or the carrying out by, Trust Company or Owner
Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust
Agreement or of any of the transactions contemplated by any of the other Owner Trustee Agreements,
other than any such consent, approval, order, authorization, registration, notice or action as has
been duly obtained, given or taken;



          (h) on each Delivery Date, Owner Trustee’s right, title and interest in and to the Equipment
delivered on such Delivery Date shall be free of any Lessor’s Liens attributable to Trust Company;



          (i) on each Closing Date, the proceeds received by Owner Trustee from Owner Participant on
such Closing Date pursuant to the Trust Agreement will be administered by it in accordance with
Article IV of the Trust Agreement; and



          (j) on each Delivery Date, the Trust shall receive from Seller such title to the Units of
Equipment delivered on such Delivery Date as was conveyed to it by Seller, subject to the rights of
Owner Trustee and Lessee under the Lease and the security interest created pursuant to the
Indenture and each Indenture Supplement.



     Section 3.2 Representations and Warranties of Lessee. Lessee represents and warrants to Owner Trustee, Trust Company, Indenture Trustee, Loan
Participants and Owner Participant that, as of the date hereof and as of each Closing Date (unless
any such representation is specifically made as of one date):



          (a) Lessee is a corporation duly organized, validly existing, and in good standing under the
laws of the State of Missouri, is a Class I railroad as defined in 49 CFR Part 12011-1, is duly
licensed or qualified and in good standing in each jurisdiction in which the




	 		 		 
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failure to so qualify
would have a material adverse effect on its ability to enter into and perform its obligations under
the Lessee Agreements, has the corporate power and authority to carry on its business as now
conducted, and has the requisite power and authority to execute, deliver and perform its
obligations under the Lessee Agreements;




          (b) the Lessee Agreements have been duly authorized by all necessary corporate action (no
shareholder approval being required), executed and delivered (or in the case of the Lease
Supplement will on each Closing Date have been duly executed and delivered) by Lessee, and
constitute (or in the case of the Lease Supplement will on each Closing Date constitute) the legal,
valid and binding obligation of Lessee, enforceable against Lessee in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency and similar laws and
by general principles of equity;



          (c) the execution, delivery and performance by Lessee of each Lessee Agreement and compliance
by Lessee with all of the provisions thereof do not and will not contravene any law or regulation,
or any order of any court or governmental authority or agency applicable to or binding on Lessee or
any of its properties, or contravene the provisions of, or constitute a default by Lessee under, or
result in the creation of any Lien (except for Permitted Liens) upon the property of Lessee under
its Certificate of Incorporation or by-laws or any material indenture, mortgage, contract or other
agreement or instrument to which Lessee is a party or by which Lessee or any of its property is
bound or affected;



          (d) except for those matters discussed in the financial statements provided to the
Participants under Section 3.2(e), there are no proceedings pending or, to the knowledge of Lessee,
threatened against Lessee in any court or before any governmental authority or arbitration board or
tribunal which individually or in the aggregate would materially and adversely affect the financial
condition of Lessee or impair the ability of Lessee to perform its obligations under the Lessee
Agreements or which questions the validity of any Lessee Agreement or any action taken or to be
taken pursuant thereto;



          (e) the audited consolidated balance sheet and consolidated statements of income and retained
earnings and cash flows of KCS for the fiscal year ended December 31, 2004, fairly present, in
conformity with generally accepted accounting principles, the consolidated financial position of
KCS as of such date and the results of its operations for the period then ended. The unaudited
consolidated balance sheet and consolidated statements of income and retained earnings and cash
flows of KCS for the nine months ended September 30, 2005, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial position of KCS as of such
date and the results of its operations for the period then ended, subject to normal year-end
adjustments;



          (f) neither the nature of Lessee nor its businesses or properties, nor any relationship
between Lessee and any other Person, nor any circumstances in connection with the execution and
delivery by Lessee of the Lessee Agreements, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, or the giving of notice to, any
governmental authority on the part of Lessee in connection with the execution and delivery by
Lessee of the Lessee Agreements, other than notices required to be filed with the



	 		 		 
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STB, which notices shall have been filed on or prior to each Closing Date and except as contemplated by
Section 3.2(g) hereof;




          (g) all filings and other actions necessary to protect the rights of Owner Trustee under the
Lease, and to perfect the security interest of Indenture Trustee under the Indenture in the
Indenture Estate as against creditors of and purchasers from Owner Trustee, will have been made on
or prior to each Closing Date and the Indenture will on each Closing Date create a valid and
perfected lien and security interest in the Indenture Estate, subject to any Lessor’s Liens and
Permitted Liens;



          (h) on each Delivery Date, the Equipment is covered by the insurance required by Section 12 of
the Lease and all premiums due prior to each Delivery Date in respect of such insurance shall have
been paid in full;



          (i) Lessee has timely filed all United States Federal income tax returns and all other
material tax returns which (to its knowledge) are required to be filed by it and has paid all taxes
due pursuant to such returns or pursuant to any assessment made against Lessee or any of its assets
(other than assessments, the payment of which is being contested in good faith by Lessee) and no
tax liens have been filed and no claims are being asserted with respect to any such taxes, fees or
other charges which could reasonably be expected to have a materially adverse effect on its ability
to perform its obligations under the Lessee Agreements;



          (j) the (i) “location” (as such term is used in Section 9-307 of the Uniform Commercial Code)
of Lessee is the State of Missouri, and the place where its records concerning the Equipment and
all of its interests in, to and under all documents relating to the Equipment are and will be kept,
is located at Kansas City, Missouri, and (ii) The Kansas City Southern Railway Company is its true
legal name as registered in the jurisdiction of its organization, its federal employer
identification number is 44-6000758 and its organizational identification number designated by its
jurisdiction of organization is R00000513;



          (k) no Lease Default has occurred and is continuing and no Event of Loss has occurred;



          (l) Lessee is not an “investment company” or an “affiliated person” of an “investment company”
within the meaning of the Investment Company Act of 1940;



          (m) the acquisition by Owner Participant of the Beneficial Interest for its own account will
not constitute a prohibited transaction within the meaning of section 4975(c)(1)(A) through (D) of
the Code. The representation made by Lessee in the preceding clause is made in reliance upon and
subject to the accuracy of the representation of Owner Participant in Section 3.6(g) of this
Agreement;



          (n) on each Delivery Date, after giving effect to the transactions contemplated hereby, Owner
Trustee shall have good and marketable title to the Units being delivered on or such Delivery Date,
in each case free and clear of all claims, Liens and encumbrances of any nature, except Permitted
Liens of the type described in clauses (iii), (iv) or (v) of the definition thereof;



	 		 		 
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     (o) each Unit has been manufactured to meet the Design Specifications;




     (p) the Equipment Cost for each Unit is equal to the purchase price on November 2, 2005, paid
by Lessee and NAFTA Rail to El-Mo-Mex, Inc. in connection with the purchase of the Units; and



     (q) the only expected use outside the United States of any Unit is use in Canada or Mexico on
a temporary basis which is not expected to exceed a total of 90 days in any calendar year.



     Section 3.3 Representations and Warranties of Indenture Trustee. Indenture Trustee
represents and warrants to Owner Participant, Owner Trustee, Trust Company, Loan Participants and
Lessee that, as of the date hereof and as of each Closing Date (unless any such representation is
specifically made as of one date):



          (a) Indenture Trustee is a national banking association duly organized and validly existing
and in good standing under the laws of the United States and has the full corporate power,
authority and legal right under the laws of the State of Utah and the laws of the United States
pertaining to its banking, trust and fiduciary powers to execute, deliver and carry out the terms
of each of the Indenture Trustee Agreements;



          (b) the execution, delivery and performance by Indenture Trustee of each of the Indenture
Trustee Agreements have been duly authorized by Indenture Trustee and will not violate its
Certificate of Incorporation or by-laws or the provisions of any indenture, mortgage, contract or
other agreement to which it is a party or by which it is bound or any laws, rules or regulations of
the United States or the State of Utah (or any governmental subdivision of either thereof)
pertaining to its banking, trust or fiduciary powers;



          (c) each Indenture Trustee Agreement, when executed and delivered, will constitute its legal,
valid and binding obligation enforceable against it in accordance with its terms;



          (d) there are no proceedings pending or, to the knowledge of Indenture Trustee, threatened,
and to the knowledge of Indenture Trustee there is no existing basis for any such proceedings,
against or affecting Indenture Trustee in or before any court or before any governmental authority
or arbitration board or tribunal which, individually or in the aggregate, if adversely determined,
might impair the ability of Indenture Trustee to perform its obligations under the Indenture
Trustee Agreements;



          (e) no authorization or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body of the United States or the State of Utah, in
required for the due execution, delivery and performance by Indenture Trustee of the Indenture
Trustee Agreements, except as have been previously obtained, given or taken;



          (f) Indenture Trustee is not in default under any of the Indenture Trustee Agreements;



	 		 		 
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          (g) neither Indenture Trustee, nor any Person authorized to act on behalf of Indenture
Trustee, has directly or indirectly offered any interest in the Trust Estate or the Equipment Notes
or any other Operative Agreement or any security similar to either thereof for sale to, or
solicited offers to buy any of the same from, or otherwise approached or negotiated with respect to
any of the same with, any Person other than the Loan Participants; and



          (h) there are no Taxes which may be imposed on or asserted against the Indenture Estate or any
part thereof or any interest therein, Trust Company, Owner Trustee or Owner Participant by any
state or local government or taxing authority in connection with the execution, delivery or
performance by Indenture Trustee of the Indenture Trustee Agreements or the authentication of the
Equipment Notes.



     Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest.



          (a) Owner Trustee represents and warrants to Lessee, Indenture Trustee, Loan Participants and
Owner Participant that, as of the date hereof and as of each Closing Date, neither Owner Trustee
nor any Person authorized or employed by Owner Trustee as agent or otherwise in connection with the
placement of the Beneficial Interest or any similar interest has offered any of the Beneficial
Interest or any similar interest or any of the Equipment Notes or any similar interest for sale to,
or solicited offers to buy any thereof from, or otherwise approached or negotiated with respect
thereto with, any prospective purchaser.



          (b) Lessee represents and warrants to Owner Trustee, Indenture Trustee, Loan Participants and
Owner Participant that, as of the date hereof and as of each Closing Date, it has not offered any
of the Beneficial Interest for sale to, or solicited offers to buy any thereof from, any Person
other than Owner Participant and not more than 35 other prospective institutional investors.



          (c) Both Owner Trustee and Lessee agree severally but not jointly that neither Owner Trustee
nor Lessee nor anyone acting on behalf of Owner Trustee or Lessee will offer the Beneficial
Interest or any part thereof or any similar interest for issue or sale to any prospective
purchaser, or solicit any offer to acquire any of the Beneficial Interest or any part thereof so as
to bring the issuance and sale of the Beneficial Interest or any part thereof within the provisions
of Section 5 of the Securities Act of 1933, as amended.



          (d) Lessee has not retained or employed any broker, finder or financial advisor (other than
AMA Capital) to act on its behalf in connection with the transactions contemplated hereby and it
has not authorized any broker, finder or financial advisor retained or employed by any other Person
to so act.



     Section 3.5 [Reserved].



     Section 3.6 Representations and Warranties of Owner Participant. Owner Participant
represents and warrants to Owner Trustee, Trust Company, Indenture Trustee, Loan Participants and
Lessee that, as of the date hereof and as of each Closing Date (unless any such representation is
specifically made as of one date):



	 		 		 
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          (a) Owner Participant is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power and authority to carry on
its business as now conducted;



          (b) Owner Participant has the power and authority to enter into the Owner Participant
Agreements and to perform its obligations thereunder, and such execution, delivery and performance
do not and will not contravene any law or any order of any court or governmental authority or
agency applicable to or binding on Owner Participant, or contravene the provisions of, or
constitute a default under, or result in the creation of any Lien (other than the leasehold
interest of Lessee under the Lease and the security interest of Indenture Trustee under the
Indenture) upon the Equipment under, its organization documents or any material indenture,
mortgage, contract or other agreement or instrument to which Owner Participant is a party or by
which it or any of its property or the Equipment may be bound or affected;



          (c) the Owner Participant Agreements have been duly authorized by all necessary action on the
part of Owner Participant, do not require any approval not already obtained of the members of Owner
Participant or any approval or consent not already obtained of any trustee or holders of
indebtedness or obligations of Owner Participant, have been duly executed and delivered by Owner
Participant and (assuming the due authorization, execution and delivery by each other party
thereto) constitute the legal, valid and binding obligations of Owner Participant, enforceable
against Owner Participant in accordance with their respective terms except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws and by general principles of equity;



          (d) no authorization or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due execution, delivery or
performance by Owner Participant of the Trust Agreement, the Tax Indemnity Agreement and this
Agreement, it being understood that no representation or warranty is being made herein with respect
to the ICC Termination Act or any other laws, governmental rules or regulations specific to the
Equipment;



          (e) the Trust Estate is free of any Lessor’s Liens attributable to Owner Participant;



          (f) there are no pending or, to the knowledge of Owner Participant, threatened actions or
proceedings before any court or administrative agency which would materially adversely affect Owner
Participant’s financial condition or its ability to perform its obligations under the Trust Agreement, the Tax Indemnity Agreement, this Agreement or any
other Owner Participant Agreement;



          (g) as of each Closing Date, Owner Participant is purchasing the Beneficial Interest to be
acquired by it on such Closing Date for its account with no present intention of distributing such
Beneficial Interest or any part thereof in any manner which would violate the Securities Act of
1933, as amended, but without prejudice, however, to the right of Owner Participant at all times to
sell or otherwise dispose of all or any part of such Beneficial Interest under a registration
statement under the Securities Act of 1933, as amended, or under an exemption from such
registration available under such Act. Owner Participant acknowledges



	 		 		 
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that its Beneficial Interest has not been registered under the Securities Act of 1933, as amended, and that neither Owner
Trustee nor Lessee contemplates filing, or is legally required to file, any such registration
statement;




          (h) with respect to the sources of the amount to be advanced by Owner Participant pursuant to
Section 2.2(a), no part of such amounts constitutes assets of any employee benefit plan (other than
a government plan exempt from the coverage of ERISA); and



          (i) OP Guarantor has a tangible net worth of not less than $75,000,000.



     Section 3.7 Opinion Acknowledgment. Each of the parties hereto, with respect to such
party, expressly consents to the rendering by its counsel of the opinions referred to in Section
4.1(a)(2) and Section 4.1(b)(8) and acknowledges that such opinions shall be deemed to be rendered
at the request and upon the instructions of such party, each of whom has consulted with and has
been advised by its counsel as to the consequences of such request, instructions and consent.



     Section 3.8 Representations and Warranties of the Loan Participants. Each Loan Participant
represents and warrants to Owner Trustee, Indenture Trustee, Owner Participant and Lessee that, as
of the date hereof and as of each Closing Date (and the purchase of an Equipment Note by such Loan
Participant on each Closing Date shall constitute a reaffirmation by such Loan Participant of each
of these representations and warranties as of such date):



          (a) such Loan Participant is duly organized and validly existing under the laws of its
jurisdiction of organization, and has the full power, authority and legal right under the laws of
its jurisdiction of organization to execute, deliver and perform the terms of this Agreement;



          (b) such Loan Participant is acquiring the Equipment Notes to be issued to it on each Closing
Date for the purpose of investment and not with a view to the distribution thereof, and that,
except as permitted or contemplated by the terms of the Operative Agreements, such Loan Participant
has no present intention of selling, negotiating or otherwise disposing of such Equipment Notes; it
being understood, however, that the disposition of such Loan Participant’s property shall at all
times be and remain within its control; and



          (c) such Loan Participant is acquiring the Equipment Notes with funds that do not constitute
plan assets, and the term “plan assets” shall have the meaning specified in Department of Labor
Regulation §2510.3-101.



ARTICLE IV.

CONDITIONS PRECEDENT




     Section 4.1 Conditions Precedent to First Delivery Date; Conditions of Each Participant
and Indenture Trustee to any Closing Date.



	 		 		 
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          (a) First Delivery Date Conditions. No Delivery Date shall occur until the following
conditions precedent shall have been satisfied:




     (1) Execution of Operative Agreements. This Agreement, the Trust Agreement,
the OP Guaranty, the Lease, the Indenture, shall each be satisfactory in form and substance
to the parties thereto, shall have been duly executed and delivered by the parties thereto,
shall each be in full force and effect and executed counterparts of each shall have been
delivered to each such party or its counsel; and no event shall have occurred and be
continuing that constitutes a Lease Default or an Indenture Default.




     (2) Opinions of Counsel. Owner Trustee, Indenture Trustee, Loan Participants,
Owner Participant and Lessee shall have received the favorable written opinion of each of
(A) internal counsel to Lessee and special counsel to Lessee, (B) counsel to Owner Trustee,
(C) internal counsel to OP Guarantor and special counsel to Owner Participant and OP
Guarantor and (D) counsel to Indenture Trustee, each in form and scope satisfactory to such
Participant; provided that receipt by a party hereto of a favorable written opinion
from counsel to such party shall not be a condition precedent to such party’s obligations
hereunder; provided further that, such opinions shall be dated the date of
the agreements set forth in Section 4.1(a)(1) hereof.




     (3) Tax Indemnity Agreement. The Tax Indemnity Agreement shall be satisfactory
in form and substance to Owner Participant and Lessee, shall have been duly executed and
delivered by Lessee and Owner Participant, and shall be in full force and effect.




     (4) Corporate Documents. Each of the parties shall have received such
documents and evidence with respect to Lessee, Owner Participant, OP Guarantor, Owner
Trustee and Indenture Trustee as such party may reasonably request in order to establish the
authority for the consummation of the transactions contemplated by this Agreement and the
other Operative Agreements, the taking of all corporate and other proceedings in connection
therewith and compliance with the conditions herein or therein set forth and the incumbency
of all officers signing any of the Operative Agreements.



          (b) Closing Date Conditions. The obligation of each Participant to participate in the
transactions contemplated hereby on any Closing Date shall be subject to the following conditions
precedent (except that paragraph (17) shall not be a condition precedent to Owner Participant’s obligations hereunder and paragraph (18) shall not be a condition precedent to
either Loan Participant’s obligations):




     (1) Execution of Operative Agreements. On or before such Closing Date, each of
the documents referred to in Section 4.1(a)(1) and Section 4.1(a)(3) shall be in full force
and effect and the Equipment Notes to be issued on such Closing Date, the Lease Supplement,
the Indenture Supplement, a Direct Mortgage Termination and Release in each case with
respect of the Units for which settlement will be made on such Closing Date shall each be
satisfactory in form and substance to such Participant and Indenture Trustee, shall have
been duly executed and delivered by the parties thereto (except that the execution and
delivery of the documents referred to above by a party



	 		 		 
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thereto shall not be a condition
precedent to such party’s obligations hereunder), shall each be in full force and effect and
executed counterparts of each shall have been delivered to such Participant and Indenture
Trustee or its counsel on or before such Closing Date; and no event shall have occurred and
be continuing that constitutes a Lease Default or an Indenture Default.




     (2) Recordation and Filing. On or before such Closing Date, Lessee will cause
the Lease, the Lease Supplement with respect to the Units for which settlement will be made
on such Closing Date, the Indenture, the Indenture Supplement with respect to the Units for
which settlement will be made on such Closing Date, and the Direct Mortgage Termination and
Release with respect to the Units for which settlement will be made on such Closing Date or
appropriate evidence thereof, to be duly filed, recorded and deposited (A) with the Surface
Transportation Board in conformity with 49 U.S.C. § 11301, (B) with the Registrar General of
Canada pursuant to Section 105 of the Canada Transportation Act and provision will have been
made for publication of notice of such deposit in The Canada Gazette in accordance with said
Section 105 and (C) in such other places within the United States, Canada or Mexico as Owner
Trustee, Indenture Trustee and any Participant may reasonably request for the protection of
Owner Trustee’s title to the Equipment and interest in the Lease, or the security interest
of Indenture Trustee in the Equipment and the Lease, and will furnish Indenture Trustee,
Owner Trustee and each Participant proof thereof.




     (3) Uniform Commercial Code Statements. On such Closing Date, (i) a financing
statement or statements covering all the security interests created by or pursuant to the
Indenture shall have been delivered naming the Trust, as debtor, and Indenture Trustee, as a
secured party, shall have been duly filed in the jurisdictions set forth in Schedule 4
attached hereto and all Taxes with respect to such filings shall have been paid and
reasonably satisfactory evidence thereof shall have been delivered to the Participants; and
(ii) a uniform commercial code protective financing statement or statements describing the
Lease as a lease shall have been delivered naming Indenture Trustee (as assignee of the
Trust) as lessor or secured party and Lessee as lessee or debtor, shall have been duly filed
in the jurisdictions set forth in Schedule 4 attached hereto and all Taxes with respect to
such filings shall have been paid and reasonably satisfactory evidence thereof shall have
been delivered to such Participant.




     (4) Officer’s Certificate of Lessee. On such Closing Date, Owner Trustee,
Indenture Trustee, Loan Participants and Owner Participant shall have received an Officer’s
Certificate dated such date from Lessee, to the effect that the representations and
warranties of Lessee contained in Section 3.2 and Section 3.4(b) are true and correct in all
material respects on such Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties relate solely to an
earlier date (in which case such representations and warranties were true and correct on and
as of such earlier date), and that Lessee has performed and complied with all agreements and
conditions herein contained which are required to be performed or complied with by Lessee on
or before said date.



	 		 		 
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     (5) Officer’s Certificate of Owner Trustee. On such Closing Date, Lessee,
Indenture Trustee, Loan Participants and Owner Participant shall have received an Officer’s
Certificate dated such date from Owner Trustee, to the effect that the representations and
warranties of Owner Trustee contained in Section 3.1 and Section 3.4(a) are true and correct
in all material respects on such Closing Date with the same effect as though made on and as
of said date, except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and correct on
and as of such earlier date), and that Owner Trustee has performed and complied with all
agreements and conditions herein contained which are required to be performed or complied
with by Owner Trustee on or before said date.




     (6) Officer’s Certificate of Indenture Trustee. On such Closing Date, Lessee,
Owner Trustee, Loan Participants and Owner Participant shall have received an Officer’s
Certificate dated such date from Indenture Trustee, to the effect that the representations
and warranties of Indenture Trustee contained in Section 3.3 are true and correct in all
material respects on such Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties relate solely to an
earlier date (in which case such representations and warranties were true and correct on and
as of such earlier date), and that Indenture Trustee has performed and complied with all
agreements and conditions herein contained which are required to be performed or complied
with by Indenture Trustee on or before said date.




     (7) Officer’s Certificate of Owner Participant. On such Closing Date, Lessee,
Owner Trustee, Indenture Trustee, and Loan Participants shall have received an Officer’s
Certificate dated such date from Owner Participant, to the effect that the representations
and warranties of Owner Participant contained in Section 3.6 are true and correct in all
material respects on such Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties relate solely to an
earlier date (in which case such representations and warranties were true and correct on and
as of such earlier date), and that Owner Participant has performed and complied with all
agreements and conditions herein contained which are required to be performed or complied
with by Owner Participant on or before said date.




     (8) Opinions of Counsel. On such Closing Date, Owner Trustee, Indenture
Trustee, Loan Participants and Owner Participant shall have received the favorable
written opinion of each of (A) internal counsel to Lessee and special counsel to
Lessee, (B) counsel to Owner Trustee, and (C) counsel to Indenture Trustee, in form and
scope satisfactory to each Participant, (D) Alvord and Alvord, special STB counsel, and (E)
McCarthy Tétrault, special Canadian counsel; provided that receipt by a party hereto
of a favorable written opinion from counsel to such party shall not be a condition precedent
to such party’s obligations hereunder.




     (9) Title. On such Closing Date, after giving effect to the transactions
contemplated hereby and by the other Operative Agreements, Owner Trustee shall have good and
marketable title to each Unit to be settled on such Closing Date, free and clear



	 		 		 
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of all
Liens, except Permitted Liens of the type described in clause (iii), (iv) and (v) of the
definition thereof.




     (10) Bills of Sale. On such Closing Date, Seller shall have delivered to Owner
Trustee (with copies to Indenture Trustee, Loan Participants and Owner Participant) a Bill
of Sale with respect to each Unit being settled on such Closing Date, such Bill of Sale
dated the Closing Date for such Unit, transferring to Owner Trustee good and marketable
title to such Units and warranting to Owner Trustee that at the time of delivery of each
such Unit, Seller had legal title thereto and good and lawful right to sell the same, and
title thereto was free of all claims, liens and encumbrances of any nature, except Permitted
Liens of the type describe in clause (iii) and (iv) of the definition thereof.




     (11) Certificates of Acceptance. On such Closing Date, Lessee shall have
delivered to Owner Trustee (with copies to Indenture Trustee, Loan Participants and Owner
Participant) a Certificate of Acceptance with respect to each Unit being settled on such
Closing Date, such Certificate of Acceptance executed on and dated the Delivery Date for
such Unit.




     (12) Insurance Certificate. On or before such Closing Date, Indenture Trustee,
Loan Participants, Owner Trustee and Owner Participant shall have received any certificate
relating to insurance that is required pursuant to Section 12 of the Lease.




     (13) Corporate Documents. Each of the Participants shall have received such
documents and evidence with respect to Lessee, Owner Participant, OP Guarantor, Owner
Trustee and Indenture Trustee as the Participants may reasonably request in order to
establish the authority for the consummation of the transactions contemplated by this
Agreement and the other Operative Agreements, the taking of all corporate and other
proceedings in connection therewith and compliance with the conditions herein or therein set
forth and the incumbency of all officers signing any of the Operative Agreements.




     (14) No Threatened Proceedings. No action or proceeding shall have been
instituted nor shall governmental action be threatened before any court or governmental
agency, nor shall any order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of such Closing Date, to set aside, restrain,
enjoin or prevent the completion and consummation of this Agreement or any of the other
Operative Agreements or the transactions contemplated hereby or thereby.




     (15) Closing Date Notice. Prior to such Closing Date, Indenture Trustee and
the Participants shall have received the written notice of such Closing Date required
pursuant to Section 2.3(a).




     (16) No Illegality. No change shall have occurred after the date of the
execution and delivery of this Agreement in applicable law or regulations thereunder or
interpretations thereof by regulatory authorities that, in the opinion of such Participant
or its counsel, would make it illegal for such Participant to enter into any transaction
contemplated by the Operative Agreements.



	 		 		 
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     (17) Owner Participant’s Investments. Owner Participant shall have made
available its Commitment with respect to the Units delivered on such Closing Date in
accordance with Sections 2.2(a) and 2.3.




     (18) Loan Participants’ Investment. Each Loan Participant shall have made
available its Commitment with respect to the Units delivered on such Closing Date in
accordance with Sections 2.2(b) and 2.3.




     (19) Consents. All approvals and consents of any trustees or holders of any
indebtedness or obligations of Lessee which are required in connection with the transactions
contemplated by this Agreement and the other Operative Agreements shall have been duly
obtained and be in full force and effect.




     (20) Governmental Actions. All actions, if any, required to have been taken on
or prior to such Closing Date in connection with the transactions contemplated by this
Agreement and the other Operative Agreements on such Closing Date shall have been taken by
any governmental or political agency, subdivision or instrumentality of the United States
and all orders, permits, waivers, exemptions, authorizations and approvals of such entities
required to be in effect on such Closing Date in connection with such transactions
contemplated by this Agreement and the other Operative Agreements on such Closing Date shall
have been issued, and all such orders, permits, waivers, exemptions, authorizations and
approvals shall be in full force and effect, on such Closing Date.



     Section 4.2 Additional Conditions Precedent to the Obligations of Loan Participants. The
obligation of each Loan Participant to advance funds for the Equipment Notes to be purchased by it
pursuant to Section 2.2(b) on any Closing Date shall be subject to the additional conditions that:



          (a) Equipment Notes. The Equipment Notes to be delivered on such Closing Date shall
have been duly authorized, executed and delivered to such Loan Participant by a duly authorized
officer of Owner Trustee and duly authenticated by Indenture Trustee.



          (b) Debt Appraisal Letter. On or before such Closing Date, each Loan Participant
shall have received a letter from the equipment appraiser setting forth the appraiser’s opinion as
to the fair market value of the applicable Units and that such fair market value is not less than
the Equipment Cost for the applicable Equipment.



          (c) Loan Participants’ Fee. Lessee shall have paid to each Loan Participant (i) the
fee payable to each Loan Participant in connection with its making of the loan contemplated hereby,
as provided in Section 9.04(f) of the Direct Loan Agreement and (ii) all accrued and unpaid
interest and other accrued amounts payable under the Direct Loan Agreement in respect of the Units
to be delivered and accepted under the Lease on such Closing Date.



          (d) Opinion. On such Closing Date, each Loan Participant shall have received the
opinion of Vedder, Price, Kaufman & Kammholz, P.C., addressed to each Loan Participant, in form and
substance satisfactory to such Loan Participant.



	 		 		 
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     Section 4.3 Additional Conditions Precedent to the Obligations of Owner Participant. The
obligation of Owner Participant to provide the funds specified with respect to it in Section 2.2(a)
on each Closing Date with respect to any Unit to be settled on such Closing Date shall be subject
to the following additional conditions:



          (a) Appraisal. On or before such Closing Date, Owner Participant shall have received
an opinion (the “Appraisal”) of an equipment appraiser reasonably satisfactory in form and
substance to Owner Participant.



          (b) Opinion with Respect to Certain Tax Aspects. On such Closing Date, Owner
Participant shall have received the opinion of Thelen Reid & Priest LLP, addressed to Owner
Participant, in form and substance satisfactory to Owner Participant, containing such counsel’s
favorable opinion with respect to the Federal income tax aspects of the transaction contemplated
hereby.



          (c) No Tax Law Change. No Change in Tax Law shall have occurred nor shall a judicial
opinion on a tax issue have been rendered on or prior to such Closing Date which change, if
enacted, adopted or made effective, or such judicial opinion, would, in the reasonable opinion of
Owner Participant, render it disadvantageous or inadvisable for Owner Participant to enter into the
transactions contemplated by the Operative Agreements unless Lessee shall indemnify Owner
Participant to Owner Participant’s reasonable satisfaction for such Change in Tax Law or, if such
change can be compensated for by an adjustment to Basic Rent, unless Lessee agrees to an adjustment
to Basic Rent in accordance with the principles of Section 2.6 of this Agreement to preserve Owner
Participant’s Net Economic Return.



     Section 4.4 Conditions Precedent to the Obligation of Lessee. The obligation of Lessee to
participate in the transactions contemplated hereby on any Closing Date shall be subject to the
following conditions precedent:



          (a) Corporate Documents. On or before such Closing Date, Lessee shall have received
such documents and evidence with respect to Owner Participant, OP Guarantor, Owner Trustee and
Indenture Trustee as Lessee may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all corporate and other proceedings in
connection therewith and compliance with the conditions herein or therein set forth.



          (b) Operative Agreements. On or before such Closing Date, each of the documents
referred to in Section 4.1(b)(1) shall be in full force and effect.



          (c) Representations and Warranties True. On such Closing Date, the representations
and warranties of Owner Trustee, Indenture Trustee, Loan Participants and Owner Participant
contained in Section 3 hereof and OP Guarantor contained in the OP Guaranty shall be true and
correct in all material respects as of such Closing Date as though made on and as of such date, and
Lessee shall have received an Officer’s Certificate dated such date from each of Owner Trustee as
described in Section 4.1(b)(5), Owner Participant as described in Section 4.1(b)(7) and Indenture
Trustee as described in Section 4.1(b)(6), addressed to Lessee



	 		 		 
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and certifying as to the foregoing
matters insofar as they relate to Owner Trustee, Owner Participant and Indenture Trustee, as the
case may be.




          (d) Opinions of Counsel. On such Closing Date, Lessee shall have received the
opinions of counsel for Owner Trustee and Indenture Trustee referred to in Section 4.1(b)(8),
addressed to Lessee.



          (e) No Threatened Proceedings. No action or proceeding shall have been instituted nor
shall governmental action be threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by any court or governmental
agency at the time of such Closing Date, to set aside, restrain, enjoin or prevent the completion
and consummation of this Agreement or the transactions contemplated hereby.



          (f) No Tax Law Change. Lessee shall not be obligated to carry out the transactions
contemplated on such Closing Date if a Change in Tax Law shall have occurred after the date of
execution hereof and on or prior to such Closing Date which would, in the reasonable opinion of
Lessee, result in an adjustment pursuant to Section 2.6 which would increase by more than 50 basis
points the present value (discounted at an interest rate per annum equal to the Debt Rate) of all
payments of Basic Rent payable for the Units to be delivered on such Closing Date.



ARTICLE V.

FINANCIAL AND OTHER REPORTS OF LESSEE




     Lessee agrees that it will furnish directly to each Participant the following:



          (a) unless included in a Form 10-Q delivered or deemed delivered under clause (c) below, as
soon as available and in any event within 60 days after the end of each quarterly period, except
the last, of each fiscal year, consolidated balance sheets of KCS, and its consolidated
Subsidiaries as at the end of such period, together with the related consolidated statements of
income and cash flows of KCS and its consolidated Subsidiaries for the period beginning on the
first day of such fiscal year and ending on the last day of such quarterly period, setting forth in
each case (except for the consolidated balance sheet) in comparative form the figures for the
corresponding periods of the previous fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles and certified by any Vice President, the
Treasurer, the Chief Financial Officer or any Assistant Treasurer of KCS;



          (b) unless included in a Form 10-K delivered or deemed delivered under clause (c) below, as
soon as available and in any event within 120 days after the last day of each fiscal year, a copy
of KCS’s annual audited report covering the operations of KCS and its consolidated Subsidiaries,
including consolidated balance sheets, and related consolidated statements of income and retained
earnings and consolidated statement of cash flows of KCS and its consolidated Subsidiaries for such
fiscal year, setting forth in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and prepared in accordance with generally accepted accounting
principles applied on a consistent basis, which statements will have been certified by a firm of
independent public accountants of recognized national standing selected by KCS;



	 		 		 
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          (c) as soon as available, one copy of each Annual Report on Form 10-K (or any successor form),
Quarterly Report on Form 10-Q (or any successor form) and Form 8-K filed by KCS with the SEC or any
successor agency, provided that, as long as KCS is subject to informational requirements of
the Securities Exchange Act of 1934 and in accordance therewith files reports and other information
with the SEC each Participant shall be deemed to have been furnished the foregoing reports and
forms and each Participant may electronically access such reports and forms by means of the SEC’s
homepage on the internet or at KCS’s homepage on the internet, provided, further,
in the event that KCS shall cease to be subject to such informational requirements, Lessee will
provide each Participant with 90 days’ advance written notice and thereafter Lessee shall directly
furnish such reports and forms to each Participant; and



          (d) as soon as available and in any event within 120 days after the last day of each fiscal
year, a certificate signed by any Vice President, the Treasurer, the Chief Financial Officer or any
Assistant Treasurer of Lessee stating that he/she has reviewed the activities of Lessee during such
year and that Lessee during such year has kept, observed, performed and fulfilled each and every
covenant, obligation and condition contained herein and in the Lease, or if a Lease Event of
Default shall exist or if an event has occurred and is continuing which, with the giving of notice
or the passage of time or both, would constitute a Lease Event of Default, specifying such Lease
Event of Default and all such events and the nature and status thereof.



If at any time Lessee shall become subject to the public reporting requirements of the Securities
and Exchange Commission or Lessee shall cease to be a consolidated subsidiary of KCS, then the
reporting requirements of paragraphs (a) through (c) above shall apply directly to Lessee.



ARTICLE VI.

CERTAIN COVENANTS OF THE PARTICIPANTS,

TRUSTEES AND LESSEE




     Section 6.1 Restrictions on Transfer of Beneficial Interest. Owner Participant agrees that
it shall not sell, convey, assign, pledge, mortgage or otherwise transfer any of its Beneficial
Interest, except to Lessee in accordance with Section 23(c) of the Lease (to which transfer
Indenture Trustee hereby consents), unless:



          (a) the Person to whom such transfer is to be made (a “Transferee”) is (i) a Person that is an
institutional investor organized as a corporation, limited liability company,
partnership or other legal entity under the laws of the United States or any state or
territory thereof or the District of Columbia with tangible net worth or, in the case of a bank or
lending institution, combined capital or surplus at the time of such transfer of at least US
$75,000,000, all of the foregoing determined in accordance with generally accepted accounting
principles or (ii) any United States subsidiary or United States affiliate of any such
institutional or corporate investor if such investor guarantees the obligations so assumed by such
subsidiary or affiliate pursuant to an instrument or instruments reasonably satisfactory to Lessee,
Owner Trustee and Indenture Trustee or (iii) any United States subsidiary or United States
affiliate of the original Owner Participant if the original Owner Participant remains liable for
all obligations of Owner Participant under each of the Operative Agreements or OP Guarantor
guarantees the obligations of the Transferee;



	 		 		 
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          (b) neither the Transferee nor any of its Affiliates shall be (i) directly involved in the
transportation business (it being understood that operating lessors and passive equity and debt
investors (including lessors) in railroad rolling stock and facilities are not directly involved in
the transportation business), (ii) a competitor of Lessee in Lessee’s primary business, (iii) at
the time of the proposed transfer, a substantial investor in Lessee or any Affiliate of Lessee
attempting a merger, acquisition or other takeover of Lessee or any Affiliate of Lessee which
merger, acquisition or other takeover shall not have been approved by the Board of Directors of
Lessee or such Affiliate or otherwise be perceived by Lessee or such Affiliate to be hostile to the
management of Lessee or such Affiliate, (iv) an adverse plaintiff or defendant in any then-existing
litigation or any then-existing third-party arbitration involving Lessee or an Affiliate of Lessee,
or (v) the potential plaintiff in any litigation which has been threatened, in writing, against
Lessee or an Affiliate of Lessee; provided that if a Specified Default or an Event of
Default shall have occurred and be continuing, the requirements set forth in this subsection (b)
above shall not apply to such transfer;



          (c) Indenture Trustee, Lessee and Owner Trustee shall have received 30 days’ (10 days in the
case of a transfer to an Affiliate) prior written notice of such transfer specifying the name and
address of any proposed transferee and such additional information as shall be necessary to
determine whether the proposed transfer satisfies the requirements of this Section 6.1 and Section
8.01 of the Trust Agreement;



          (d) such Transferee enters into an agreement or agreements in form and substance reasonably
satisfactory to Lessee, Owner Trustee and Indenture Trustee whereby such Transferee confirms that
it shall be deemed a party to this Agreement and each other Operative Agreement to which the
transferring Owner Participant is a party, and agrees to be bound by all the terms of, and to
undertake all of the obligations and liabilities of the transferring Owner Participant contained
in, this Agreement and such other Operative Agreements and in which the Transferee shall make
representations and warranties comparable to those of Owner Participant contained herein and
therein;



          (e) such transfer complies in all respects with and does not violate any applicable law,
including any applicable Federal securities law and the securities law of any applicable state;



          (f) an opinion of counsel of the Transferee (which counsel shall be either Thelen Reid &
Priest LLP, internal counsel to the Transferee or another counsel reasonably acceptable to Lessee
and Indenture Trustee), confirming (i) the existence, power and authority of, and due
authorization, execution and delivery of all relevant documentation by, the Transferee (with
appropriate reliance on certificates of corporate officers or public officials as to matters of
fact), (ii) that each agreement referred to in subparagraph (d) above is the legal, valid, binding
and enforceable obligation of the Transferee subject to the customary exceptions, (iii) compliance
of the transfer with the registration provisions of applicable laws and regulations including
Federal securities laws and securities laws of the Transferee’s domicile and other jurisdictions
reasonably identified by Lessee as potentially applicable to the transfer, and (iv) other matters
as Lessee or Indenture Trustee may reasonably request, shall be provided, prior to such transfer,
to Lessee, Indenture Trustee and Owner Trustee, which opinion shall be in form and substance
reasonably satisfactory to each of them;



	 		 		 
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          (g) except as specifically consented to in writing by Lessee and Indenture Trustee, the terms
of the Operative Agreements shall not be altered;



          (h) all fees, expenses and charges of the parties hereto (including without limitation, legal
fees and expenses of special counsel) incurred in connection with each transfer of such Beneficial
Interest shall be paid by Owner Participant;



          (i) such transfer (i) does not involve the use of an amount which constitutes assets of an
employee benefit plan (other than a government plan exempt from the coverage of ERISA) or (ii) will
not constitute a prohibited transaction; and



          (j) as a result of such transfer, no Indenture Default attributable to Owner Participant or
Owner Trustee shall have occurred and be continuing.



     Upon any such transfer, (i) except as the context otherwise requires, such Transferee shall be
deemed the “Owner Participant” for all purposes, and shall enjoy the rights and privileges and
perform the obligations of Owner Participant to the extent of the interest transferred hereunder
and under each other Operative Agreement to which such Owner Participant is a party, and, except as
the context otherwise requires, each reference in this Agreement and each other Operative Agreement
to the “Owner Participant” shall thereafter be deemed to include such Transferee for all purposes
to the extent of the interest transferred and (ii) the transferor, except as provided in Section
6.1(h) hereof, shall be released from all obligations hereunder and under each other Operative
Agreement to which such transferor is a party or by which such transferor is bound to the extent
such obligations are expressly assumed by a Transferee; and provided, further, that
in no event shall any such transfer or assignment waive or release the transferor from any
liability on account of any breach existing immediately prior to such transfer of any of its
representations, warranties, covenants or obligations set forth in the Operative Agreements or for
any fraudulent or willful misconduct. Any transfer or assignment of the Beneficial Interest in
violation of this Section 6.1 shall be void and of no effect.



     Section 6.2 Lessor’s Liens Attributable to Owner Participant. Owner Participant hereby unconditionally agrees with and for the benefit of the
other parties to
this Agreement that Owner Participant will not directly or indirectly create, incur, assume or
suffer to exist any Lessor’s Liens on or against any part of the Trust Estate or the Equipment
arising out of any act or omission of or claim against Owner Participant, and Owner Participant
agrees that it will, at its own cost and expense, take such action as may be necessary to duly
discharge and satisfy in full any such Lessor’s Lien (by bonding or otherwise, so long as Lessee’s
operation and use of the Equipment is not impaired); provided that Owner Participant may
contest any such Lessor’s Lien in good faith by appropriate proceedings so long as such proceedings
do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest
therein and do not interfere with the use, operation, or possession of the Equipment by Lessee
under the Lease or the rights of Indenture Trustee under the Indenture and the other Operative
Agreements or the rights of the Loan Participants under the Operative Agreements. Owner
Participant hereby indemnifies and holds harmless Lessee, Indenture Trustee, Indenture Estate,
Owner Trustee and each Loan Participant from and against any loss, cost or expense (including
reasonable legal fees and expenses but excluding consequential damages) which may be suffered or
incurred by any of





	 		 		 
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them as the result of the failure of Owner Participant to discharge and satisfy
any such Lessor’s Lien.



     Section 6.3 Lessor’s Liens Attributable to Trust Company. Trust Company, hereby
unconditionally agrees with and for the benefit of the other parties to this Agreement that Trust
Company will not directly or indirectly create, incur, assume or suffer to exist any Lessor’s Liens
on or against any part of the Trust Estate or the Equipment arising out of any act or omission of
or claim against Trust Company, and Trust Company agrees that it will, at its own cost and expense,
take such action as may be necessary to duly discharge and satisfy in full (i) any such Lessor’s
Lien attributable to Trust Company (by bonding or otherwise, so long as Lessee’s operation and use
of the Equipment is not impaired) and (ii) any other liens or encumbrances attributable to Trust
Company on any part of the Trust Estate or the Indenture Estate which result from claims against
Trust Company not related to the ownership of the Equipment, the administration of the Trust Estate
or the Indenture Estate or the transactions contemplated by the Operative Agreements;
provided that Owner Trustee may contest any such Lessor’s Lien in good faith by appropriate
proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture
or loss of the Equipment or any interest therein and do not interfere with the use, operation, or
possession of the Equipment by Lessee under the Lease or the rights of Indenture Trustee under the
Indenture and the other Operative Agreements or the rights of the Loan Participants under the
Operative Agreements. Trust Company hereby indemnifies and holds harmless Lessee, Indenture
Trustee, the Indenture Estate, Owner Participant, Seller and each Loan Participant from and against
any loss, cost or expense (including reasonable legal fees and expenses) which may be suffered or
incurred by any of
them as the result of the failure of Owner Trustee to discharge and satisfy any
such Lessor’s Lien.




     Section 6.4 Liens Created by Indenture Trustee and Loan Participants.



          (a) Indenture Trustee covenants and agrees with Lessee, Owner Trustee, Owner Participant and
each Loan Participant that it shall not cause or permit to exist any Lien on the Equipment or all
or any portion of the Trust Estate or the Indenture Estate arising as a result of (i) claims
against Indenture Trustee not related to its interest in the Equipment and the Trust
Estate, or to the administration of the Indenture Estate pursuant to the Indenture, (ii) acts
of Indenture Trustee not contemplated by, or failure of Indenture Trustee to take any action it is
expressly required to perform by, the Operative Agreements, (iii) claims against Indenture Trustee
relating to Taxes or expenses that are not indemnified against by Lessee pursuant to Section 7
attributable to the actions of Indenture Trustee, or (iv) claims against Indenture Trustee arising
out of the transfer by Indenture Trustee of all or any portion of its interest in the Equipment,
the Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative
Agreements and that Indenture Trustee will, at its own cost and expense (and without any right of
reimbursement from any other party hereto), promptly take such action as may be necessary duly to
discharge any such Lien. Indenture Trustee further agrees to indemnify and hold harmless each of
the other parties hereto from and against any loss, out-of-pocket cost and expenses (including
reasonable legal fees and expenses) incurred, in each case, as a result of the imposition or
enforcement of any such Lien.



          (b) Each Loan Participant covenants and agrees with Lessee, Owner Trustee, Owner Participant
and Indenture Trustee that it shall not cause or permit to exist any Lien on the



	 		 		 
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Equipment or all
or any portion of the Trust Estate or the Indenture Estate arising as a result of (i) claims
against such Loan Participant not related to its interest in the Equipment and the Trust Estate,
(ii) acts of such Loan Participant not contemplated by, or failure of such Loan Participant to take
any action it is expressly required to perform under, the Operative Agreements, (iii) claims
against such Loan Participant relating to Taxes or expenses that are not indemnified against by
Lessee pursuant to Section 7 or (iv) claims against such Loan Participant arising out of the
transfer by such Loan Participant of all or any portion of its interest in the Equipment, the
Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative
Agreements and that such Loan Participant will, at its own cost and expense (and without any right
of reimbursement from Lessee), promptly take such action as may be necessary duly to discharge any
such Lien. Each Loan Participant further agrees to indemnify and hold harmless each of the other
parties hereto from and against any loss, out-of-pocket cost and expenses (including reasonable
legal fees and expenses) incurred, in each case, as a result of the imposition or enforcement of
any such Lien.




     Section 6.5 Covenants of Owner Trustee, Trust Company, Owner Participant and Indenture
Trustee. Owner Participant, and Owner Trustee and Trust Company, hereby agree, severally and
not jointly, with Lessee, Loan Participants and Indenture Trustee (i) to comply with all of the
terms of the Trust Agreement applicable to it in its respective capacity, (ii) not to amend,
supplement, or otherwise modify any provision of the Trust Agreement in such a manner as to
adversely affect the rights of any such party without the prior written consent of such party and
(iii) not to terminate or revoke the Trust Agreement or the trust created by the Trust Agreement
and such trust shall not be subject to revocation or termination by Owner Participant prior to the
payment in full and discharge of the Equipment Notes and all other indebtedness secured by the
Indenture and the final discharge thereof pursuant to Section 10.01 thereof or prior to the
expiration or early termination of the Lease and the payment in full and discharge of the Equipment
Notes and all other indebtedness secured by the Indenture and the final discharge thereof pursuant
to Section 10.01 thereof. Each of Owner Trustee and Indenture Trustee agrees, for the benefit of
Lessee and Owner Participant, to comply with the provisions of the Indenture and not to amend,
supplement, or otherwise modify any provision of the Indenture in such a manner as to adversely
affect the rights of any such party without the prior written consent of such party.
Notwithstanding any provision herein or in any of the 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.



     Section 6.6 Amendments to Operative Agreements. The Trustees and Participants will not
terminate the Operative Agreements to which Lessee is not or will not be a party, except in
accordance with the Operative Agreements in effect on the date hereof (as amended, modified or
supplemented from time to time in accordance with the terms hereof and of the other Operative
Agreements), or amend, supplement, waive or modify such Operative Agreements in any manner that
increases the obligations or liabilities, or decreases the rights, of Lessee under the Operative
Agreements, without, in each such case, the prior written consent of Lessee. Owner Participant and
the Trustees (as applicable) agree that, in any event, they will not amend



	 		 		 
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Section 2.10 or Article IX of the Indenture or Article IX of the Trust Agreement without the prior written consent of
Lessee.




     Section 6.7 Section 1168. Lessee shall at all times remain a “railroad”, as such term is
defined in Section 101 (44) of the U.S. Bankruptcy Code, such that Lessee’s obligations under the
Lease shall be subject to the provisions of Section 1168 of the U.S. Bankruptcy Code. Lessee shall
not take any action which would cause Section 1168 to cease to be applicable to this transaction
or, in connection with any bankruptcy proceedings involving Lessee or any of its Affiliates, take a
position in the United State Bankruptcy Court that is inconsistent with the rights of Lessor under
such Section 1168.



     Section 6.8 Merger Covenant. Lessee shall not consolidate with or merge into any other
Person or convey, transfer or lease substantially all of its assets as an entirety to any Person
unless (i) the Person formed by such consolidation or into which Lessee is merged or the Person
which acquires by conveyance, transfer or lease substantially all of the assets of Lessee as an
entirety shall execute and deliver to Owner Trustee, Owner Participant, Loan Participants and
Indenture Trustee an agreement containing the assumption by such successor corporation of the due
and punctual performance and observance of each covenant and condition of this Agreement and each
of the other Lessee Agreements to be performed or observed by Lessee, (ii) immediately after giving
effect to such transaction, no Lease Event of Default shall have occurred solely as a result of
such consolidation or merger or such conveyance, transfer or lease and (iii) Lessor shall be
entitled to the benefits of Section 1168 of the Bankruptcy Code to same extent as immediately prior
to such merger, consolidation or transfer. Upon such consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of Lessee as an entirety in accordance with
this Section 6.8, the successor corporation formed by such consolidation or into which Lessee is
merged or to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, Lessee under this Agreement and the
other Operative Agreements with the same effect as if such successor corporation had been named as
Lessee herein. If Lessee shall have consolidated with or merged into any other Person or conveyed,
transferred or leased substantially all of its assets, such assets to include Lessee’s leasehold
interest in the Lease, the Person owning such leasehold interest after such event shall deliver to
Owner Participant, Loan Participants and Indenture Trustee, an opinion of counsel (which counsel
may be such Person’s in-house counsel) confirming that the assumption agreement pursuant to which
such Person assumed the obligations of Lessee shall have been duly authorized, executed and
delivered by such Person and that such agreement is the legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms.



     Section 6.9 Additional Filings. In the event that during the Lease Term (i) a central
filing system becomes available in Mexico for the filing or recording of security interests or
ownership rights in railroad rolling stock and (ii) 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, 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 the Lease, the Indenture or any
supplements thereto and any other instruments as may be necessary or reasonably required to
maintain, so long as the Indenture or the 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



	 		 		 
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interest that may be claimed to have been
created by the Lease and the ownership interest of Owner Trustee in each Unit to the extent such
protection is available pursuant to such filing or recording in Mexico.




     Section 6.10 Owner Participant an Affiliate of Lessee. If at any time the original or any
successor Owner Participant shall be an affiliate of Lessee, such Owner Participant and Lessee
agree that, notwithstanding any provision of the Indenture to the contrary, they will not modify,
amend or supplement any provision of the Lease or this Agreement or give, or permit Owner Trustee
to give, any consent, waiver, authorization or approval thereunder if any such action would
adversely affect in a material manner Indenture Trustee or any holder of an Equipment Note unless
such action shall have been consented to by a Majority in Interest.



     Section 6.11 Taxes. Lessee shall pay and discharge all Taxes imposed upon Lessee or upon
its income, profits or properties prior to the date on which penalties attach thereto except for
those Taxes which are being contested in good faith through appropriate proceedings and for which
adequate reserves are being maintained.



     Section 6.12 Direct Loan. If any Closing Date shall have occurred, Lessee shall cause the
Direct Loan to be paid in full and discharged on or before February 15, 2006.



     Section 6.13 Transfers by KfW. Notwithstanding anything else to the contrary, in addition
to any other right or privilege granted to KfW herein or in the other Operative Agreements, the
parties hereto agree that KfW may transfer or assign any or all of its rights and obligations under
the Operative Agreements to any other entity (the “KfW Assignee”) that may lawfully receive and
perform the rights and obligations being transferred or assigned (including, without limitation,
any company that qualifies as a “Subsidiary” of KfW within the meaning of section 15 ff. of the
German Stock Corporation Act (Aktiengesetz) in that such Subsidiary is directly or indirectly (i)
majority owned (im Mehrheitsbesitz) by KfW or (ii) controlled (abhängig) by KfW); provided,
however, that in connection with any such assignment or transfer:




     (1) KfW will provide to all other parties hereto timely notice of such assignment or
transfer and the KfW Assignee shall becomes a party to this Participation Agreement;




     (2) If, by reason of circumstances already existing at the time of such assignment or
transfer, Lessee and Owner Trustee would be obligated to make a payment to the KfW Assignee
under Section 7.02 of the Indenture or Section 7.1(j) of the Participation Agreement,
Lessee’s and Owner Trustee’s obligation to the KfW Assignee under such Section shall be
limited to the amount that Lessee and Owner Trustee would have been required to pay to KfW
under such Section assuming such assignment or transfer had not occurred; and




     (3) KfW will pay the reasonable costs of the parties hereto in connection with any such
assignment or transfer.



	 		 		 
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ARTICLE VII.

LESSEE’S INDEMNITIES




     Section 7.1 General Tax Indemnity.



          (a) Tax Indemnitee Defined. For purposes of this Section 7.1, “Tax Indemnitee” means
Owner Participant, each Affiliate, Owner Trustee, Trust Company, the Trust, the Trust Estate,
Indenture Trustee, each Loan Participant, and each of their respective successors or assigns
permitted under the terms of the Operative Agreements and, with respect to any taxes, shall also
include any affiliated or combined group of which such Tax Indemnitee is, or may become, a member
if consolidated or combined returns are filed for such group for purposes of such taxes.



          (b) Taxes Indemnified. Subject to the exclusions stated in subsection (c) below
(except with respect to clause (v) of subsection (b), which shall apply without regard to the
exclusions set forth in subsection (c)), Lessee agrees to indemnify and hold harmless each Tax
Indemnitee, taking into account all taxes payable by the Tax Indemnitee as a result of the accrual
or receipt of an indemnity payment hereunder, against all fees, taxes, levies, assessments, charges
or withholdings of any nature, together with any penalties, fines or interest thereon or additions
thereto (“Taxes”) imposed upon any Tax Indemnitee, Lessee or all or any part of the Equipment by
any federal, state or local government, political subdivision, or taxing authority in
the United States, by any government or taxing authority of or in a foreign country or by any
international authority, upon, with respect to or in connection with:



               (i) the Equipment or any part of any of the Equipment or interest therein;



               (ii) the acquisition, financing, use or operation with respect to the Equipment or any part of
any of the Equipment or interest therein;



               (iii) payments of Rent or the receipts, income or earnings arising therefrom;



               (iv) any or all of the Operative Agreements or any payments made with respect to the Equipment
Notes; or otherwise with respect to the transactions contemplated by or resulting from the
Operative Agreements, including any payments thereunder and the exercise of rights and remedies
thereunder; or



               (v) in the case of Owner Participant and Owner Trustee, any withholding tax and penalties and
interest thereon imposed in respect of Loan Certificates held by a non-U.S. Loan Participant.



          (c) Taxes Excluded. The indemnity provided for in paragraph (b) above shall not
extend to any of the following:



               (i) Taxes which are based upon, measured by or in respect to gross or net income or gross or
net receipts; Taxes on items of preference or any minimum tax; value added taxes; business and
occupation taxes; franchise taxes; or Taxes based upon Owner



	 		 		 
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Participant’s or Lessor’s capital
stock or net worth; provided that there shall not be excluded under this subparagraph (i)
any sales, use, property, value added, license, rental, ad valorem or Taxes in the nature thereof,
Taxes which are in the nature of withholding Taxes imposed with respect to any payment of
principal, interest or other amounts due under the Equipment Notes, or any Taxes imposed by any
government or taxing authority of or in a foreign country if, and to the extent, such Taxes are
imposed as a result of (A) the operation, presence or registration in such jurisdiction of any Unit
or part thereof, (B) the presence in such jurisdiction of a permanent establishment or fixed place
of business of any Lessee Person, (C) the residence, nationality or place of management and control
of any Lessee Person, (D) the payment by any Lessee Person of any amount due under the Operative
Agreements which is treated as paid from such jurisdiction or (E) any combination of factors
(A)-(D) (it being agreed, solely for the avoidance of doubt, that any value added tax imposed by
Mexico or any political subdivision of Mexico with respect to any transaction involving the
Equipment on or prior to the Closing Date described in the recitals in the first three pages of
this Agreement shall be treated as described in this proviso and thus as not excluded under this
subparagraph (i));




               (ii) Taxes imposed with respect to any period after the earliest of (x) the return of
possession of the Equipment to Owner Participant or the placement of the Equipment in storage at
the request of Owner Participant, in either case pursuant to Section 6 of the Lease and only so
long as no Lease Event of Default shall have occurred and be continuing, (y) the termination of the
Lease Term pursuant to Section 22.1 of the Lease, or (z) the discharge
in full of Lessee’s obligation to pay the Termination Value or the Stipulated Loss Value and
all other amounts due, if any, under Section 10 or 11.2 of the Lease, as the case may be, with
respect to the Equipment; provided that the exclusion set forth in this clause (ii) shall
not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to
or simultaneously with such time (including Taxes on or with respect to any payment to a Tax
Indemnitee due after the termination or expiration of the Lease if such payment relates to events
occurring or matters arising prior to or simultaneously with such time);



               (iii) Taxes of a Tax Indemnitee which arise out of or are caused by any breach by such Tax
Indemnitee of any of its representations, warranties or covenants in any of the Operative
Agreements, or the gross negligence or willful misconduct of such Tax Indemnitee;



               (iv) Taxes which become payable as a result of a sale, assignment, transfer or other
disposition (whether voluntary or involuntary) by a Tax Indemnitee of all or any portion of its
interest in the Equipment or any part thereof, the Trust Estate or any of the Operative Agreements
or rights created thereunder other than a disposition attributable to (v) a Lease Event of Default
(but only while a Lease Event of Default has occurred and is continuing), (w) an Event of Loss, (x)
the exercise by Lessee of the termination right pursuant to Section 10 of the Lease, (y) the
exercise by Lessee of the purchase right pursuant to Section 23 of the Lease and (z) the
replacement, substitution, subleasing or interchange of any Unit by any Lessee Person (as defined
in the Tax Indemnity Agreement);



               (v) Taxes imposed with respect to any fees received by Indenture Trustee or Owner Trustee for
services rendered in its capacity as trustee;



	 		 		 
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               (vi) Taxes which have been included in the Equipment Cost;



               (vii) Taxes for which Lessee is obligated to indemnify Owner Participant under the Tax
Indemnity Agreement;



               (viii) Taxes which result from Owner Trustee’s engaging on behalf of the Trust Estate
acting
upon the instruction of Owner Participant in transactions other than those permitted or
contemplated by the Operative Agreements unless attributable to the exercise of default remedies
pursuant to Article V of the Trust Agreement;



               (ix) Taxes imposed pursuant to sections 6707, 6707A or 6708 of the Code;



               (x) Taxes imposed against a particular Indemnified Person resulting from any prohibited
transaction, within the meaning of section 4975(c)(1) of the Code, occurring with respect to the
purchase or holding of Equipment Notes or circumstances when such Indemnified Person or any Person
in such Indemnified Person’s Related Indemnitee Group caused such purchase or holding and knew it
would constitute such a prohibited transaction.




          (d) Reserved.




          (e) Reverse Indemnity. If any Tax Indemnitee shall realize an actual reduction in tax
liabilities paid as a result of any Taxes paid or indemnified against by Lessee under this Section
7.1 (whether by way of deduction, credit, allocation or apportionment or otherwise), such Tax
Indemnitee shall pay to Lessee an amount equal to the amount of such tax benefit, increased by the
Tax Indemnitee’s additional saved taxes attributable to the payment being made to Lessee hereunder
(a “reverse gross-up”), provided that (i) the Tax Indemnitee shall not be obligated to make
a payment to Lessee pursuant to this subsection (e) as long as a Lease Event of Default shall have
occurred and be continuing or (ii) to the extent the amount of such payment by the Tax Indemnitee
to Lessee would exceed the amount of all prior payments by Lessee to the Tax Indemnitee pursuant to
paragraph (b) less the amount of all prior payments by the Tax Indemnitee of tax benefits pursuant
to this paragraph (e), such excess shall not be paid but shall instead be carried forward and shall
reduce Lessee’s obligations to make subsequent payments under paragraph (b) to the Tax Indemnitee.
The foregoing proviso shall not apply to any reverse gross-up. The Tax Indemnitee shall in good
faith use diligence in filing its tax returns and in dealing with taxing authorities to seek and
claim any such tax benefit and to minimize the Taxes indemnifiable by Lessee under paragraph (b).
Any subsequent loss or disallowance of such reduction in Taxes realized by the Tax Indemnitee shall
be treated as Taxes subject to Lessee’s indemnity obligation pursuant to this Section 7.1.




          (f) Refund. Upon receipt by a Tax Indemnitee of a refund or credit of all or part of
any Taxes paid or indemnified against by Lessee, such Tax Indemnitee shall pay to Lessee an amount
equal to the amount of such refund plus any interest received by or credited to such Tax Indemnitee
with respect to such refund increased or decreased, as the case may be, by the Tax Indemnitee’s net
additional or saved taxes attributable to the receipt of such amounts from the taxing authority and
the payment being made to Lessee hereunder. The Tax Indemnitee shall in good faith use diligence
in filing its Tax returns and in dealing with taxing authorities to



	 		 		 
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seek and claim any such refund
and to minimize the Taxes indemnifiable by Lessee pursuant to paragraph (b).




          (g) Procedures. Any amount payable to a Tax Indemnitee pursuant to paragraph (b)
shall be paid within 30 days after receipt of a written demand therefor from such Tax Indemnitee
accompanied by a written statement describing in reasonable detail the basis for such indemnity and
the computation of the amount so payable, provided that such amount need not be paid prior
to the later of (i) the date which is 3 days prior to the date on which such Taxes are required to
be paid or (ii) in the case of amounts which are being contested pursuant to paragraph (h) hereof,
the time such contest (including all appeals) is finally resolved. Any amount payable to Lessee
pursuant to paragraph (e) or (f) shall be paid within 30 days after the Tax Indemnitee realizes a
tax benefit giving rise to a payment under paragraph (e) or receives a refund giving rise to a
payment under paragraph (f), as the case may be, and shall be accompanied by a written statement by
the Tax Indemnitee setting forth in reasonable detail the basis for computing the amount of such
payment. Within 15 days following Lessee’s receipt of any computation from the Tax Indemnitee,
Lessee may request that an accounting firm selected by Lessee and reasonably acceptable to the Tax
Indemnitee determine whether such computations of the Tax Indemnitee are correct. Such accounting
firm shall be requested to make the determination contemplated by this paragraph (g) within 30 days
of its selection. In the event such accounting firm shall determine that such computations are
incorrect, then such firm shall determine what it believes to be the correct computations. The Tax
Indemnitee shall cooperate with such accounting firm and supply it with all information necessary to permit it
to accomplish such determination, provided that such accounting firm shall have entered
into a confidentiality agreement reasonably satisfactory to such Tax Indemnitee. The computations
of such accounting firm shall be final, binding and conclusive upon the parties and Lessee shall
have no right to inspect the books, records or tax returns of the Tax Indemnitee to verify such
computation or for any other purpose. All fees and expenses of the accounting firm payable under
this Section 7.1(g) shall be borne by Lessee, provided, however, that such fees and
expenses shall be borne by the Tax Indemnitee if the amount determined by such firm is (1) in the
case of any amount payable by Lessee, less than the amount determined by the Tax Indemnitee by 5%
of the amount determined by such firm, and (2) in the case of any amount payable by the Tax
Indemnitee, more than the amount determined by the Tax Indemnitee by 5% of the amount determined by
such firm.



          (h) Contest. If a written claim is made against a Tax Indemnitee for Taxes with
respect to which Lessee may be liable for indemnity hereunder, the Tax Indemnitee shall promptly
give Lessee notice in writing of such claim after its receipt and shall furnish Lessee with copies
of the claim and all other writings received from the taxing authority relating to the claim;
provided, however, that failure to notify Lessee shall not relieve Lessee of any
obligation to indemnify the Tax Indemnitee hereunder unless such failure shall effectively preclude
Lessee’s ability to initiate or continue the contest of such claim. The Tax Indemnitee shall not
pay such claim prior to 30 days after providing Lessee with such written notice, unless required to
do so by law or unless deferral of payment would cause adverse consequences to the Tax Indemnitee.
The Tax Indemnitee shall in good faith, with due diligence and at Lessee’s expense, if requested in
writing by Lessee, contest (including pursuing all appeals, other than to the United States Supreme
Court) in the name of the Tax Indemnitee (or, if requested by Lessee and permissible as a matter of
law, in the name of Lessee), or shall at Lessee’s option permit Lessee



	 		 		 
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to contest in either the name of Lessee or with the Tax Indemnitee’s consent, which consent shall not be unreasonably
withheld, in the name of the Tax Indemnitee, the validity, applicability or amount of such Taxes
by,




               (i) resisting payment thereof if practical;



               (ii) not paying the same except under protest if protest is necessary and proper;



               (iii) if the payment be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings; or



               (iv) taking such other reasonable action as is reasonably requested by Lessee from time to
time;



     Notwithstanding the foregoing provisions of this paragraph (h), the Tax Indemnitee shall not
be required to contest, or permit Lessee to contest, a claim unless (A) Lessee shall have agreed in
writing to pay on an after-tax basis to the Tax Indemnitee on demand all reasonable out-of-pocket
costs and expenses which the Tax Indemnitee may incur in connection with contesting such claim, and
(B) no Specified Default or Lease Event of Default shall have occurred and be continuing, (C) such
contest will not result in any material danger of the sale, forfeiture or loss of any of the Units unless Lessee shall have provided security reasonably
acceptable to the Tax Indemnitee, and there is no risk of imposition of any criminal penalties as a
result of such Tax Claim, (D) if such contest involves payment of such Tax, Lessee will either lend
to the Tax Indemnitee on an interest-free basis (without reduction for any Tax savings that the Tax
Indemnitee may realize as a result of the payment of such Tax), which loan will be repaid in full
by the Tax Indemnitee upon the conclusion of the contest or pay such Tax Indemnitee the amount
payable by Lessee pursuant to Section 7.1(a) above with respect to such Tax, and (E) upon request
of a Tax Indemnitee, Lessee furnishes such Tax Indemnitee with an opinion of Lessee’s counsel that
there is a reasonable basis for the position to be asserted in such contest and in the case of an
appeal, that there is a substantial likelihood that the adverse decision will be reversed or
substantially modified on appeal. If a Tax Indemnitee is obligated to contest a claim under this
paragraph (h), such Tax Indemnitee shall not compromise or settle such claim without the express
written permission of Lessee. If it does so in the absence of such permission, Lessee’s obligation
to indemnify with respect to such claim shall terminate. If a Tax Indemnitee is obligated to
contest a claim under this paragraph (h), such Tax Indemnitee may at any time decline to take
further action with respect to the contest of such claim if such Tax Indemnitee shall first waive
in writing its right to any indemnity payment by Lessee in respect of such claim (other than the
expenses of such contest).



          (i) Reports. In case any report, return or statement is required to be filed with
respect to Taxes for which Lessee has an indemnity obligation under this Section 7.1, Lessee shall
at Lessee’s expense timely file the same (except for any such report, return or statement (x) which
the relevant Tax Indemnitee has notified in writing Lessee that such Tax Indemnitee intends to file
or (y) which Lessee is not permitted to file, in which event Lessee shall timely (but in no event
later than 30 days prior to the due date for such report, return or statement) provide at Lessee’s
expense such Tax Indemnitee with such information reasonably available to Lessee as



	 		 		 
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is reasonably necessary for preparing such report, return or statement), provided that such Tax
Indemnitee shall have furnished Lessee with such information, not within the control of Lessee, as
is in such Tax Indemnitee’s control and is reasonably available to such Tax Indemnitee and
reasonably necessary to file such report, return or statement. Lessee shall either file such
report, return or statement so as to show the ownership of the Equipment by the Trust or, where
Lessee is not permitted to so file, shall notify the Tax Indemnitee of such requirement and prepare
and deliver such report, return or statement to the Tax Indemnitee within a reasonable time prior
to the time such report, return or statement is to be filed.




          (j) Withholding. Lessee covenants and agrees to pay or cause to be paid all present
or future Taxes which are in the nature of withholding Taxes imposed on or with respect to the
payment of principal or interest under the Equipment Notes or of any other sums payable to Loan
Participants by Lessee or Owner Trustee under the Operative Agreements, including all additional
amounts and penalties payable in respect of any delay or failure of Lessee to pay any such Taxes;
provided, however, neither Lessee nor Owner Trustee shall have any liability for
any such Canadian Taxes in respect of EDC or German Taxes in respect of KfW payable by withholding
or otherwise. Lessee shall not be required to pay or discharge any such withholding Taxes so long
as it shall in good faith and by appropriate administrative or legal proceedings contest the
validity thereof in a reasonable manner which will not affect or endanger the right, title or
interest of Owner Trustee or the security interest of Indenture Trustee in the Indenture Estate,
and Lessee shall reimburse Owner Trustee and Loan Participants for any damages or
expenses resulting from such failure to pay or discharge. If any such withholding Taxes are
deducted or withheld from any such payments, Lessee hereby agrees to promptly remit to the
applicable Loan Participant the equivalent of the amounts so deducted or withheld such that the
applicable Loan Participant receives a net sum equal to the sum which it would have received had no
such deduction or withholding been made, and Lessee shall pay all such withholding Taxes and
deliver to the applicable Loan Participant proof of payment of all such withholding Taxes within 30
days of the due date for such payment; provided, however, Lessee shall be released
from its obligations under this Section 7.1(j) with respect to U.S. withholding Taxes resulting
from the failure of such Loan Participant to provide at Lessee’s request a properly completed form
W-8BEN or W-8ECI or such other information or certificates permitted under applicable law that
would exempt or reduce such withholding. Notwithstanding any provision to the contrary in the
Operative Agreements, neither Owner Participant nor Owner Trustee shall have any liability with
respect to any such withholding Taxes and Lessee will indemnify Owner Trustee and Owner Participant
for any such withholding Taxes.



     Section 7.2 General Indemnification and Waiver of Certain Claims.



          (a) Claims Defined. For the purposes of this Section 7.2, “Claims” shall mean any and
all costs, expenses, liabilities, obligations, losses, damages, penalties, actions or suits or
claims of whatsoever kind or nature (whether or not on the basis of negligence, strict or absolute
liability or liability in tort) which may be imposed on, incurred by, suffered by, or asserted
against an Indemnified Person, as defined herein, or any Unit and, except as otherwise expressly
provided in this Section 7.2, shall include, but not be limited to, all reasonable out-of-pocket
costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an
Indemnified Person in connection therewith or related thereto.



	 		 		 
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          (b) Indemnified Person Defined. For the purposes of this Section 7.2, “Indemnified
Person” means Owner Participant, Owner Trustee, Trust Company, the Trust, Indenture Trustee, each
Loan Participant, and each of their respective directors, officers, employees, shareholders,
constituent investors or partners, Affiliates, successors and permitted assigns, agents and
servants, the Trust Estate and the Indenture Estate (the respective directors, officers, employees,
shareholders, constituent investors or partners, Affiliates, successors and permitted assigns,
agents and servants of Owner Participant, Owner Trustee and Indenture Trustee, as applicable,
together with Owner Participant, Owner Trustee but not Wilmington Trust Company, and Indenture
Trustee, as the case may be, being referred to herein collectively as the “Related Indemnitee
Group” of Owner Participant, Indenture Trustee and Owner Trustee, but not Wilmington Trust Company
respectively), provided that as a condition of any obligations of Lessee to pay any
indemnity or perform any action under this Section 7.2 with respect to any persons who are not
signatories hereto, such persons at the written request of Lessee shall expressly agree in writing
to be bound by all the terms of this Section 7.2. In the event that any Indemnified Person fails,
after notice to such Indemnified Person referring to this sentence, to comply with any duty or
obligation under Section 7.2(e) and (f), such Indemnified Person shall not be entitled to indemnity
under this Section 7.2 to the extent such failure to comply has a material adverse effect on
Lessee’s ability to defend any such Claim.



          (c) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or a
closing occurs with respect thereto, and subject to the exclusions stated in subsection
(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each Indemnified
Person on an after-tax basis against Claims resulting from or arising out of or related to (whether
or not such Indemnified Person shall be indemnified as to such Claim by any other Person):



               (i) this Agreement or any other Operative Agreement, the Direct Loan Agreement, the Direct
Mortgage, the Trust Agreement or any of the transactions contemplated hereby and thereby or
resulting herefrom or therefrom and the enforcement thereof and hereof;



               (ii) the ownership, lease, operation, possession, modification, use, non-use, maintenance,
sublease, financing, substitution, control, repair, storage, alteration, violation of law with
respect to any Unit (including applicable securities laws, ERISA and environmental law), transfer
or other disposition of any Unit, return, overhaul, testing or registration of any Unit (including,
without limitation, injury, death or property damage of passengers, shippers or others, and
environmental control, noise and pollution regulations) whether or not in compliance with the terms
of the Lease;



               (iii) the manufacture, design, purchase, acceptance, rejection, delivery, nondelivery or
condition of any Unit (including, without limitation, latent and other defects, whether or not
discoverable, and any claim for patent, trademark or copyright infringement);



               (iv) any breach of or failure to perform or observe, or any other noncompliance with, any
covenant, condition or agreement to be performed by, or other obligation of, Lessee under any of
the Operative Agreements, or the falsity when made of any representation or warranty of Lessee in
any of the Operative Agreements or in any document or certificate delivered in connection therewith
other than representations and warranties in the Tax Indemnity Agreement; and



	 		 		 
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               (v) the offer, sale or delivery of any Equipment Notes or any interest in the Trust Estate.



          (d) Lessee’s Claims Excluded. The following are excluded from the agreement to
indemnify under this Section 7.2:



               (i) Claims with respect to any Unit to the extent attributable to acts or events occurring
after (A) in the case of the exercise by Lessee of a purchase option with respect to such Unit
under Section 23 of the Lease, the exercise by Lessee of an early termination option with respect
to such Unit under Section 10 of the Lease or the occurrence of an Event of Loss with respect to
such Unit under Section 11 of the Lease, the last to occur of (w) if an Event of Default exists,
the elimination of such Event of Default and the payment of all amounts due under the Operative
Agreements, (x) the payment of all amounts due from Lessee in connection with any such event and
(y) the release of the lien of the Indenture on such Unit or (B) in all other cases, with respect
to such Unit the last to occur of (w) if an Event of Default exists, the elimination of such Event
of Default and the payment of all amounts due under the Operative Agreements, (x) the earlier to
occur of the termination of the Lease or the expiration of the Lease Term, (y) the return of such
Unit to Lessor in accordance with the terms of the Lease (it being understood that the date of the
placement of such Unit in storage as provided in Section 6 of the
Lease constitutes the date of return of such Unit under the Lease) and (z) the release of the
lien of the Indenture on such Unit;



               (ii) with respect to any particular Indemnified Person, Claims which are Taxes or Losses,
whether or not Lessee is required to indemnify therefor under Section 7.1 hereof or the Tax
Indemnity Agreement, except, subject to subparagraph (xii) below, Taxes arising by reason of ERISA
and not related to such Indemnified Person’s making or holding its investment as contemplated by
the Operative Agreements or in accordance with the instructions of Lessee. Except as expressly
provided in the Operative Agreements (including the foregoing sentence), Lessee’s entire obligation
with respect to taxes and losses of tax benefits being fully set out in such Section 7.1 or the Tax
Indemnity Agreement;



               (iii) with respect to any particular Indemnified Person, Claims to the extent attributable to
the gross negligence or willful misconduct of (other than gross negligence or willful misconduct
imputed as a matter of law to such Indemnified Person solely by reason of its interest in the
Equipment), or to the breach of any contractual obligation by, or the falsity or inaccuracy of any
representation or warranty of such Indemnified Person or any of such Indemnified Person’s Related
Indemnitee Group;



               (iv) with respect to any particular Indemnified Person, Claims to the extent attributable to
any breach by such Indemnified Person of the warranty of quiet enjoyment set forth in Section 8 or
any transfer (other than pursuant to Section 10, 11, 15 or 23 of the Lease or pursuant to the
Indenture) by such Indemnified Person of any interest in the Trust Estate;



               (v) with respect to any particular Indemnified Person, any Claim to the extent attributable to
the offer, sale or disposition (voluntary or involuntary) by or on behalf of such Indemnified
Person of any Equipment Note or any interest in the Trust Estate or the Trust Agreement, or any
similar security, other than a transfer by such Indemnified Person of its



	 		 		 
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interests in any Unit
pursuant to Section 10, 11 or 23 of the Lease and Section 11 of the Indenture or otherwise
attributable to a Lease Event of Default that has occurred and is continuing;




               (vi) any Claim by Owner Trustee or Owner Participant and the Related Indemnitee Group of such
Indemnified Person to the extent attributable to a failure on the part of Owner Trustee to
distribute in accordance with the Trust Agreement any amounts received and distributable by it
thereunder;



               (vii) any Claim (other than to the extent any such Claim is brought against Owner Participant
or Owner Trustee and the Related Indemnitee Group of such Indemnified Person) to the extent
attributable to a failure on the part of Indenture Trustee to distribute in accordance with the
Indenture any amounts received and distributable by it thereunder;



               (viii) any Claim to the extent attributable to the authorization or giving or unreasonable
withholding by such Indemnified Person of any future amendments, supplements, modifications,
alterations, waivers or consents with respect to any of this Agreement and the other Operative
Agreements, other than such as have been requested by or
consented to by Lessee or necessary or required to comply with applicable laws or to
effectuate the purpose or intent of any Operative Agreement or as are expressly required by any
Operative Agreements;



               (ix) any Claim to the extent attributable to an Indenture Default that does not also
constitute a Lease Default;



               (x) any Claim which relates to a cost, fee or expense payable by a Person other than Lessee
pursuant to this Agreement, the Lease or any other Operative Agreement;



               (xi) any Claim which is an ordinary and usual operating or overhead expense of such
Indemnified Person other than such expenses attributable to the occurrence of an Event of Default;
or



               (xii) with respect to a particular Indemnified Person and such Indemnified Person’s
Related
Indemnitee Group, Claims resulting from any prohibited transaction, within the meaning of section
4975(c)(I) of the Code, occurring with respect to the purchase or holding of Equipment Notes under
circumstances when such Indemnified Person caused such purchase or holding and knew it would
constitute such a prohibited transaction.



          (e) Insured Claims. In the case of any Claim indemnified by Lessee hereunder which is
covered by a policy of insurance maintained by Lessee pursuant to Section 12 of the Lease or
otherwise, each Indemnified Person agrees to provide reasonable cooperation, at the expense and
risk of Lessee, to the insurers in the exercise of their rights to investigate, defend or
compromise such Claim as may be required to retain the benefits of such insurance with respect to
such Claim.



	 		 		 
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          (f) Claims Procedure. An Indemnified Person shall promptly notify Lessee of any Claim
as to which indemnification is sought; provided, however, that, notwithstanding the
last sentence of Section 7.2(b), the failure to give such notice shall not release Lessee from any
of its obligations under this Section 7, except to the extent that such failure to give notice
shall have a material adverse effect on Lessee’s ability to defend such claim. Subject to the
rights of insurers under policies of insurance maintained by Lessee, Lessee shall have the right in
each case at Lessee’s sole expense to investigate, and the right in its sole discretion to defend
or compromise, any Claim for which indemnification is sought under this Section 7.2 and the
Indemnified Person shall cooperate with all reasonable requests of Lessee in connection therewith;
provided that no right to defend or compromise such Claim shall exist on the part of Lessee
with respect to any Indemnified Person if (1) a Lease Event of Default shall have occurred and be
continuing or (2) such Claim would entail a significant risk to Owner Participant, any Loan
Participant or any Affiliate thereof of any criminal liability; provided, further,
that no right to compromise or settle such Claim shall exist unless Lessee agrees in writing to pay
the amount of such settlement or compromise. In any case in which any action, suit or proceeding is
brought against any Indemnified Person in connection with any Claim, Lessee may and, upon such
Indemnified Person’s request, will at Lessee’s expense resist and defend such action, suit or
proceeding, or cause the same to be resisted or defended by counsel selected by Lessee and
reasonably acceptable to such Indemnified Person and, in the event of
any failure by Lessee to do so, Lessee shall pay all costs and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) incurred by such Indemnified Person in
connection with such action, suit or proceeding. Where Lessee or the insurers under a policy of
insurance maintained by Lessee undertake the defense of an Indemnified Person with respect to a
Claim, no additional legal fees or expenses of such Indemnified Person in connection with the
defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at
the request of Lessee or such insurers; provided, however, that if in the written
opinion of counsel to such Indemnified Person an actual or potential material conflict exists where
it is advisable for such Indemnified Person to be represented by separate counsel, the reasonable
fees and expenses of any such separate counsel shall be paid by Lessee. Subject to the
requirements of any policy of insurance, an Indemnified Person may participate at its own expense
in any judicial proceeding controlled by Lessee pursuant to the preceding provisions;
provided that such party’s participation does not, in the opinion of the independent
counsel appointed by Lessee or its insurers to conduct such proceedings, interfere with such
control; and such participation shall not constitute a waiver of the indemnification provided in
this Section 7.2(f). Nothing contained in this Section 7.2(f) shall be deemed to require an
Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial
proceeding with respect thereto.



          (g) Subrogation. If a Claim indemnified by Lessee under this Section 7.2 is paid by
Lessee and/or an insurer under a policy of insurance maintained by Lessee, Lessee and/or such
insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and
remedies of the Indemnified Person (other than under insurance policies maintained by such
Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event
giving rise to such Claim. So long as no Lease Event of Default shall have occurred and be
continuing, should an Indemnified Person receive any refund, in whole or in part, with respect to
any Claim paid by Lessee hereunder, it shall promptly pay over the amount refunded (but not in
excess of the amount Lessee or any of its insurers has paid in respect of such Claim paid or
payable by such Indemnified Person on account of such refund) to Lessee.



	 		 		 
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          (h) Waiver of Certain Claims. Lessee hereby waives and releases any Claim now or
hereafter existing against any Indemnified Person arising out of death or personal injury to
personnel of Lessee, loss or damage to property of Lessee, or the loss of use of any property of
Lessee, which may result from or arise out of the condition, use or operation of the Equipment
during the Lease Term, including without limitation any latent or patent defect whether or not
discoverable.



          (i) Conflicting Provisions. The general indemnification provisions of this Section
7.2 are not intended to waive or supersede any specific provisions of, or any rights or remedies of
Lessee under, the Lease, this Agreement or any other Operative Agreement to the extent such
provisions apply to any Claim. The general indemnification provisions of this Section 7.2 do not
constitute a guaranty by Lessee that the principal of, interest on or any amounts payable with
respect to the Equipment Notes will be paid.



ARTICLE VIII.

LESSEE’S RIGHT OF QUIET ENJOYMENT




     Each party to this Agreement acknowledges notice of, and consents in all respects to, the
terms of the Lease, and expressly, severally and as to its own actions only, agrees that, so long
as no Lease Event of Default has occurred and is continuing, it shall not take or cause to be taken
any action contrary to Lessee’s rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by Lessee or any permitted sublessee.



ARTICLE IX.

[RESERVED]




ARTICLE X.

SUCCESSOR INDENTURE TRUSTEE




          (a) In the event that Indenture Trustee gives notice of its resignation pursuant to Section
8.02(a) of the Trust Indenture, Owner Trustee shall promptly appoint a successor Indenture Trustee
reasonably acceptable to Lessee and to the Loan Participants.



          (b) In the event that any of Owner Trustee, Loan Participants or Lessee obtains actual
knowledge of the existence of any of the grounds for removal of Indenture Trustee set forth in
Section 8.02(a) of the Indenture, Owner Trustee, Loan Participants or Lessee, as the case may be,
shall promptly notify the others by telephone, confirmed in writing and Owner Trustee shall
promptly thereafter remove Indenture Trustee and appoint a successor Indenture Trustee reasonably
acceptable to Lessee and to the Loan Participants.



ARTICLE XI.

MISCELLANEOUS




     Section 11.1 Consents. Each Participant covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of Owner Trustee or Indenture Trustee,
as the case may be, under the terms of the Operative Agreements that by its terms is not to be
unreasonably withheld by Owner Trustee or Indenture Trustee.



	 		 		 
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     Section 11.2 Refinancing.



          (a) Generally. Provided no Specified Default or Event of Default shall have occurred
or be continuing, Lessee shall have the right at any time during the Lease Term to request Owner
Participant and Owner Trustee to effect an optional prepayment of all of the Equipment Notes
pursuant to Section 2.10(d) of the Indenture as part of a refunding or refinancing operation.
Promptly on receipt of such request, Owner Participant will conclude an agreement with Lessee as to
the terms of such refunding or refinancing operation, and upon such agreement:



               (i) Lessee, Owner Participant, Indenture Trustee, Owner Trustee, and any other appropriate
parties will enter into a financing or loan agreement which shall be without
recourse or warranty as to Owner Participant (which may involve an underwriting agreement in
connection with a public offering) providing for (x) the issuance and sale by Owner Trustee or such
other party as may be appropriate to such institution or institutions on the date specified in such
agreement (for the purposes of this Section 11.2, the “Refunding Date”) of debt Securities in an
aggregate principal amount (in the lawful currency of the United States) equal to the principal
amount of the Equipment Notes outstanding on the Refunding Date, and (y) the application of the
proceeds of the sale of such debt Securities to the prepayment of all such Equipment Notes on the
Refunding Date, and (z) payment by Lessee to the Person or Persons entitled thereto on behalf of
Owner Trustee as Supplemental Rent of all other amounts in respect of accrued interest, and any
Make-Whole Amount with respect to any Equipment Note payable on such Refunding Date;



               (ii) Lessee and Owner Trustee will amend the Lease such that (w) if the Refunding Date is
not
a Rent Payment Date, Lessee shall on the Refunding Date prepay that portion of the next succeeding
installment of Basic Rent as shall equal the aggregate interest accrued on the Equipment Notes
outstanding to the Refunding Date, (x) Basic Rent payable in respect of the period from and after
the Refunding Date shall be recalculated to preserve the Net Economic Return which Owner
Participant would have realized had such refunding not occurred, provided that the net
present value of Basic Rent shall be minimized to the extent consistent therewith, and (y) the EBO
Fixed Purchase Price and amounts payable in respect of Stipulated Loss Value and Termination Value
from and after the Refunding Date shall be appropriately recalculated to preserve the Net Economic
Return which Owner Participant would have realized had such refunding not occurred (it being agreed
that any recalculations pursuant to subclauses (x) and (y) of this clause (ii) shall be performed
in accordance with the requirements of Section 2.6 hereof);



               (iii) Owner Participant will cause Owner Trustee to enter into an agreement to provide for the
securing thereunder of the debt Securities issued by Owner Trustee pursuant to clause (a) of this
Section 11.2 in like manner as the Equipment Notes and/or will enter into such amendments and
supplements to the Indenture which shall be without recourse or warranty as to Owner Participant as
may be necessary to effect such refunding or refinancing; provided that, notwithstanding
the foregoing, Lessee reserves the right to set the economic terms and other terms not customarily
negotiated between an owner participant and a lender of the refunding or refinancing transaction to
be so offered; provided, further, that no such amendment



	 		 		 
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or supplement will increase the obligations or impair the rights of Owner Participant or Owner Trustee under the
Operative Agreements without the consent of Owner Participant;




               (iv) in the case of a refunding or refinancing involving a public offering of debt Securities,
the offering materials (including any registration statement) for the refunding or refinancing
transaction shall be reasonably acceptable to Owner Participant to the extent of any description or
statement contained therein describing Owner Participant or Owner Trustee or the terms of the
transaction among Owner Participant, Owner Trustee and Lessee; and



               (v) unless otherwise agreed by Owner Participant, Lessee shall pay to Owner Trustee as
Supplemental Rent an amount equal to the Make-Whole Amount, if any, payable in respect of Equipment
Notes outstanding on the Refunding Date, and all reasonable fees, costs, expenses of such refunding
or refinancing and in the case of Owner Participant, an administrative fee of $10,000.00 on each Refunding Date other than the first Refunding Date;
provided, however, that (u) any such refinancing shall not adversely affect the
rights or increase the obligations or risks of Owner Participant under the Operative Agreements;
(v) such refinancing shall not create or increase Owner Participant’s risk of any adverse tax
consequences (including any adverse tax consequences under section 467 or section 861 of the Code
or the Regulations) unless such risks are indemnified by Lessee in a manner satisfactory to Owner
Participant; (w) Lessee may only enter into a refunding or refinancing operation under this Section
11.2(a) on no more than two occasions; (x) Lessee shall pay to or reimburse the Participants, Owner
Trustee and Indenture Trustee for all costs and expenses (including reasonable attorneys’ and
advisors’ fees) paid or incurred by them in connection with such refinancing; (y) no refinancing
shall cause Owner Participant to account for the transaction contemplated hereby as other than a
“leveraged lease” under the Financial Accounting Standards Board (“FASB”) Statement No. 13, as
amended (including any amendment effected by means of the adoption by FASB of a new statement in
lieu of FASB Statement No. 13); and (z) such refinancing shall not (A) create Replacement Notes
with a maturity longer than the Notes, (B) create Replacements Notes with an average life more than
three (3) months longer than the average life of the Notes (C) require any additional investment by
Owner Participant or (D) increase the amount of premium payable in connection with a prepayment of
the Notes. In addition to the foregoing, in the case of any refunding or refinancing of the
Equipment Notes pursuant to this Section 11, the party purchasing the Equipment Notes shall
represent either that (i) no part of its purchase consists of assets of any “employee benefit plan”
(as defined in Section 3(3) of ERISA) or any other entity subject to section 4975 of the Code other
than a “governmental plan” or “church plan” (as defined in section 3(32) of ERISA) organized in a
jurisdiction not having prohibition on transactions with such governmental plan or church plan
substantially similar to those contained in section 406 of ERISA or section 4975 of the Code, (ii)
the purchase of such Equipment Notes does not constitute a non-exempt prohibited transaction under
section 406 of ERISA or section 4975 of the Code, or (iii) the source of funds for its purchase is
an “insurance company general account” within the meaning of proposed Department of Labor
Prohibited Transaction Exemption (“PTE”) 95-60 (issued July 12, 1995) and it has identified that
there is no employee benefit plan, treating as a single employee benefit plan, all employee benefit
plans maintained by the same employer or affiliates thereof or employee organization, with respect
to which the amount of the reserves for all contracts held by or on behalf of such employee benefit
plan exceed 10% of the total liabilities of such general account. Accordingly, Owner Participant
agrees to cooperate in good faith with Lessee in




	 		 		 
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effecting any such refunding or refinancing and,
in connection therewith, at the request of Lessee made at least 30 days prior to any proposed
Refunding Date, (A) to cooperate with the reasonable requests of any advisor selected by Lessee
after consultation with Owner Participant to obtain commitments from financial institutions to lend
to Owner Trustee funds sufficient to permit Owner Trustee to prepay, in whole, the outstanding
Equipment Notes in accordance with their terms in connection with any such refunding or refinancing
and (B) to make the adjustments contemplated by this Section 11.2 in connection with any such
refunding or refinancing.




          (b) Other Prepayments, Redemptions, Etc. No prepayment or redemption and cancellation
by Owner Trustee or Owner Participant of any Equipment Note (other than pursuant to Section 2.10(b)
of the Indenture and this Section 11.2) shall be made without the prior written consent of Lessee.



     Section 11.3 Amendments and Waivers. No term, covenant, agreement or condition of this
Agreement may be terminated, amended or compliance therewith waived (either generally or in a
particular instance, retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.



     Section 11.4 Notices. Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices provided for herein shall be in writing or by 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 by either of the methods set forth in clauses (a) or (b)
above, in each case addressed to each party hereto at its address set forth below or, in the case
of any such party hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:



	 	 	 
	If to Lessee:
	 	Address of Lessee for Mail Delivery:
	 
	 	The Kansas City Southern Railway Company
	 
	 	P.O. Box 219335
	 
	 	Kansas City, MO 64121-9335
	 
	 	Attention: Senior Vice President
— Finance & Treasurer
	 
	 	Facsimile No.: (816) 983-1198
	 
	 	Telephone No.: (816) 983-1802
	 	 	 
	 
	 	Address of Lessee for Courier and Similar Delivery:
	 
	 	The Kansas City Southern Railway Company
	 
	 	427 West 12th Street
	 
	 	Kansas City, MO 64105
	 
	 	Attention: Senior Vice President — Finance & Treasurer
	 
	 	Facsimile No.: (816) 983-1198
	 
	 	Telephone No.: (816) 983-1802






	 		 		 
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	With a copy to:
	 	 
	 

	 	The Kansas City Southern Railway Company
	 

	 	427 West 12th Street
	 

	 	Kansas City, MO 64105
	 

	 	Attention: Senior Vice President & General Counsel
	 

	 	Facsimile No.: (816) 983-1227
	 

	 	Telephone No.: (816) 983-1303
	 
	 	 
	If to Owner Trustee:

	 	Wilmington Trust Company
	 

	 	Rodney Square North
	 

	 	1100 North Market Street
	 

	 	Wilmington, DE 19890-0001
	 

	 	Attention: Corporate Trust Administration
	 

	 	Facsimile No.: (302) 636-4140
	 

	 	Telephone No.: (302) 636-6000
	 
	 	 
	with a copy to:

	 	Owner Participant at the address set forth below
	 
	 	 
	If to Owner Participant:

	 	GS Leasing (KCSR 2005-1) LLC
	 

	 	c/o The Goldman Sachs Group Inc.
	 

	 	85 Broad Street
	 

	 	New York, NY 10004
	 

	 	Attention: Robert Emer,
	 

	 	Fixed Income, Currency and Commodities
	 

	 	Facsimile: 212-256-4853
	 

	 	Telephone No.: 212-902-0047
	 
	 	 
	If to a Loan Participant:

	 	at the addresses set forth in Annex B to the Indenture
	 
	 	 
	If to Indenture Trustee:

	 	Wells Fargo Bank Northwest, National Association
	 

	 	299 South Main Street, 12th Floor
	 

	 	MAC: U1228-120
	 

	 	Salt Lake City, Utah, 84111
	 

	 	Attention: Corporate Trust Department
	 

	 	Facsimile No.: 801-246-5053
	 

	 	Telephone No.: 801-246-5630






     Section 11.5 Survival. All warranties, representations, indemnities and covenants made by
any party hereto, herein or in any certificate or other instrument delivered by any such party or
on the behalf of any such party under this Agreement, shall be considered to have been relied upon
by each other party hereto and shall survive the consummation of the transactions contemplated
hereby on the date hereof and on each Closing Date regardless of any investigation made by any such
party or on behalf of any such party.



     Section 11.6 No Guarantee of Debt. Nothing contained herein or in the Lease, the Trust
Indenture, the Trust Agreement or the Tax Indemnity Agreement or in any certificate or other
statement delivered by Lessee in connection with the transactions contemplated hereby



	 		 		 
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shall be
deemed to be (a) a guarantee by Lessee to Owner Trustee, Owner Participant, Indenture Trustee or
any Loan Participant that the Equipment will have any residual value or useful life, or (b) a
guarantee by Indenture Trustee or Lessee of payment of the principal or Make-Whole Amount, if any,
with respect to any Equipment Note, or interest on the Equipment Notes.




     Section 11.7 Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of, and shall be enforceable by, the parties hereto and their respective successors
and assigns as permitted by and in accordance with the terms hereof, including each successive
holder of the Beneficial Interest permitted under Section 6.1 hereof and Section 23(c) of the Lease
and each successive holder of any Equipment Note issued and delivered pursuant to this Agreement or
the Indenture. Except as expressly provided herein or in the other Operative Agreements, no party
hereto may assign their interests herein without the consent of the parties hereto.



     Section 11.8 Business Day. Notwithstanding anything herein or in any other Operative
Agreement to the contrary, if the date on which any payment is to be made pursuant to this
Agreement or any other Operative Agreement is not a Business Day, the payment otherwise payable on
such date shall be payable on the next succeeding Business Day with the same force and effect as if
made on such scheduled date and (provided such payment is made on such succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such scheduled date to the time
of such payment on such next succeeding Business Day.



     Section 11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE; PROVIDED, HOWEVER, THAT THE PARTIES HERETO
SHALL BE ENTITLED TO ALL RIGHTS CONFERRED BY ANY APPLICABLE FEDERAL STATUTE, RULE OR REGULATION.



     Section 11.10 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.



     Section 11.11 Counterparts. This Agreement may be executed in any number of counterparts,
each executed counterpart constituting an original but all together only one Agreement.



     Section 11.12 Headings and Table of Contents. The headings of the sections of this
Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.



     Section 11.13 Limitations of Liability.



          (a) Liabilities of the Participants. Neither Indenture Trustee, Trust Company, Owner
Trustee nor any Participant shall have any obligation or duty to Lessee, to any other Participant
or to others with respect to the transactions contemplated hereby, except those



	 		 		 
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obligations or duties of such Participant expressly set forth in this Agreement and the other Operative
Agreements, and neither Indenture Trustee, Trust Company, Owner Trustee nor any Participant shall
be liable for performance by any other party hereto of such other party’s obligations or duties
hereunder. Without limitation of the generality of the foregoing, under no circumstances
whatsoever shall Indenture Trustee or any Participant be liable to Lessee for any action or
inaction on the part of Owner Trustee in connection with the transactions contemplated herein,
whether or not such action or inaction is caused by willful misconduct or gross negligence of Owner
Trustee unless such action or inaction is at the direction of Indenture Trustee or any Participant,
as the case may be, and such direction is expressly permitted hereby.




          (b) No Recourse to Owner Trustee. It is expressly understood and agreed by and
between Owner Trustee, Lessee, Owner Participant, Indenture Trustee, and each Loan Participant, and
their respective successors and permitted assigns, that, subject to the proviso contained in this
Section 11.13(b), all representations, warranties and undertakings of Owner Trustee hereunder shall
be binding upon Owner Trustee, only in its capacity as Owner Trustee under the Trust Agreement, and
(except as expressly provided herein) Trust Company for any breach thereof, except for its gross
negligence or willful misconduct, or for breach of its covenants, representations and warranties
contained herein, except to the extent covenanted or made in its individual capacity;
provided, however, that nothing in this Section 11.13(b) shall be construed to
limit in scope or substance those representations and warranties of Trust Company made expressly in
its individual capacity set forth herein. The term “Owner Trustee” as used in this Agreement shall
include any successor trustee under the Trust Agreement, or Owner Participant if the trust created
thereby is revoked.



     Section 11.14 Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by the parties hereto on the date hereof (except the Equipment
Notes), and (c) financial statements, certificates and other information previously or hereafter
furnished pursuant hereto, may be reproduced by the parties hereto by any photographic,
photostatic, microfilm, microcard, miniature photographic, electronic or other similar process and
the parties hereto may destroy any original document so reproduced. The parties agree to accept
delivery of all of the foregoing documents in electronic format in lieu of original closing
transcripts. The parties further agree and stipulate that, to the extent permitted by applicable
law, any such reproduction, in electronic format or otherwise, shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in
evidence. This Section 11.14 shall not prohibit the parties hereto or any holder of Equipment
Notes from contesting any such reproduction to the same extent that it could contest the original,
or from introducing evidence to demonstrate the inaccuracy of any such reproduction.



     Section 11.15 Tax Disclosure. Notwithstanding anything herein to the contrary, each party
hereto (and each employee, representative or other agent of such person) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax structure of the
transactions described in this Agreement, and all materials of any kind (including opinions or
other tax analyses) that are provided to the person related to such tax treatment and tax
structure.



	 		 		 
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The preceding sentence is intended to cause the transaction contemplated hereby to be
treated as not having been offered under conditions of confidentiality for purposes of U.S.
Treasury Regulation §1.6011-4(b)(3) and shall be construed in a manner consistent with such
purpose.




     Section 11.16 Bankruptcy of Trust or Trust Estate. If (i) all or any part of the Trust
Estate becomes the property of a debtor, or the Trust becomes a debtor, subject to the
reorganization provisions of Title 11 of the United States Code, as amended from time to time, (ii)
pursuant to such reorganization provisions Owner Participant is required, by reason of Owner
Participant being held to have recourse liability to the debtor or the trustee of the debtor
directly or indirectly, to make payment on account of any amount payable as principal of or
interest on any Equipment Note, and (iii) Indenture Trustee or any Loan Participant actually
receives any Excess Amount as defined below, which reflects any payment by Owner Participant on
account of clause (ii) above, Indenture Trustee or such Loan Participant, as the case may be, shall
promptly refund to Owner Participant such Excess Amount. For purposes of this Section 11.16,
“Excess Amount” means the amount by which such payment exceeds the amount which would have been
received by Indenture Trustee or such Loan Participant if Owner Participant has not become subject
to the recourse liability referred to in clause (ii) above.




	 		 		 
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     IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be executed
and delivered, all as of the date first above written.



	 	 	 	 	 
	Lessee:	 	THE KANSAS CITY SOUTHERN RAILWAY COMPANY
	 	 	 	 	 
	 
	 	By:
	 	/s/ Ronald G. Russ
	 
	 	 	 	 
	 
	 	 	 	Name: Ronald G. Russ
	 
	 	 	 	Title: Executive Vice President & CFO
	 	 	 	 	 
	Owner Trustee:	 	KCSR TRUST 2005-1,
acting through WILMINGTON TRUST COMPANY, not in its individual
capacity, except where otherwise expressly provided, but solely as
Owner Trustee

	 
	 
	 	By:
	 	/s/ Michele C. Harra
	 
	 	 	 	 
	 
	 	 	 	Name: Michele C. Harra
	 
	 	 	 	Title: Financial Services Officer
	 	 	 	 	 
	Owner Participant:	 	GS LEASING (KCSR 2005-1) LLC
	 	 	 	 	 
	 
	 	By:
	 	/s/ Vijay Radhakishun
	 
	 	 	 	Name: Vijay Radhakishun
	 
	 	 	 	Title: Vice President






			
	Participation Agreement (KCSR 2005-1)
	 	 






 









 






	 	 	 	 	 
	Indenture Trustee:	 	WELLS FARGO BANK NORTHWEST, NATIONAL
	 	 	    ASSOCIATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Brett R. King
	 

	 	 	 	 
	 

	 	 	 	Name: Brett R. King
	 

	 	 	 	Title: Vice President
	 
	 	 	 	 
	Loan Participant:	 	EXPORT DEVELOPMENT CANADA
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Ian Cameron
	 

	 	 	 	 
	 

	 	 	 	Name: Ian Cameron
	 

	 	 	 	Title: Asset Management
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Roman Chomyn
	 

	 	 	 	 
	 

	 	 	 	Name: Roman Chomyn
	 

	 	 	 	Title: Portfolio Manager
	 
	 	 	 	 
	Loan Participant:	 	KFW
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Martin Kloster
	 

	 	 	 	 
	 

	 	 	 	Name: Martin Kloster
	 

	 	 	 	Title: First Vice President
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Dr. Inga Conrady
	 

	 	 	 	 
	 

	 	 	 	Name: Dr. Inga Conrady
	 

	 	 	 	Title: Vice President






	 		
	Participation Agreement (KCSR 2005-1)