Document:

exv10w2

 

    Exhibit 10.2

 

 

    Equipment
    Lease Agreement

    (KCSM
    2007-1)

    dated
    as of April 4, 2007

    between

    High Ridge Leasing
    LLC,

    Lessor

    and

    Kansas City Southern de
    Mexico, S. de R.L. de C.V.,

    Lessee

    30 GE ES44AC Locomotives
    

 

    Memorandum of Equipment Lease Agreement (KCSM
    2007-1)
    filed with the Surface Transportation Board pursuant to
    49 U.S.C. § 11301 on April 4, 2007 at
    4:10 p.m., Recordation Number 26908, and deposited in the
    Office of the Registrar General of Canada pursuant to
    Section 105 of the Canada Transportation Act on
    April 5, 2007 at 12:19 p.m.

 

 

    Table
    of Contents

 

	 	 	 	 	 	 	 
	

    Section

	
 
	

    Heading

	
 
	
    Page

	 

	

    Section 1.
    

	
 
	
    Definitions
    
	
 
	
	
    1
    
	

	

    Section 2.
    

	
 
	
    Acceptance
    and Leasing of Equipment
    
	
 
	
	
    1
    
	

	

    Section 2.1.
    

	
 
	
    Sale and Purchase; Participation
    in Equipment Cost
    
	
 
	
	
    1
    
	

	

    Section 2.2.
    

	
 
	
    Settlement Date; Procedure for
    Participation
    
	
 
	
	
    1
    
	

	

    Section 3.
    

	
 
	
    Term and
    Rent
    
	
 
	
	
    2
    
	

	

    Section 3.1.
    

	
 
	
    Lease Term
    
	
 
	
	
    2
    
	

	

    Section 3.2.
    

	
 
	
    Basic Rent
    
	
 
	
	
    2
    
	

	

    Section 3.3.
    

	
 
	
    Supplemental Rent
    
	
 
	
	
    2
    
	

	

    Section 3.4.
    

	
 
	
    Calculation of Adjustments to
    Basic Rent, Stipulated Loss Value, Termination Value, EBO Fixed
    Purchase Price and FPO Fixed Purchase Price; Confirmation and
    Verification
    
	
 
	
	
    3
    
	

	

    Section 3.5.
    

	
 
	
    Manner of Payments
    
	
 
	
	
    4
    
	

	

    Section 4.
    

	
 
	
    Ownership
    and Marking of Equipment
    
	
 
	
	
    5
    
	

	

    Section 4.1.
    

	
 
	
    Retention of Title
    
	
 
	
	
    5
    
	

	

    Section 4.2.
    

	
 
	
    Duty to Number and Mark Equipment
    
	
 
	
	
    5
    
	

	

    Section 4.3.
    

	
 
	
    Prohibition against Certain
    Designations
    
	
 
	
	
    5
    
	

	

    Section 5.
    

	
 
	
    Disclaimer
    of Warranties; Right of Quiet Enjoyment
    
	
 
	
	
    5
    
	

	

    Section 5.1.
    

	
 
	
    Disclaimer of Warranties
    
	
 
	
	
    5
    
	

	

    Section 5.2.
    

	
 
	
    Quiet Enjoyment
    
	
 
	
	
    6
    
	

	

    Section 6.
    

	
 
	
    Return
    of Equipment; Storage
    
	
 
	
	
    6
    
	

	

    Section 6.1.
    

	
 
	
    General
    
	
 
	
	
    6
    
	

	

    Section 6.2.
    

	
 
	
    Condition of Equipment
    
	
 
	
	
    7
    
	

	

    Section 6.3.
    

	
 
	
    Storage
    
	
 
	
	
    7
    
	

	

    Section 6.4.
    

	
 
	
    Termination of Lease
    
	
 
	
	
    8
    
	

	

    Section 7.
    

	
 
	
    Liens
    
	
 
	
	
    8
    
	

	

    Section 7.1.
    

	
 
	
    Lessee Liens
    
	
 
	
	
    8
    
	

	

    Section 7.2.
    

	
 
	
    Lessor Liens
    
	
 
	
	
    8
    
	

	

    Section 8.
    

	
 
	
    Maintenance;
    Operation; Sublease
    
	
 
	
	
    8
    
	

	

    Section 8.1.
    

	
 
	
    Maintenance
    
	
 
	
	
    8
    
	

	

    Section 8.2.
    

	
 
	
    Operation
    
	
 
	
	
    8
    
	

	

    Section 8.3.
    

	
 
	
    Sublease
    
	
 
	
	
    9
    
	

	

    Section 9.
    

	
 
	
    Modifications
    
	
 
	
	
    9
    
	

	

    Section 9.1.
    

	
 
	
    Required Modifications
    
	
 
	
	
    9
    
	

	

    Section 9.2.
    

	
 
	
    Optional Modifications
    
	
 
	
	
    9
    
	

	

    Section 9.3.
    

	
 
	
    Removal of Proprietary and
    Communications Equipment
    
	
 
	
	
    10
    
	

	

    Section 9.4.
    

	
 
	
    Retention of Equipment by Lessor
    
	
 
	
	
    10
    
	

	

    Section 10.
    

	
 
	
    Voluntary
    Termination
    
	
 
	
	
    10
    
	

	

    Section 10.1.
    

	
 
	
    Right of Termination
    
	
 
	
	
    10
    
	

	

    Section 10.2.
    

	
 
	
    Sale of Equipment
    
	
 
	
	
    11
    
	

	

    Section 10.3.
    

	
 
	
    Retention of Equipment by Lessor
    
	
 
	
	
    11
    
	

	

    Section 10.4.
    

	
 
	
    Termination of Lease
    
	
 
	
	
    12
    
	

    

    i

 

	 	 	 	 	 	 	 
	

    Section

	
 
	

    Heading

	
 
	
    Page

	 

	

    Section 11.
    

	
 
	
    Loss,
    Destruction, Requisition,
    Etc. 
    
	
 
	
	
    12
    
	

	

    Section 11.1.
    

	
 
	
    Event of Loss
    
	
 
	
	
    12
    
	

	

    Section 11.2.
    

	
 
	
    Replacement or Payment upon Event
    of Loss
    
	
 
	
	
    12
    
	

	

    Section 11.3.
    

	
 
	
    Rent Termination
    
	
 
	
	
    13
    
	

	

    Section 11.4.
    

	
 
	
    Disposition of Equipment;
    Replacement of Unit
    
	
 
	
	
    13
    
	

	

    Section 11.5.
    

	
 
	
    Eminent Domain
    
	
 
	
	
    13
    
	

	

    Section 12.
    

	
 
	
    Insurance
    
	
 
	
	
    14
    
	

	

    Section 12.1.
    

	
 
	
    Property Damage and Public
    Liability Insurance
    
	
 
	
	
    14
    
	

	

    Section 12.2.
    

	
 
	
    Proceeds of Insurance
    
	
 
	
	
    15
    
	

	

    Section 12.3.
    

	
 
	
    Additional Insurance
    
	
 
	
	
    15
    
	

	

    Section 13.
    

	
 
	
    Reports;
    Inspection
    
	
 
	
	
    15
    
	

	

    Section 13.1.
    

	
 
	
    Duty of Lessee to Furnish
    
	
 
	
	
    15
    
	

	

    Section 13.2.
    

	
 
	
    Lessor’s Inspection Rights
    
	
 
	
	
    15
    
	

	

    Section 13.3.
    

	
 
	
    Financial and Other Reports of
    Lessee
    
	
 
	
	
    15
    
	

	

    Section 14.
    

	
 
	
    Events
    of Default
    
	
 
	
	
    16
    
	

	

    Section 15.
    

	
 
	
    Remedies
    
	
 
	
	
    17
    
	

	

    Section 15.1.
    

	
 
	
    Remedies
    
	
 
	
	
    17
    
	

	

    Section 15.2.
    

	
 
	
    Cumulative Remedies
    
	
 
	
	
    19
    
	

	

    Section 15.3.
    

	
 
	
    No Waiver
    
	
 
	
	
    19
    
	

	

    Section 15.4.
    

	
 
	
    Lessee’s Duty to Return
    Equipment Upon Default
    
	
 
	
	
    19
    
	

	

    Section 15.5.
    

	
 
	
    Specific Performance; Lessor
    Appointed Lessee’s Agent
    
	
 
	
	
    19
    
	

	

    Section 16.
    

	
 
	
    Filings;
    Further Assurances
    
	
 
	
	
    19
    
	

	

    Section 16.1.
    

	
 
	
    Filings
    
	
 
	
	
    19
    
	

	

    Section 16.2.
    

	
 
	
    Further Assurances
    
	
 
	
	
    19
    
	

	

    Section 16.3.
    

	
 
	
    Expenses
    
	
 
	
	
    20
    
	

	

    Section 17.
    

	
 
	
    Lessor’s
    Right to Perform
    
	
 
	
	
    20
    
	

	

    Section 18.
    

	
 
	
    Assignment
    
	
 
	
	
    20
    
	

	

    Section 18.1.
    

	
 
	
    Assignment by Lessor
    
	
 
	
	
    20
    
	

	

    Section 18.2.
    

	
 
	
    Assignment by Lessee
    
	
 
	
	
    22
    
	

	

    Section 18.3.
    

	
 
	
    Sublessee’s Performance and
    Rights
    
	
 
	
	
    22
    
	

	

    Section 18.4.
    

	
 
	
    Merger Covenant
    
	
 
	
	
    22
    
	

	

    Section 19.
    

	
 
	
    Net
    Lease, etc. 
    
	
 
	
	
    22
    
	

	

    Section 20.
    

	
 
	
    Notices
    
	
 
	
	
    23
    
	

	

    Section 21.
    

	
 
	
    Lessee’s
    Indemnities
    
	
 
	
	
    24
    
	

	

    Section 21.1.
    

	
 
	
    General Tax Indemnity
    
	
 
	
	
    24
    
	

	

    Section 21.2.
    

	
 
	
    General Indemnification and Waiver
    of Certain Claims
    
	
 
	
	
    29
    
	

	

    Section 22.
    

	
 
	
    Termination
    Upon Purchase by Lessee
    
	
 
	
	
    32
    
	

	

    Section 23.
    

	
 
	
    Lessee’s
    Options to Purchase Equipment
    
	
 
	
	
    32
    
	

	

    Section 24.
    

	
 
	
    Transaction
    Costs
    
	
 
	
	
    33
    
	

	

    Section 25.
    

	
 
	
    Filing
    in Mexico
    
	
 
	
	
    34
    
	

	

    Section 26.
    

	
 
	
    Miscellaneous
    
	
 
	
	
    34
    
	

	

    Section 26.1.
    

	
 
	
    Governing Law; Severability
    
	
 
	
	
    34
    
	

	

    Section 26.2.
    

	
 
	
    Execution in Counterparts
    
	
 
	
	
    34
    
	

	

    Section 26.3.
    

	
 
	
    Headings and Table of Contents;
    Section References
    
	
 
	
	
    34
    
	

    

    ii

 

	 	 	 	 	 	 	 
	

    Section

	
 
	

    Heading

	
 
	
    Page

	 

	

    Section 26.4.
    

	
 
	
    Successors and Assigns
    
	
 
	
	
    34
    
	

	

    Section 26.5.
    

	
 
	
    True Lease
    
	
 
	
	
    34
    
	

	

    Section 26.6.
    

	
 
	
    Amendments and Waivers
    
	
 
	
	
    34
    
	

	

    Section 26.7.
    

	
 
	
    Survival
    
	
 
	
	
    34
    
	

	

    Section 26.8.
    

	
 
	
    Business Days
    
	
 
	
	
    35
    
	

	

    Section 26.9.
    

	
 
	
    Directly or Indirectly
    
	
 
	
	
    35
    
	

	

    Section 26.10.
    

	
 
	
    Entitlement to §1168 Benefits
    
	
 
	
	
    35
    
	

	

    Section 26.11.
    

	
 
	
    Waiver of Jury Trial
    
	
 
	
	
    35
    
	

	

    Section 26.12.
    

	
 
	
    Reproduction of Documents
    
	
 
	
	
    35
    
	

	

    Section 26.13.
    

	
 
	
    Tax Disclosure
    
	
 
	
	
    35
    
	

	

    Section 26.14.
    

	
 
	
    Jurisdiction, Court Proceedings
    
	
 
	
	
    36
    
	

	

    Section 26.15.
    

	
 
	
    Judgment Currency
    
	
 
	
	
    36
    
	

	

    Attachments to Equipment Lease
    Agreement:
    

	

    Exhibit A — Closing
    and Settlement Conditions
    

	

    Exhibit B — Form
    of Certificate of Acceptance
    

	

    Exhibit C — Form
    of Lease Supplement
    

	

    Exhibit D — Form
    of Lessee Officer’s Certificate
    

	

    Exhibit E — Form
    of Lessor Officer’s Certificate
    

	

    Exhibit F — Form
    of Bill of Sale
    

	

    Appendix
    A — Definitions
    

	

    Schedule 1 — Price
    Assumptions and Pro Forma Schedules
    

    

    iii

 

    Equipment
    Lease Agreement

    (KCSM
    2007-1)

 

    This Equipment Lease
    Agreement (KCSM
    2007-1),
    dated as of April 4, 2007 (this “Lease”),
    between High Ridge
    Leasing LLC, a Delaware limited liability company
    (“Lessor”), and
    Kansas City Southern de
    Mexico, S. de R.L. de C.V., a corporation incorporated
    under the laws of Mexico (“Lessee”),

 

    Witnesseth:

 

    WHEREAS, Lessee has acquired thirty (30) General Electric
    ES44AC locomotives that were newly built and delivered within
    the last six months; and

 

    WHEREAS, Lessee desires to sell such locomotives to Lessor and
    to simultaneously lease such locomotives from Lessor in
    accordance with the terms of this Lease; and

 

    NOW THEREFORE, in consideration of the forgoing, Lessor and
    Lessee agree to consummate the sale and leaseback of such
    locomotives subject to the terms and conditions set forth herein.

 

    Section 1.  Definitions.

 

    Unless the context otherwise requires, all capitalized terms
    used herein without definition shall have the respective
    meanings set forth in Appendix A hereto for all purposes of
    this Lease.

 

    Section 2.  Acceptance
    and Leasing of Equipment.

 

    Section 2.1.  Sale
    and Purchase; Participation in Equipment
    Cost.  Subject to the terms and conditions hereof
    (and the satisfaction or waiver of the applicable conditions
    precedent set forth in Exhibit A attached hereto), on each
    Delivery Date (as defined below), Lessee agrees to sell to
    Lessor and Lessor agrees to purchase from Lessee, the Units of
    Equipment to be delivered on such Delivery Date as described in
    the Bill of Sale delivered on the Settlement Date (as defined
    below), and, in connection therewith, Lessor agrees to pay to
    Lessee the purchase price of $2,176,320 for each Unit of
    Equipment purchased; provided, however, that Lessee shall
    not be obligated to sell and Lessor shall not be obligated to
    purchase on the Settlement Date any Unit that is destroyed,
    damaged or otherwise unacceptable to Lessee for lease pursuant
    to this Lease on the Settlement Date; provided further
    that Lessor’s maximum commitment for all Units shall
    not exceed $66,000,000. Lessee shall deliver the applicable
    Equipment to Lessor at a location in the contiguous 48
    United States and Lessee shall, as authorized
    representative and on behalf of Lessor, accept such delivery on
    one or more delivery dates (each a “Delivery
    Date”) occurring during the period commencing on the
    date of the execution and delivery of this Lease and the Tax
    Indemnity Agreement and ending on the Settlement Date (as
    defined below).

 

    Section 2.2.  Settlement
    Date; Procedure for Participation.

 

    (a) Notice of Settlement Date.  Lessee
    shall give Lessor notice (the “Notice of
    Settlement”) by telex, telegraph, facsimile or other
    form of telecommunication or telephone of the Settlement Date
    not later than 1:00 P.M., New York City time, on the second
    Business Day preceding the Settlement Date, which Notice of
    Settlement shall specify in reasonable detail the number and
    type of Units to be settled on such date and the aggregate
    Equipment Cost of such Units required to be paid with respect to
    such Units. Prior to 11:00 A.M., New York City time, on the
    Settlement Date, Lessor shall make the amount of the Equipment
    Cost required to be paid on the Settlement Date available to
    Lessee, or its designee, by transferring or delivering such
    amounts in funds immediately available on the Settlement Date,
    to Lessee’s account at Bank of America (ABA
    No. 026009593), for credit to account number 629082687,
    Account Name: Kansas City Southern de Mexico, S. de R.L. de
    C.V., re: (KCSM
    2007-1) or
    such other account as designated by Lessee. The making available
    by Lessor of the amount of the Equipment Cost shall be deemed a
    waiver of the Notice of Settlement by Lessor.

 

    (b) Settlement.  The closing with respect
    to the settlement of the purchase price of the applicable Units
    (the “Settlement”) shall commence at
    9:00 A.M., New York City time at the offices of Chapman and
    Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603 or
    at such other place or time as the parties hereto shall

 

    agree on the date designated by Lessee in the Notice of
    Settlement described in Section 2.2(a) (such date being
    referred to as the “Settlement Date”);
    provided that the Settlement Date shall occur on or after
    April 4, 2007 and on or prior to April 30, 2007. Upon
    receipt by Lessee on the Settlement Date of the full amount of
    the Equipment Cost in respect of the Units delivered on or prior
    to the Settlement Date, (i) Lessee shall deliver the Bill
    of Sale for such Units to Lessor, (ii) Lessor shall have
    accepted such Units, such acceptance to be conclusively
    evidenced by the execution and delivery by Lessor or its
    authorized representative of a Certificate of Acceptance with
    respect to the applicable Units in the form attached hereto as
    Exhibit B (a “Certificate of Acceptance”),
    and (iii) Lessor shall, pursuant to this Lease, lease such
    Equipment as and when delivered and accepted on or prior to the
    Settlement Date to Lessee, and Lessee, pursuant to this Lease,
    shall accept delivery of such Units under this Lease, such
    lease, delivery and acceptance of such Units under this Lease to
    be conclusively evidenced by the execution and delivery by
    Lessee of a Certificate of Acceptance covering the Equipment so
    delivered subject to the condition subsequent that Lessee shall
    receive the purchase price for such Equipment on the Settlement
    Date.

 

    Section 3.  Term
    and Rent.

 

    Section 3.1.  Lease
    Term.  The interim term of this Lease (the
    “Interim Term”) for each Unit shall commence on
    the Delivery Date for such Unit and shall terminate at
    11:59 P.M. (New York City time) on the day before the Basic
    Term Commencement Date for such Unit. The basic term of this
    Lease (the “Basic Term”) for each Unit shall
    commence on the Basic Term Commencement Date for such Unit and,
    subject to earlier termination pursuant to
    Sections 10, 11, 15, 22.1 and 23, shall expire at
    11:59 P.M. (New York City time) on the Basic Term
    Expiration Date for such Unit.

 

    Section 3.2.  Basic
    Rent.  Lessee and Lessor hereby agree that no Rent
    (other than Supplemental Rent, if any) shall be payable to the
    Lessor during the Interim Term. Lessee hereby agrees to pay
    Lessor Basic Rent for each Unit throughout the Basic Term
    applicable thereto on the first Rent Payment Date and in
    consecutive semi-annual installments thereafter payable on each
    Rent Payment Date. Each payment of Basic Rent shall be in an
    amount equal to the product of the Equipment Cost for such Unit
    multiplied by the Basic Rent percentage for such Unit set forth
    opposite such Rent Payment Date on Schedule 2 to the Lease
    Supplement for such Units (as such Schedule 2 shall be
    adjusted pursuant to Section 3.4 hereof). Basic Rent shall
    be payable on the Rent Payment Dates as set forth in
    Schedule 2 to the Lease Supplement for the applicable
    Units. Basic Rent shall be allocated to and accrue for the use
    of the Units as specified in Schedule 5 to the Lease
    Supplement for such Units. For the avoidance of doubt, and
    notwithstanding anything to the contrary herein, the parties
    agree that irrespective of Lessee’s payment obligation on
    each Rent Payment Date, Lessee’s liability on account of
    the use of each Unit shall be allocated to each Lease period in
    the amount set forth in Schedule 5 to the Lease Supplement
    for the applicable Units. Basic Rent allocated to any Lease
    period shall be further allocated ratably to each day within
    such Lease period. Basic Rent shall be allocated to each
    calendar year in the Lease Term based upon the assumption that
    each calendar year in the Lease Term is 360 days,
    consisting of four
    90-day
    quarters and twelve
    30-day
    months. It is the intention of Lessor and Lessee that the
    allocations of Basic Rent to each Lease period in the amount set
    forth in Schedule 5 to the Lease Supplement constitute
    specific allocations of fixed rent within the meaning of
    Treasury Regulation
    section 1.467-1(c)(2)(ii)
    with the intended effect that the Lease will not have
    “prepaid rent” or “deferred rent” within the
    meaning of Treasury Regulation
    sections 1.467-1(c)(3)(i)
    or (ii). The parties hereto agree that for Mexican tax purposes
    each payment of Basic Rent pursuant to this Section 3.2
    shall constitute the payment of royalty for the temporary use of
    the Equipment during the term of this Lease.

 

    Section 3.3.  Supplemental
    Rent.  Lessee also agrees to pay to Lessor, or to
    whomsoever shall be entitled thereto, any and all Supplemental
    Rent, promptly as the same shall become due and owing, or where
    no due date is specified, promptly after demand by the Person
    entitled thereto, and in the event of any failure on the part of
    Lessee to pay any Supplemental Rent, Lessor shall have all
    rights, powers and remedies provided for herein or by law or
    equity or otherwise as in the case of nonpayment of Basic Rent.
    Without limiting the generality of the foregoing, Lessee will
    pay, as Supplemental Rent, (i) on demand, to the extent
    permitted by applicable law, an amount equal to interest at the
    applicable Late Rate on any part of any installment of Basic
    Rent not paid when due for any period for which the same shall
    be overdue and on any payment of Supplemental Rent not paid when
    due or demanded, as the case may be, for the period from such

    

    2

 

    due date or demand until the same shall be paid and (ii) on
    demand, any payments required under the Tax Indemnity Agreement
    or Section 21 hereof. All Supplemental Rent to be paid
    pursuant to this Section 3.3 shall be payable in the type
    of funds and in the manner set forth in Section 3.5.

 

    Section 3.4.  Calculation
    of Adjustments to Basic Rent, Stipulated Loss Value, Termination
    Value, EBO Fixed Purchase Price and FPO Fixed Purchase Price;
    Confirmation and Verification.

 

    (a) Schedules.  Schedule 1 hereto
    sets forth pricing assumptions (the “Pricing
    Assumptions”) and pro forma schedules of Basic Rent,
    Rent Payment Dates, Stipulated Loss Values, Termination Values,
    EBO Fixed Purchase Price, EBO Fixed Purchase Price Date, FPO
    Fixed Purchase Price and Allocation of Basic Rent. Promptly
    after receipt of the Notice of Settlement, Lessor shall prepare
    Schedules 2 through 7 for the Lease Supplement to be delivered
    on the Settlement Date setting forth the actual Basic Rent, Rent
    Payment Dates, Stipulated Loss Values, Termination Values, EBO
    Fixed Purchase Price, EBO Fixed Purchase Price Date, FPO Fixed
    Purchase Price, Allocation of Basic Rent, Overpayment of Basic
    Rent and Underpayment of Basic Rent, in each case in respect of
    the Units to be settled on the Settlement Date. Lessor shall
    also advise Lessee if there shall have occurred a Change in Tax
    Law that will result in an adjustment to economic schedules.
    After having been advised in writing by Lessor of such Change in
    Tax Law and the proposed adjustment to the payments of Basic
    Rent resulting therefrom as provided below, Lessee may decline
    to proceed with the transaction.

 

    In preparing such schedules, Lessor shall first increase or
    decrease the nominal after-tax yield component of Lessor’s
    Net Economic Return in an amount equal to 54.955% of the
    difference between (x) the Lessor’s Funding Index Rate
    on the second Business Day preceding the Settlement Date and
    (y) 5.05%, and then recalculate the payments or amounts, as
    the case may be, of Basic Rent, Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO Fixed
    Purchase Price:

 

    (i) to preserve the Net Economic Return, as adjusted, that
    Lessor would have realized had there been no change in the
    Pricing Assumptions or, if applicable, had no Change in Tax Law
    occurred prior to the Settlement Date, 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 for purposes of the foregoing
    being computed using the discount rate of 7.5%, semiannually
    compounded, and discounting to the Settlement Date).

 

    In performing any such recalculation and in determining
    Lessor’s Net Economic Return, Lessor shall utilize the same
    methods, tax constraints and assumptions originally used to
    calculate the payments of Basic Rent, Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO Fixed
    Purchase Price with respect to the Basic Term set forth in the
    pro forma schedules on Schedule 1 hereto (other than the
    changes in Pricing Assumptions 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 this Lease could not be treated as a
    “disqualified leaseback” or “long term
    agreement” within the meaning of section 467 of the
    Code). On the Settlement Date, Lessor and Lessee shall execute
    and deliver a Lease Supplement containing such revised schedules
    and attaching a list of the Units subject thereto.

 

    (b) Post Settlement Adjustments.  In the
    event (A) any amount is paid by Lessee to Lessor pursuant
    to Section 5.5(i) or 5.5(iii) of the Tax Indemnity
    Agreement, or (B) Lessee elects to make payments to Lessor
    pursuant to Section 5.5(ii) of the Tax Indemnity Agreement,
    then, in each case, Lessor shall recalculate the payments or
    amounts, as the case may be, of Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO Fixed
    Purchase Price:

 

    (i) to preserve the Net Economic Return that Lessor would
    have realized 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, and

    

    3

 

 

    (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 for purposes of the foregoing
    being computed using the discount rate of 7.5%, semiannually
    compounded, and discounting to the Settlement Date).

 

    In performing any such recalculation and in determining
    Lessor’s Net Economic Return, Lessor shall utilize the same
    methods, tax constraints and assumptions originally used to
    calculate the payments of Basic Rent, Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO 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) and (B) 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 this Lease could not be treated as a
    “disqualified leaseback” or “long term
    agreement” within the meaning of section 467 of the
    Code).

 

    (c) Confirmation and Verification.  Upon
    completion of any recalculation described above in this
    Section 3.4 a duly authorized officer of Lessor shall
    provide a certificate to Lessee either (x) stating that the
    payments of Basic Rent, Stipulated Loss Values, Termination
    Values, EBO Fixed Purchase Price and FPO Fixed Purchase Price
    with respect to the Basic Term as are then set forth in this
    Lease do not require change, or (y) setting forth such
    adjustments to the payments of Basic Rent, Stipulated Loss
    Values, Termination Values, EBO Fixed Purchase Price or and FPO
    Fixed Purchase Price with respect to the Basic Term as have been
    calculated by Lessor in accordance with Section 3.4(b)
    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 3.4 shall be verified by a nationally recognized
    firm of independent accountants selected by Lessor and
    reasonably acceptable to Lessee and any such recalculation of
    such adjustment as so verified shall be binding on Lessee and
    Lessor. Such accounting firm shall be requested to make its
    determination within 30 days. Lessor 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 Lessor and the methods used by Lessor in the
    original calculation of, and any recalculation of, Basic Rent,
    Stipulated Loss Values, Termination Values, EBO Fixed Purchase
    Price and FPO 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 Lease. 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 Lessor pursuant to this
    Section 3.4(c) 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 a discount rate
    of 7.75% per annum, semiannually compounded, and
    discounting to the Settlement Date) to decline by 10 basis
    points or more from 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 a discount rate of 7.75% per annum, semiannually
    compounded, and discounting to the Settlement Date) certified by
    Lessor pursuant to this Section 3.4(c), or (2) any
    payment of Stipulated Loss Value, Termination Value, EBO Fixed
    Purchase Price or FPO Fixed Purchase Price is adjusted and such
    adjustment causes such Stipulated Loss Value, Termination Value,
    EBO Fixed Purchase Price or FPO Fixed Purchase Price to decline
    by 10 basis points or more from such Stipulated Loss Value,
    Termination Value, EBO Fixed Purchase Price or FPO Fixed
    Purchase Price certified by Lessor pursuant to this
    Section 3.4(c), in which case Lessor shall be responsible
    for the reasonable costs of such verification.

 

    (d) Invoices.  All invoices in respect of
    Transaction Costs shall be directed to Lessor at the address set
    forth in Section 20, with a copy to Lessee.

 

    Section 3.5.  Manner
    of Payments.  All Rent (other than Supplemental
    Rent payable to Persons other than Lessor, which shall be
    payable to such other Persons in accordance with written
    instructions furnished to

    

    4

 

    Lessee by such Persons, as otherwise provided in any of the
    Operative Agreements or as required by law) shall be paid by
    Lessee to Lessor at:

 

    Deutsche Bank Trust Company Americas

    ABA Number 021 001 033

    Account Name: GE Transportation Finance, Inc.

    Account Number
    50-276-558

    Reference: KCSM 2007

 

    All Rent shall be paid by Lessee in U.S. Dollars, which
    shall be immediately available to the recipient not later than
    12:00 noon (New York City time) on the date of such payment.

 

    Section 4.  Ownership
    and Marking of Equipment.

 

    Section 4.1.  Retention
    of Title.  Lessor shall and hereby does retain
    full legal title to and ownership of the Equipment
    notwithstanding the delivery of the Equipment to Lessee
    hereunder.

 

    Section 4.2.  Duty
    to Number and Mark Equipment.  On or before the
    applicable Delivery Date, Lessee shall cause each Unit to be
    numbered with the reporting mark shown on the Lease Supplement
    for such Unit dated the Settlement Date and, within 30 days
    of the Settlement Date and at all times thereafter, shall cause
    each Unit to be plainly, distinctly, permanently and
    conspicuously marked by a plate or stencil printed in
    contrasting colors upon each side of each Unit, in letters not
    less than one inch in height, a legend substantially as follows:

 

    “Subject
    to a Lease Agreement recorded

    with the Surface Transportation Board”

    or

    “Ownership subject to a Lease Agreement filed

    with the Surface Transportation Board”
    

 

    with appropriate changes thereof and additions thereto as from
    time to time may be required by law in order to protect
    Lessor’s right, title and interest in and to such Unit and
    its rights under this Lease. Except as provided hereinabove,
    Lessee will not place any such Units in operation or exercise
    any control or dominion over the same until the required legend
    shall have been so marked on both sides thereof, and will
    replace promptly any such word or words in such legend which may
    be removed, defaced, obliterated or destroyed. Lessee will not
    change the reporting mark of any Unit except in accordance with
    a statement of new reporting marks to be substituted therefor,
    which statement shall be delivered to Lessor by Lessee and a
    supplement to this Lease with respect to such new reporting
    marks shall be filed or recorded by Lessee in all public offices
    where this Lease shall have been filed or recorded, in each case
    promptly after a Responsible Officer of Lessee obtains actual
    knowledge of such change.

 

    Section 4.3.  Prohibition
    against Certain Designations.  Except as above
    provided, Lessee will not allow the name of any Person to be
    placed on any Unit as a designation that might reasonably be
    interpreted as a claim of ownership; provided however,
    that subject to the delivery of the statement specified in the
    last sentence of Section 4.2, Lessee may cause the
    Equipment to be lettered with the names or initials or other
    insignia customarily used by Lessee or any permitted sublessees
    or any of their respective Affiliates on railroad equipment used
    by it of the same or a similar type.

 

    Section 5.  Disclaimer
    of Warranties; Right of Quiet Enjoyment.

 

    Section 5.1.  Disclaimer
    of Warranties.  Without waiving any claim Lessee
    may have against any seller, supplier or manufacturer,
    Lessee acknowledges and
    agrees that, (i) each Unit is of a size, design, capacity
    and manufacture selected by and acceptable to Lessee,
    (ii) Lessee is satisfied that each Unit is suitable for its
    purposes, (iii) Lessor is not a manufacturer or a dealer in
    property of such kind, (iv) each Unit is leased hereunder
    subject to all applicable laws and governmental regulations now
    in effect or hereinafter adopted, and (v) Lessor leases and
    Lessee takes each Unit “as-is”, “where-is”
    and “with all faults”, and Lessee acknowledges that
    Lessor does not make nor shall be deemed to have made, and
    expressly disclaims,
    

    

    5

 

    any and all rights,
    claims, warranties or representations either express or implied,
    as to the value, condition, fitness for any particular purpose,
    design, operation, merchantability thereof or as to the title of
    the equipment, the quality of the material or workmanship
    thereof or conformity thereof to specifications, freedom from
    patent, copyright or trademark infringement, the absence of any
    latent or other defect, whether or not discoverable, or as to
    the absence of any obligations based on strict liability in tort
    or any other express or implied representation or warranty
    whatsoever with respect thereto, except that Lessor
    represents and warrants that on each Delivery Date, Lessor shall
    have received whatever title to the Equipment delivered under
    this Lease on such Delivery Date as was conveyed to Lessor by
    Lessee and each Unit will be free of Lessor’s Liens. During
    the Lease Term so long as no Event of Default shall have
    occurred and be continuing, Lessor hereby appoints and
    constitutes Lessee its agent and
    attorney-in-fact
    during the Lease Term to assert and enforce, from time to time,
    in the name and for the account of Lessor and Lessee, as their
    interests may appear, but in all cases at the sole cost and
    expense of Lessee, whatever claims and rights Lessor may have as
    owner of the Equipment against the manufacturers or any prior
    owner thereof.

 

    Section 5.2.  Quiet
    Enjoyment.  Each party to this Lease acknowledges
    notice of, and consents in all respects to, the terms of this
    Lease, and expressly, severally and as to its own actions only,
    agrees that, notwithstanding any other provision of any of the
    Operative Agreements, so long as no Event of Default has
    occurred and is continuing, it shall not take or cause to be
    taken any action inconsistent with Lessee’s rights under
    this Lease or otherwise through its own actions in any way
    interfere with or interrupt the quiet enjoyment of the use,
    operation and possession of any Unit by Lessee.

 

    Section 6.  Return
    of Equipment; Storage.

 

    Section 6.1.  General.  (a) If
    Lessee determines not to give a notice of its election to
    repurchase the Units pursuant to Section 23(a)(iii), Lessee
    shall give Lessor at least 90 days prior notice of its
    intention to return the Units at the expiration of the Term. On
    the expiration of the Lease Term with respect to any Unit which
    has not been purchased by Lessee, Lessee will, at its own cost
    and expense, deliver possession of such Unit to Lessor at not
    more than three interchange points on the tracks of Lessee or an
    Affiliate of Lessee in the 48 contiguous United States, f.o.b.
    such interchange point, as Lessor may reasonably designate to
    Lessee in writing at least 60 days before the end of the
    Lease Term or, in the absence of such designation, as Lessee may
    reasonably select or, if Lessor has requested storage pursuant
    to Section 6.3, to the location determined in accordance
    with Section 6.3. Upon expiration of the Lease Term with
    respect to such Unit, compliance with the terms hereof and
    tender of such Unit at the location determined in accordance
    with this Section 6.1(a), this Lease and the obligation to
    pay Basic Rent and all other Rent for such Unit accruing
    subsequent to such expiration (except for Supplemental Rent
    obligations with respect to such Unit surviving pursuant to
    Section 21 hereof or the Tax Indemnity Agreement or which
    have otherwise accrued but not been paid as of the date of the
    expiration of the Lease Term) shall terminate.

 

    (b) In the event any Unit is not returned as hereinabove
    provided upon the scheduled expiration of the Lease Term with
    respect to such Unit, Lessee may retain custody and control of
    such Unit so long as Lessee is attempting to remedy any
    condition delaying such return, and in any case the covenants of
    Lessee (other than with respect to Basic Rent) under this Lease
    (including those pertaining to indemnities, Liens, maintenance
    and insurance) shall continue with respect to such Unit until
    such return of such Unit and, regardless of whether such delay
    shall be attributable to Lessee or any permitted sublessee,
    Lessee shall pay to Lessor, for each day from and after the
    scheduled expiration of this Lease, Basic Rent in an amount
    equal to the greater of the Fair Market Rental Value of such
    Unit and the daily equivalent of the arithmetic average of the
    Basic Rent payable during the Basic Term for such Unit.

 

    (c) In the event any Unit is not returned as hereinabove
    provided within 90 days after the expiration of the Lease
    Term with respect to such Unit, Lessee may retain custody and
    control of such Unit so long as Lessee is attempting to remedy
    any condition delaying such return, and in any case the
    covenants of Lessee (other than with respect to Basic Rent)
    under this Lease (including those pertaining to indemnities,
    Liens, maintenance and insurance) shall continue with respect to
    such Unit until such return of such Unit and, regardless of
    whether such delay shall be attributable to Lessee or any
    permitted sublessee, Lessee shall pay to Lessor, for each day
    from and after the expiration of such
    90-day
    period, Basic Rent in an amount equal to the

    

    6

 

    greater of the Fair Market Rental Value of such Unit and 150% of
    the daily equivalent of the arithmetic average of the Basic Rent
    payable during the Basic Term.

 

    (d) In the event any Unit is not returned as hereinabove
    provided within 180 days after the expiration of the Lease
    Term with respect to such Unit, Lessee may retain custody and
    control of such Unit so long as Lessee is attempting to remedy
    any condition delaying such return, and in any case the
    covenants of Lessee (other than with respect to Basic Rent)
    under this Lease (including those pertaining to indemnities,
    Liens, maintenance and insurance) shall continue with respect to
    such Unit until such return of such Unit and, regardless of
    whether such delay shall be attributable to Lessee or any
    permitted sublessee, Lessor may, at its option, upon notice to
    Lessee on any Business Day after the expiration of such
    180-day
    period deem such failure to return such Unit to be an Event of
    Loss, whereupon the provisions of Sections 11.2, 11.3 and
    11.4 shall apply to such Unit.

 

    (e) The provision for payment pursuant to
    Section 6.1(b) and Section 6.1(c) above shall not be
    in abrogation of Lessor’s right under Section 6.1(a)
    to have such Unit returned to it hereunder or prevent Lessor
    from exercising any other remedies set forth herein.

 

    Section 6.2.  Condition
    of Equipment.  Each Unit when returned to Lessor
    pursuant to Section 6.1(a) shall (i) be in the
    condition required by Sections 8.1 and 9.3, (ii) be
    capable of performing the functions for which it was designed
    covered by Section 8.1 and (iii) be free and clear of
    all Liens except Lessor’s Liens and Permitted Liens,
    provided that Lessee agrees to promptly discharge any
    such Permitted Lien upon return of the Unit with Lessor’s
    sole remedy for any breach of this clause (iii) being
    damages at law or specific performance at equity. To the extent
    that any maintenance or overhaul logs are kept by Lessee with
    respect to any Unit returned pursuant to Section 6.1 and
    such maintenance logs are customarily made available to the
    purchaser of equipment of a type similar to such Unit, upon the
    request of Lessor and at Lessee’s expense, such maintenance
    and overhaul logs shall be made available to Lessor or its
    designee upon the return of such Unit. Except as expressly
    provided in this Section 6.2, there will be no further
    requirements imposed upon Lessee with respect to the condition
    of any Unit upon its return in accordance with the provisions of
    Section 6.1 hereof and this Section 6.2.

 

    Section 6.3.  Storage.  Upon
    the expiration of the Lease Term with respect to each Unit, upon
    written request of Lessor received at least 60 days prior
    to the end of the Lease Term with respect to such Unit, Lessee
    shall permit Lessor to store each such Unit, free of charge,
    except as provided below, at such location on the tracks of
    Lessee used by Lessee for the storage of surplus rolling stock
    or locomotives or rolling stock or locomotives available for
    sale as shall be reasonably designated by Lessor (taking into
    account, among other things, Lessee’s storage capacity,
    security and access) in its request for storage pursuant to this
    Section 6.3 for a period (the “Storage
    Period”) beginning on the expiration of the Lease Term
    and ending not more than 60 days after the later of the
    expiration of the Lease Term with respect to such Units or the
    date on which 65% of all Units to be returned at the expiration
    of the Lease Term have been returned. Any storage facilities
    provided by Lessee pursuant to this Section 6.3 shall, in
    all cases, be at the cost to Lessor of insurance and
    Lessee’s
    out-of-pocket
    costs in connection with providing any services not contemplated
    hereby to be provided during the Storage Period and at the risk
    of Lessor, including but not limited to any deterioration of any
    Unit caused by moisture or any weather-related cost to the
    extent such cost arises during such period of storage and not as
    a result of Lessee’s violation of its obligations under
    this Lease (except, with respect to any injury to, or death of,
    any person exercising, either on behalf of Lessor or any
    prospective purchaser or user, the inspection rights granted
    pursuant to this Section 6.3, Lessee’s gross
    negligence or willful misconduct). With respect to the Units
    stored pursuant hereto, Lessee will carry and maintain with
    respect to stored Units, during the Storage Period, under
    Lessee’s insurance policies, property damage insurance and
    public liability insurance with respect to third party personal
    and property damage as Lessee then maintains in respect of
    equipment owned or leased by it similar in type to the
    Equipment; provided that (i) Lessor pays all
    incremental costs associated with such insurance coverage,
    (ii) such insurance coverage does not negatively impact
    upon Lessee’s loss insurance rating and (iii) any
    coverage provided is above Lessee’s deductibles or
    self-insurance retention amounts. On not more than one occasion
    with respect to each stored Unit and upon not less than
    15 days’ prior written notice from Lessor to Lessee,
    Lessee will, during the Storage Period, transport such Units, in
    groups of not fewer than five (5), at Lessee’s cost and
    expense, to an

    

    7

 

    interchange point, f.o.b., such interchange point, on the lines
    of Lessee or an Affiliate of Lessee in the 48 contiguous United
    States reasonably specified by Lessor, whereupon Lessee shall
    have no further liability or obligation with respect to such
    Units. During the Storage Period, Lessee will permit Lessor or
    any person designated by it, including the authorized
    representative or representatives of any prospective purchaser
    or user of such Unit, to inspect the same; provided,
    however, that such inspection shall not interfere with the
    normal conduct of Lessee’s business and such person shall
    be insured to the reasonable satisfaction of Lessee with respect
    to any risks incurred in connection with any such inspections
    and Lessee (except in the case of Lessee’s gross negligence
    or willful misconduct) shall not be liable for any injury to, or
    the death of, any person exercising, either on behalf of Lessor
    or any prospective purchaser or user, the rights of inspection
    granted pursuant hereto. Lessee shall not be required to store
    the Equipment after the Storage Period. If Lessee stores any
    Unit after the Storage Period, such storage shall be at the sole
    expense and risk of Lessor.

 

    Section 6.4.  Termination
    of Lease.  Upon the later of (i) expiration
    of the Lease Term with respect to such Unit and payment of all
    sums due hereunder, (ii) tender of such Unit at the
    location determined in accordance with Section 6.1(a) or,
    as applicable, the tender of such Unit for storage in accordance
    with Section 6.3, and (iii) compliance by such Unit
    with Section 6.2, this Lease and the obligation to pay Rent
    (except for Supplemental Rent obligations surviving pursuant to
    Section 21 hereof) for such Unit accruing subsequent to the
    expiration of the Lease Term with respect to such Unit shall
    terminate.

 

    Section 7.  Liens.

 

    Section 7.1.  Lessee
    Liens.  Lessee will not directly or indirectly
    create, incur, assume or suffer to exist any Lien on or with
    respect to any Units or Lessee’s leasehold interest therein
    under this Lease, except Permitted Liens, and Lessee shall
    promptly, at its own expense, take such action as may be
    necessary to duly discharge (by bonding or otherwise) any such
    Lien not excepted above if the same shall arise at any time.

 

    Section 7.2.  Lessor
    Liens.  Lessor will not directly or indirectly
    create, incur, assume or suffer to exist any Lessor’s Lien
    on or with respect to any Units or Lessor’s interest
    therein, and Lessor shall promptly, at its own expense, take
    such action as may be necessary to duly discharge (by bonding or
    otherwise) any such Lessor’s Lien if the same shall arise
    at any time.

 

    Section 8.  Maintenance;
    Operation; Sublease.

 

    Section 8.1.  Maintenance.  Lessee,
    at its own cost and expense, shall service, maintain, repair and
    keep each Unit (i) in good repair and operating condition,
    ordinary wear and tear excepted, (ii) in accordance with
    (a) prudent Class I railroad industry maintenance
    practices in existence from time to time and
    (b) manufacturer’s recommendations to the extent
    required to maintain such manufacturer’s warranties in
    effect with respect to such Unit, (iii) in a manner
    consistent with service, maintenance, overhaul and repair
    practices used by Lessee in respect of equipment owned or leased
    by Lessee similar in type to such Unit and without
    discrimination between owned and leased equipment and
    (iv) in compliance, in all material respects, with all
    applicable laws and regulations, including any applicable AAR
    Mechanical Standards and Federal Railroad Administration
    regulations as applicable to continued use by Lessee;
    provided, however, that Lessee may, in good faith and by
    appropriate proceedings diligently conducted, contest the
    validity or application of any such law, regulation, requirement
    or rule in any reasonable manner which does not materially
    adversely affect the rights or interests of Lessor in the
    Equipment or hereunder or otherwise expose Lessor to criminal
    sanctions or release Lessee from the obligation to return the
    Equipment in compliance with the provisions of Section 6.2.

 

    Section 8.2.  Operation.  Lessee
    shall be entitled to the possession of the Equipment and to the
    use of the Equipment by it or any Affiliate in the general
    operation of Lessee’s or any such Affiliate’s freight
    rail business upon lines of railroad owned or operated by it or
    any such Affiliate, upon lines of railroad over which Lessee or
    any such Affiliate has trackage or other operating rights or
    over which railroad equipment of Lessee or any such Affiliate is
    regularly operated pursuant to contract and on railroad lines of
    other railroads (including in connection with barge-related rail
    transportation) in Mexico, the United States and Canada, in the
    usual interchange of traffic or in through or run-through
    service and shall be entitled to permit the use of the Equipment
    upon lines of railroad of connecting and other carriers in the
    usual interchange of traffic or pursuant to through or
    run-through agreements; provided Lessee shall use the
    Equipment only for the purpose

    

    8

 

    and in the manner for which it was designed and intended and in
    compliance, in all material respects, with all laws, regulations
    and guidelines of any governmental body, the Association of
    American Railroads, the Federal Railroad Administration and the
    Surface Transportation Board and their successors and assigns.
    Nothing in this Section 8.2 shall be deemed to constitute
    permission by Lessor to any Person that acquires possession of
    any Unit to take any action inconsistent with the terms and
    provisions of this Lease and any of the other Operative
    Agreements. The rights of any person that acquires possession of
    any Unit pursuant to this Section 8.2 shall be subject and
    subordinate to the rights of Lessor hereunder.

 

    Section 8.3.  Sublease.  So
    long as no Specified Default or Event of Default shall have
    occurred and be continuing and subject to Lessor’s prior
    written consent to any sublease for a term in excess of one year
    to a
    non-Class I
    railroad, Lessee shall have the right, without the prior written
    consent of Lessor, to sublease any Unit to or permit its use by
    a user organized under the federal laws or the laws of any state
    of Mexico, incorporated under the federal laws or the laws of
    any state of the United States or organized under the federal
    laws or the laws of any province of Canada, for use by such
    sublessee or user upon lines of railroad owned or operated by
    Lessee, any Affiliate of Lessee, such sublessee or user or by a
    railroad company or companies organized under the federal laws
    or the laws of any state of Mexico, incorporated under the
    federal laws or laws of any state of the United States or
    organized under the federal laws or the laws of any province in
    Canada, over which Lessee, such Affiliate of Lessee, such
    sublessee or user or such railroad company or companies has
    trackage or other operating rights, and upon lines of railroad
    of connecting and other carriers in the usual interchange of
    traffic or pursuant to through or run-through service
    agreements; provided such sublessee shall not, at the
    time of such sublease, be insolvent or subject to insolvency or
    bankruptcy proceedings. Each sublease shall be subject and
    subordinate to this Lease (including the duration of the
    sublease term, which term may not expire after the expiration of
    the Basic Term) and no such sublease shall contain a purchase
    option. No sublease shall in any way discharge or diminish any
    of Lessee’s obligations hereunder, and Lessee shall remain
    primarily liable hereunder for the performance of all the terms,
    conditions and provisions of this Lease and the other Lessee
    Agreements to the same extent as if such sublease had not been
    entered into. Nothing in this Section 8.3 shall be deemed
    to constitute permission to any Person in possession of any Unit
    pursuant to any such sublease to take any action inconsistent
    with the terms and provisions of this Lease or any of the other
    Operative Agreements.

 

    Section 9.  Modifications.
    

 

    Section 9.1.  Required
    Modifications.  In the event the Association of
    American Railroads, the United States Department of
    Transportation, or any other Mexican, United States or Canadian
    federal, state or local governmental authority having
    jurisdiction over the operation, safety or use of any Unit
    requires that such Unit be altered, replaced or modified (a
    “Required Modification”), Lessee agrees to make
    such Required Modification at its own expense; provided,
    however, that Lessee may, in good faith and by appropriate
    proceedings diligently conducted, contest the validity or
    application of any such law, regulation, requirement or rule in
    any reasonable manner which does not materially adversely affect
    the rights or interests of Lessor in the Equipment or hereunder
    or otherwise expose Lessor to criminal sanctions or relieve
    Lessee of the obligation to return the Equipment in compliance
    with the provisions of Section 6.2. Subject to
    Section 9.3, title to any Required Modification shall
    immediately vest in Lessor. Notwithstanding anything herein to
    the contrary, if Lessee determines in good faith that any
    Required Modification to a Unit would be economically
    impractical, it shall provide written notice of such
    determination to Lessor and the parties hereto shall treat such
    Unit as if an Event of Loss had occurred as of the date of such
    written notice with respect to such Unit and the provisions of
    Sections 11.2, 11.3 and 11.4 with respect to rent,
    termination and disposition shall apply with respect to such
    Unit unless Lessor, within 15 Business Days of such notice,
    elects to retain such Unit pursuant to Section 9.4.

 

    Section 9.2.  Optional
    Modifications.  Lessee at any time may modify,
    alter or improve any Unit (a “Modification”);
    provided that no Modification shall diminish in more than
    a de minimis respect the current fair market value,
    utility, expected residual value or remaining useful life of
    such Unit below the current fair market value, utility, expected
    residual value or remaining useful life thereof immediately
    prior to such Modification, assuming such Unit was then in the
    condition required to be maintained by the terms of this Lease.
    Title to any Non-Severable Modifications shall be immediately
    vested in Lessor. Title to any Severable

    

    9

 

    Modifications shall remain with Lessee. If Lessee shall at its
    cost cause such Severable Modifications to be made to any Unit
    and such Severable Modifications are reasonably necessary for
    the economic operation of any such Unit, Lessor shall have the
    right, prior to the return of such Unit to Lessor hereunder, to
    purchase such Severable Modifications (other than Severable
    Modifications consisting of proprietary or communications
    equipment) at their then Fair Market Sales Value (taking into
    account their actual condition). If Lessor does not elect to
    purchase such Severable Modifications, Lessee may remove, and
    shall remove if requested by Lessor, such Severable
    Modifications at Lessee’s cost and expense.

 

    Section 9.3.  Removal
    of Proprietary and Communications
    Equipment.  Notwithstanding anything to the
    contrary contained herein, Lessee shall at all times own and be
    entitled to remove at Lessee’s cost and expense, any
    Severable Modification consisting of proprietary or
    communications equipment from any Unit prior to the return of
    such Unit; provided that if Lessee removes such Severable
    Modification that is (i) a Required Modification and
    (ii) such equipment is not customarily provided by the
    user, Lessee shall replace such proprietary or communications
    equipment with non-proprietary equipment of comparable utility.

 

    Section 9.4.  Retention
    of Equipment by Lessor.  Notwithstanding the
    provisions of the last sentence of Section 9.1, Lessor may
    irrevocably elect by written notice to Lessee, no later than 15
    Business Days after receipt of Lessee’s notice of
    determination of economic impracticality pursuant to
    Section 9.1, not to declare an Event of Loss as provided in
    Section 9.1, whereupon Lessee shall not be liable for the
    Stipulated Loss Value for the affected Units but shall
    (i) deliver the affected Units to Lessor in the same manner
    and in the same condition as if delivery were made pursuant to
    Section 6 (except that Lessee shall not be required to
    correct the conditions which gave rise to the notice of economic
    impracticality), treating the applicable date for payment
    specified in Section 11.2(ii) as the termination date of
    the Lease Term with respect to the affected Units, and
    (ii) pay to Lessor, or to the Persons entitled thereto, all
    Basic Rent and Supplemental Rent due and owing on such
    termination date and unpaid and the Underpayment of Basic Rent
    for such Units as of such termination date. On such termination
    date, if Lessee shall have paid all amounts due hereunder,
    Lessor shall pay to Lessee the Overpayment of Basic Rent for
    such Units as of such termination date. If Lessor shall fail to
    perform any of its obligations pursuant to this Section 9.4
    on the scheduled termination date for any affected Unit, the
    parties hereto shall treat such Unit as if an Event of Loss had
    occurred as of the date of Lessee’s written notice with
    respect to such Unit pursuant to Section 9.1 and the
    provisions of Sections 11.2, 11.3 and 11.4 with respect to
    rent, termination and disposition shall apply with respect to
    such Unit and Lessor shall thereafter no longer be entitled to
    exercise its election to retain such affected Units.

 

    Section 10.  Voluntary
    Termination.

 

    Section 10.1.  Right
    of Termination.  So long as no Specified Default
    or Event of Default shall have occurred and be continuing, if
    Lessee determines in good faith (as evidenced by a certificate
    executed by the Chief Financial Officer of Lessee), either
    (x) that the Units have become obsolete or surplus to
    Lessee’s requirements or (z) that a Section 10
    Change in Tax Law has occurred and as a result thereof, Lessee
    is subject either (A) to a new or increased indemnity
    obligation to Lessor with respect to Mexican Taxes (which
    indemnity Lessor has not waived in writing) or (B) Lessee
    is subject to a new or increased Mexican Tax with respect to the
    transactions contemplated by this Lease and the net present
    value of such new or increased indemnity obligation or Taxes
    from and after the Termination Date for the remainder of the
    Lease Term, is greater than 5% of the net present value of the
    Basic Rent for the remainder of the Lease Term, in each case
    discounted at the Discount Rate, Lessee shall have the right
    with respect to, at the sole discretion of Lessee, all but not
    less than all of the Equipment in the case of obsolescence or
    any such tax law change and with respect to lots of one
    (1) or more Units in the case of surplusage (the
    “Terminated Units”), at its option at any time
    or from time to time on or after the fifth anniversary of the
    Settlement Date in the case of obsolescence or surplusage and at
    any time or from time to time in the case of any such tax law
    change, to terminate this Lease with respect to the Terminated
    Units by delivering at least 120 days’ prior notice to
    Lessor specifying a proposed date of termination for such Units
    (the “Termination Date”), which date shall be a
    Determination Date, any such termination to be effective on the
    Termination Date. Except as expressly provided herein, there
    will be no conditions to Lessee’s right to terminate this
    Lease with respect to the Terminated Units pursuant to this
    Section 10.1. So long as Lessor shall not have given Lessee
    a notice of election to retain the Terminated Units in
    accordance with Section 10.3, Lessee may withdraw the
    termination notice referred to above at any

    

    10

 

    time prior to the 20th day preceding the scheduled
    Termination Date, whereupon this Lease shall continue in full
    force and effect; provided that (i) Lessee shall pay
    all reasonable costs of Lessor incurred in connection with any
    proposed or withdrawn termination and (ii) Lessee may not
    withdraw a notice hereunder more than two times.

 

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

 

    Section 10.3.  Retention
    of Equipment by Lessor.  Notwithstanding the
    provisions of Sections 10.1 and 10.2, Lessor may
    irrevocably elect by written notice to Lessee, no later than
    30 days after receipt of Lessee’s notice of
    termination, not to sell the Terminated Units on the Termination
    Date, whereupon Lessee shall (i) deliver the Terminated
    Units to Lessor in the same manner and condition as if delivery
    were made to Lessor pursuant to Section 6, treating the
    Termination Date as the termination date of the Lease Term with
    respect to the Terminated Units, and (ii) pay to Lessor, or
    to the Persons entitled thereto, all Basic Rent and Supplemental
    Rent due and owing on the Termination Date and unpaid, and the
    Underpayment of Basic Rent for such Units as of such Termination
    Date. On such Termination Date, if Lessee shall have paid all
    amounts due hereunder, Lessor shall pay to Lessee the
    Overpayment of Basic Rent for such Units as of such Termination
    Date. If Lessor shall fail to perform any of its obligations
    pursuant to this Section 10.3 and as a result thereof this
    Lease shall not be terminated with respect to the Terminated
    Units on a proposed Termination Date, Lessor shall thereafter no
    longer be entitled to exercise its election to retain such
    Terminated Units and Lessee may at its option at any time
    thereafter submit a new termination notice pursuant to
    Section 10.1 with respect to such Terminated Units
    specifying a proposed Termination Date occurring not earlier
    than five Business Days from the date of such notice.

    

    11

 

 

    Section 10.4.  Termination
    of Lease.  In the event of any such sale and
    receipt by Lessor of all of the amounts provided herein, and
    upon compliance by Lessee with the other provisions of this
    Section 10, the Lease Term for the Terminated Units shall
    end and the obligation to pay Basic Rent and all other Rent for
    such Terminated Units (except for Supplemental Rent obligations
    with respect to such Terminated Units surviving pursuant to
    Section 21 hereof or the Tax Indemnity Agreement or which
    have otherwise accrued but not been paid as of the date of the
    expiration of the Lease Term) shall terminate.

 

    Section 11.  Loss,
    Destruction, Requisition, Etc.

 

    Section 11.1.  Event
    of Loss.  In the event that any Unit
    (i) shall suffer destruction, damage, contamination or wear
    which, in Lessee’s good faith opinion, makes repair
    uneconomic or renders such Unit unfit for commercial use,
    (ii) shall suffer theft or disappearance, (iii) shall
    be permanently returned to the manufacturer pursuant to any
    warranty or patent indemnity provisions, (iv) shall have
    title thereto taken or appropriated by any governmental
    authority under the power of eminent domain or otherwise,
    (v) shall be taken or requisitioned for use by any
    governmental authority (other than the United States government
    or any agency or instrumentality thereof) under the power of
    eminent domain or otherwise and such taking or requisition is
    continuing in excess of 180 days or, if earlier, on the
    last day of the Basic Term, or (vi) shall be taken or
    requisitioned for use by the United States government or any
    agency or instrumentality thereof and such taking or requisition
    is continuing on the last day of the Basic Term (any such
    occurrence being hereinafter called an “Event of
    Loss”), Lessee, in accordance with the terms of
    Section 11.2, shall promptly and fully inform Lessor of
    such Event of Loss.

 

    Section 11.2.  Replacement
    or Payment upon Event of Loss.  Upon the
    occurrence of an Event of Loss or the deemed occurrence of an
    Event of Loss pursuant to Section 9.1 or Section 9.4
    with respect to any Unit, Lessee shall within 60 days after
    a Responsible Officer of Lessee shall have actual knowledge of
    such occurrence or deemed occurrence give Lessor notice of such
    occurrence or deemed occurrence of such Event of Loss and of its
    election to perform one of the following options (it being
    agreed that if Lessee shall not have given notice of such
    election within such 60 days after such actual knowledge of
    such occurrence or deemed occurrence, Lessee shall be deemed to
    have elected to perform the option set forth in the following
    paragraph (ii)):

 

    (i) So long as no Specified Default or Event of Default
    shall have occurred and be continuing, as promptly as
    practicable, and in any event on or before the Business Day next
    preceding the 91st day next following the date on which a
    Responsible Officer of Lessee shall have actual knowledge of the
    occurrence or deemed occurrence of such Event of Loss, Lessee
    shall comply with Section 11.4(b) and shall convey or cause
    to be conveyed to Lessor a Replacement Unit to be leased to
    Lessee hereunder, such Replacement Unit to be free and clear of
    all Liens (other than Permitted Liens) and to have a current
    fair market value, utility, expected residual value and
    remaining useful life at least equal to the Unit so replaced
    (assuming such Unit was in the condition required to be
    maintained by the terms of this Lease); provided that, if
    Lessee shall not perform its obligation to effect such
    replacement under this paragraph (i) during the period
    of time provided herein, then Lessee shall pay on a
    Determination Date selected by Lessee that is within
    20 days after the end of such period to Lessor, or in the
    case of Supplemental Rent, to the Person entitled thereto, the
    amounts specified in paragraph (ii) below; or

 

    (ii) on or before the next succeeding Rent Payment Date
    that is at least 30 days after the date of notice of such
    Event of Loss or deemed Event of Loss or on the date specified
    in the proviso to paragraph (i) above, Lessee shall
    pay or cause to be paid on the applicable Determination Date to
    Lessor or, in the case of Supplemental Rent, to the Persons
    entitled thereto, in funds of the type specified in
    Section 3.5, (A) an amount equal to the Stipulated
    Loss Value of each such Unit determined as of such Determination
    Date, (B) all unpaid Basic Rent with respect to each such
    Unit due on or prior to such Determination Date and (C) in
    the case of a deemed Event of Loss pursuant to Section 9.1
    or the last sentence of Section 9.4, Breakage, if any, with
    respect to each such Unit and (D) without duplication, all
    other Rent (other than Basic Rent) then due and payable
    hereunder, it being understood that until such Stipulated Loss
    Value is paid, there shall be no abatement or reduction of Basic
    Rent.

    

    12

 

 

    Section 11.3.  Rent
    Termination.  Upon the payment of all sums
    required to be paid pursuant to Section 11.2(ii) hereof in
    respect of any Unit or Units for which Lessee has elected to pay
    or deemed to have elected to pay pursuant to the proviso to
    Section 11.2(i) the amounts specified in
    paragraph 11.2(ii), the Lease Term with respect to such
    Unit or Units and the obligation to pay Rent for such Unit or
    Units (except for Supplemental Rent obligations with respect to
    such Unit or Units surviving pursuant to Section 21 hereof
    or the Tax Indemnity Agreement or which have otherwise accrued
    but not been paid as of the date of the expiration of the Lease
    Term) shall terminate; provided that Lessee shall be
    obligated to pay all Rent in respect of such Unit or Units which
    has accrued up to and including the date of payment of
    Stipulated Loss Value pursuant to Section 11.2.

 

    Section 11.4.  Disposition
    of Equipment; Replacement of Unit.  (a) Upon
    the payment of all sums required to be paid pursuant to
    Section 11.2 in respect of any Unit or Units, Lessor will
    convey to Lessee or its designee all right, title and interest
    of Lessor in and to such Unit or Units, “as is”,
    “where is”, without recourse or warranty, except for a
    warranty against Lessor’s Liens, and shall execute and
    deliver to Lessee or its designee such bills of sale and other
    documents and instruments as Lessee or its designee may
    reasonably request to evidence such conveyance. As to each
    separate Unit so disposed of, Lessee or its designee shall be
    entitled to any amounts arising from such disposition, plus any
    awards, insurance (other than insurance maintained by Lessor for
    its own account in accordance with Section 12.3) or other
    proceeds and damages (including any Association of American
    Railroads interline settlement paid upon an Event of Loss)
    received by Lessee or Lessor by reason of such Event of Loss
    after having paid the Stipulated Loss Value attributable
    thereto; provided that any proceeds from condemnation
    awards in excess of the applicable Stipulated Loss Value shall
    be divided between Lessor and Lessee as their interests appear.

 

    (b) At the time of or prior to any replacement of any Unit,
    Lessee, at its own expense, shall (A) furnish Lessor with a
    full warranty bill of sale and an assignment of warranties with
    respect to the Replacement Unit, (B) cause a Lease
    Supplement substantially in the form of Exhibit C hereto,
    subjecting such Replacement Unit to this Lease, duly executed by
    Lessee, to be delivered to Lessor for execution and, upon such
    execution, to be filed for recordation in the same manner as
    provided for in the original Lease Supplement in
    Section 16.1, (C) furnish Lessor with an opinion of
    Lessee’s counsel (which may be Lessee’s internal
    counsel), to the effect that (w) Lessor shall be entitled
    to the benefits of Section 1168 of the Bankruptcy Code in
    respect of such Replacement Unit to the same extent that Lessor
    would have been entitled to such benefits in respect of the Unit
    being replaced in the event of any bankruptcy proceedings of
    Lessee filed under the U.S. Bankruptcy Code, (x) the
    bill of sale referred to in clause (A) above
    constitutes an effective instrument for the conveyance of title
    to the Replacement Unit to Lessor, (y) good and marketable
    title to the Replacement Unit has been delivered to Lessor, free
    and clear of all Liens (other than Permitted Liens), and
    (z) all filings, recordings and other action necessary or
    appropriate to perfect and protect Lessor’s interests in
    the Replacement Unit have been accomplished, (D) furnish
    Lessor with a certificate of a qualified engineer (who may be a
    mechanical officer of Lessee) certifying that the Replacement
    Unit has a fair market value, estimated residual value, utility
    and remaining useful life at least equal to the Unit so replaced
    (assuming such Unit was in the condition required to be
    maintained by the terms of this Lease) and
    (E) (x) furnish Lessor with an opinion of independent
    tax counsel selected by Lessor and reasonably acceptable to
    Lessee to the effect that such replacement will not result in
    any adverse tax consequences to Lessor, or (y) furnish
    Lessor with an opinion of such tax counsel to the effect that
    such replacement should not result in any adverse tax
    consequences to Lessor and enter into an agreement in form and
    substance satisfactory to Lessor to indemnify Lessor against any
    adverse tax consequences resulting from such replacement. For
    all purposes hereof, upon passage of title thereto to Lessor,
    the Replacement Unit shall be deemed part of the property leased
    hereunder and the Replacement Unit shall be deemed a
    “Unit” of Equipment as defined herein. Upon such
    passage of title, Lessor will transfer to Lessee, without
    recourse or warranty (except as to Lessor’s Liens), all
    Lessor’s right, title and interest in and to the replaced
    Unit.

 

    Section 11.5.  Eminent
    Domain.  In the event that during the Lease Term
    the use of any Unit is requisitioned or taken by any
    governmental authority under the power of eminent domain or
    otherwise for a period which does not constitute an Event of
    Loss, Lessee’s obligation to pay all installments of Basic
    Rent shall continue for the duration of such requisitioning or
    taking. Lessee shall be entitled to receive and retain

    

    13

 

    for its own account all sums payable for any such period by such
    governmental authority as compensation for requisition or taking
    of possession. Any amount referred to in this Section 11.5
    which is payable to Lessee shall not be paid to Lessee, or if it
    has been previously paid directly to Lessee, shall not be
    retained by Lessee, if at the time of such payment a Specified
    Default or an Event of Default shall have occurred and be
    continuing, but shall be paid to and held by Lessor as security
    for the obligations of Lessee under this Lease, and upon the
    earlier of (i) 200 days after Lessor shall have
    received such amount provided Lessor has not proceeded to
    exercise remedies under Section 15 and (ii) such time
    as there shall not be continuing any Specified Default or Event
    of Default, such amount shall be paid to Lessee.

 

    Section 12.  Insurance.

 

    Section 12.1.  Property
    Damage and Public Liability Insurance.

 

    (a) Coverages.  Lessee will, at all times
    prior to the return of the Units to Lessor, at its own expense,
    cause to be carried and maintained all risk property insurance
    in respect of the Units in an amount not less than $10,000,000
    and public liability insurance against loss or damage for
    personal injury, death or property damage suffered upon, in or
    about any premises occupied by Lessee or occurring as a result
    of the use, maintenance or operation of the Units in an amount
    not less than $25,000,000 and against such risks, with such
    insurance companies and with such terms (including co-insurance,
    deductibles, limits of liability and loss payment provisions) as
    are customary under Lessee’s risk management program;
    provided, however, that Lessee may self insure
    and/or
    provide for deductibles with respect to any or all of the above
    risks if customary under such risk management program;
    provided further that so long as Lessee maintains its own
    property insurance described herein separate from its United
    States Affiliates, such self-insurance and deductibles shall not
    exceed $3,000,000 per occurrence so long as purchased
    third-party property insurance is available at commercially
    reasonable rates and in no event shall such self-insurance or
    deductibles be greater than what is customary for Class I
    railroads generally. Notwithstanding the foregoing, all
    insurance coverages (including, without limitation,
    self-insurance) with respect to the Units required under this
    Lease shall be comparable to, and no less favorable than,
    insurance coverages applicable to equipment owned or leased by
    Lessee which is comparable to the Units. Lessee shall, at its
    own expense, be entitled to make all proofs of loss and take all
    other steps necessary to collect the proceeds of such insurance.

 

    (b) Certificate of Insurance.  Lessee
    shall, on or prior to the Closing Date, furnish Lessor with a
    certificate of insurance signed by the insurer or an independent
    insurance broker showing the insurance then maintained as
    required by Section 12.1(a) above, up to $100,000,000, if
    any, with respect to the Units. Lessor may, but not more than
    once in any twelve-month period, request from Lessee and Lessee
    shall promptly thereafter furnish to Lessor, a certificate of
    insurance signed by an independent insurance broker, setting
    forth all insurance maintained by Lessee pursuant to
    Section 12.1(a) above and describing such policies up to
    $100,000,000, if any, including the amounts of coverage, any
    deductible amounts and the names of the insurance providers.
    Such public liability insurance and all risk property insurance
    shall name Lessor as an additional insured with respect to such
    insurance then maintained as its interest may appear. Lessee
    agrees that such insurer or such broker will endeavor to provide
    written notice to Lessor at least 30 days prior to the
    cancellation or lapse of any insurance required to be maintained
    by Lessee in accordance with Section 12.1(a) above, and
    Lessee shall, if Lessor shall not have received such notice from
    such insurer or broker, promptly forward to Lessor any such
    notice received by Lessee from such insurer or broker. Any
    insurance maintained pursuant to this Section 12 shall
    (i) provide insurer’s waiver of its right of
    subrogation, set-off or counterclaim or any other deduction,
    whether by attachment or otherwise, in respect of any liability
    against any additional insured except for claims as shall arise
    from the willful misconduct or gross negligence of such
    additional insured, (ii) to the extent commercially
    available, provide that such all risk property insurance as to
    the interest of Lessor shall not be invalidated by any action or
    inaction of Lessee or any other Person (other than such
    claimant), regardless of any breach or violation of any
    warranty, declaration or condition contained in such policies by
    Lessee or any other Person (other than such claimant), and
    (iii) provide that all such insurance is primary without
    right of contribution from any other insurance which might
    otherwise be maintained by Lessor and shall expressly provide a
    severability of interest clause. Any insurance maintained by
    Lessor shall not be considered co-insurance with any insurance
    maintained by Lessee.

    

    14

 

 

    Section 12.2.  Proceeds
    of Insurance.  The entire proceeds of any property
    insurance purchased by Lessee (including any Association of
    American Railroads interline settlements) received by Lessor
    shall be promptly paid over to, and retained by, Lessee;
    provided, however, if an Event of Default shall
    have occurred and be continuing, such proceeds shall be paid
    over to Lessor to be held as security for Lessee’s
    obligations hereunder and under the other Operative Agreements.

 

    Section 12.3.  Additional
    Insurance.  At any time Lessor may at its own
    expense carry insurance with respect to its interest in the
    Units, provided that such insurance does not interfere
    with Lessee’s ability to insure the Units as required by
    this Section 12 or adversely affect Lessee’s insurance
    or the cost thereof, it being understood that all salvage rights
    to each Unit and all primary subrogation rights shall remain
    with Lessee’s insurers at all times. Any insurance payments
    received from policies maintained by Lessor pursuant to the
    previous sentence shall be retained by Lessor without reducing
    or otherwise affecting Lessee’s obligations hereunder.

 

    Section 13.  Reports;
    Inspection.

 

    Section 13.1.  Duty
    of Lessee to Furnish.  On or before June 30,
    2008, and on or before each June 30 thereafter, Lessee will
    furnish to Lessor (i) an accurate statement, as of the
    preceding December 31, showing the reporting marks of the
    Units then leased hereunder, identifying each Unit that may have
    suffered an Event of Loss during the 12 months ending on
    such December 31 (or since the initial Settlement Date, in
    the case of the first such statement) and (ii) such other
    information regarding the condition or repair of the Equipment
    as Lessor may reasonably request.

 

    Section 13.2.  Lessor’s
    Inspection Rights.  Lessor shall have the right,
    but not the obligation, at its sole cost and expense (unless, in
    the case of any such expense, a Specified Default or an Event of
    Default shall have occurred and be continuing) and risk
    (including, without limitation, the risk of personal injury or
    death), by its authorized representatives, to the extent within
    Lessee’s control: on not more than one occasion in any
    12-month
    period (unless a Specified Default or an Event of Default shall
    have occurred and be continuing) or during the last
    12 months of the Lease Term, to inspect the Equipment and
    Lessee’s records with respect thereto, during Lessee’s
    normal business hours and upon reasonable prior notice to
    Lessee; provided, however, that Lessee shall not be
    liable for any injury to, or the death of, any Person
    exercising, either on behalf of Lessor or any prospective user,
    the rights of inspection granted under this Section 13.2
    except as may result or arise from Lessee’s gross
    negligence or willful misconduct. No inspection pursuant to this
    Section 13.2 shall interfere with the use, operation or
    maintenance of the Equipment or the normal conduct of
    Lessee’s business, and Lessee shall not be required to
    undertake or incur any additional liabilities in connection
    therewith.

 

    Section 13.3.  Financial
    and Other Reports of Lessee.  Lessee agrees that
    it will furnish directly to Lessor 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 Lessee, and its
    consolidated Subsidiaries as at the end of such period, together
    with the related consolidated statements of income and cash
    flows of Lessee 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
    U.S. generally accepted accounting principles and certified
    by any Vice President, the Treasurer, the Chief Financial
    Officer or any Assistant Treasurer of Lessee;

 

    (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 Lessee’s annual
    audited report covering the operations of Lessee and its
    consolidated Subsidiaries, including consolidated balance
    sheets, and related consolidated statements of income and
    retained earnings and consolidated statement of cash flows of
    Lessee 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 U.S. generally accepted accounting
    principles applied on a

    

    15

 

    consistent basis, which statements will have been certified by a
    firm of independent public accountants of recognized national
    standing selected by Lessee;

 

    (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 Lessee with the SEC or any successor agency,
    provided that, as long as Lessee 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 at the time
    such Participant may electronically access such reports and
    forms by means of the SEC’s homepage on the internet or at
    Lessee’s homepage on the internet, provided,
    further, in the event that Lessee shall cease to be subject
    to such informational requirements, Lessee will provide Lessor
    with 90 days’ advance written notice and thereafter
    Lessee shall directly furnish such reports and forms to Lessor;

 

    (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, or if an 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 an Event
    of Default, specifying such Lease Event of Default and all such
    events and the nature and status thereof; and

 

    (e) from time to time, such additional information kept by
    Lessee in the ordinary course of business reasonably related to
    the transactions contemplated hereby as Lessor may reasonably
    request.

 

    Section 14.  Events
    of Default.

 

    The following events shall constitute Events of Default
    hereunder (whether any such event shall be voluntary or
    involuntary or come about or be effected by operation of law or
    pursuant to or in compliance with any judgment, decree or order
    of any court or any order, rule or regulation of any
    administrative or governmental body) and each such Event of
    Default shall be deemed to exist and continue so long as, but
    only as long as, it shall not have been remedied:

 

    (a) Lessee shall fail to make any payment of Basic Rent
    within 10 Business Days after the same shall have become due and
    payable; or

 

    (b) Lessee shall fail to make any payment of Stipulated
    Loss Value or Termination Value after the same shall have become
    due and such failure shall continue unremedied for 10 Business
    Days after receipt by Lessee of written notice of such failure
    from Lessor; or

 

    (c) Lessee shall fail to make any other payment of
    Supplemental Rent after the same shall have become due and such
    failure shall continue unremedied for a period of 10 Business
    Days after receipt by Lessee of written notice of such failure
    from Lessor; or

 

    (d) Lessee shall operate any Unit in service when any
    public liability insurance policy required by Section 12
    hereof shall have terminated or lapsed; or

 

    (e) Lessee shall make or permit any unauthorized assignment
    or transfer of this Lease in violation of Section 18.2 and
    such unauthorized assignment or transfer shall continue
    unremedied for 30 days; or

 

    (f) any representation or warranty made by Lessee in this
    Lease is untrue or incorrect in any material respect as of the
    date of issuance or making thereof and such untruth or
    incorrectness shall continue to be material and unremedied for a
    period of 30 days after receipt by Lessee of written notice
    thereof from Lessor; provided that, unless such untruth
    or incorrectness results from Lessee’s willful or
    intentional misconduct or failure to disclose, if such untruth
    or incorrectness is capable of being remedied, no such untruth
    or incorrectness shall constitute an Event of Default hereunder
    for a period of 180 days after receipt of such notice so
    long as Lessee is diligently proceeding to remedy such untruth
    or incorrectness; or

    

    16

 

 

    (g) Lessee shall (i) commence a voluntary case or
    other proceeding seeking liquidation, reorganization or other
    relief with respect to itself or its debts under any bankruptcy,
    insolvency or other similar law now or hereafter in effect, or
    seeking the appointment of a trustee, receiver, liquidator,
    custodian or other similar official of it or any substantial
    part of its property, or (ii) consent to any such relief or
    to the appointment of or taking possession by any such official
    in any voluntary case or other proceeding commenced against it,
    or (iii) admit in writing its inability to pay its debts
    generally as they come due, or (iv) make a general
    assignment for the benefit of creditors, or (v) take any
    corporate action to authorize any of the foregoing; or

 

    (h) an involuntary case or other proceeding shall be
    commenced against Lessee seeking liquidation, reorganization or
    other relief with respect to it or its debts under any
    bankruptcy, insolvency or other similar law now or hereafter in
    effect, or seeking the appointment of a trustee, receiver,
    liquidator, custodian or other similar official of it or any
    substantial part of its property, and such involuntary case or
    other proceeding shall remain undismissed and unstayed for a
    period of 90 days; or

 

    (i) Lessee shall fail to observe or perform any other of
    the covenants or agreements to be observed or performed by
    Lessee hereunder and such failure shall continue unremedied for
    30 days after notice from Lessor to Lessee, specifying the
    failure and demanding the same to be remedied; provided
    that, if such failure is capable of being remedied, no such
    failure shall constitute an Event of Default hereunder for a
    period of 180 days after receipt of such notice so long as
    Lessee is diligently proceeding to remedy such failure;

 

    provided that, notwithstanding anything to the contrary
    contained in this Lease, any failure of Lessee to perform or
    observe any covenant or agreement herein shall not constitute an
    Event of Default if such failure is caused solely by reason of
    an event referred to in the definition of “Event of
    Loss” so long as Lessee is continuing to comply with
    the applicable terms of Section 11. Lessor shall notify
    Lessee promptly upon Lessee’s failure to make any payment
    of Basic Rent, after the same shall have become due; provided
    that the giving of such notice by Lessor shall not be a
    condition to the start of the 10 Business Days period referred
    to in paragraph (a) of this Section 14 and the
    failure or delay in giving such notice shall not prejudice the
    rights or remedies of Lessor hereunder.

 

    Section 15.  Remedies.

 

    Section 15.1.  Remedies.  Upon
    the occurrence of any Event of Default and at any time
    thereafter so long as the same shall be continuing, Lessor may,
    at its option, declare this Lease to be in default by a written
    notice to Lessee (provided that upon the occurrence of an
    Event of Default under Section 14(g) or 14(h), the Lease
    shall automatically be in default without the need for any
    declaration by Lessor and any giving of notice); and at any time
    thereafter, so long as Lessee shall not have remedied all
    outstanding Events of Default prior to the commencement of
    remedies hereunder, Lessor may do one or more of the following
    as Lessor in its sole discretion shall elect, to the extent
    permitted by, and subject to compliance with any mandatory
    requirements of, applicable law then in effect:

 

    (a) proceed by appropriate court action or actions, either
    at law or in equity, to enforce performance by Lessee of the
    applicable covenants of this Lease or to recover damages for the
    breach thereof;

 

    (b) by notice in writing to Lessee, cancel this Lease,
    whereupon all right of Lessee to the possession and use of the
    Equipment shall absolutely cease and terminate, but Lessee shall
    remain liable as hereinafter provided; and thereupon, Lessor may
    demand that Lessee, and Lessee shall, upon written demand of
    Lessor and at Lessee’s expense forthwith return all of the
    Equipment to Lessor or its order in the manner and condition
    required by, and otherwise in accordance with all of the
    provisions of Section 6, except Section 6.1(b) and
    those provisions relating to periods of notice; or Lessor may by
    its agents enter upon the premises of Lessee or other premises
    where any of the Equipment may be located and take possession of
    and remove all or any of the Units and thenceforth hold, possess
    and enjoy the same free from any right of Lessee, or its
    successor or assigns, to use such Units for any purpose whatever;

 

    (c) sell any Unit at public or private sale, as Lessor may
    determine, free and clear of any rights of Lessee and without
    any duty to account to Lessee with respect to such sale or for
    the proceeds thereof

    

    17

 

    (except to the extent required by paragraph (e) or
    (f) below if Lessor elects to exercise its rights under
    said paragraph in which case such sale shall be conducted at
    arm’s length and on a commercially reasonable basis), in
    which event Lessee’s obligation to pay Basic Rent and
    Supplemental Rent with respect to such Unit hereunder due for
    any periods subsequent to the date of such sale shall terminate
    (except to the extent that Basic Rent and Supplemental Rent are
    to be included in computations under paragraph (e) or
    (f) below if Lessor elects to exercise its rights under
    either of said paragraphs);

 

    (d) hold, keep idle or lease to others any Unit as Lessor
    in its sole discretion may determine, free and clear of any
    rights of Lessee and without any duty to account to Lessee with
    respect to such action or inaction or for any proceeds with
    respect thereto, except that Lessee’s obligation to pay
    Basic Rent and Supplemental Rent with respect to such Unit due
    for any periods subsequent to the date upon which Lessee shall
    have been deprived of possession and use of such Unit pursuant
    to this Section 15 and prior to the Determination Date
    specified in paragraph (e) or (f) below shall be
    reduced by the net proceeds, if any, received by Lessor from
    leasing such Unit to any Person other than Lessee;

 

    (e) whether or not Lessor shall have exercised, or shall
    thereafter at any time exercise, any of its rights under
    paragraph (a), (b) or (c) above with respect to
    any Unit, Lessor, by written notice to Lessee specifying a
    payment date (which date shall be a Determination Date for the
    purposes of computing Stipulated Loss Value) which shall be not
    earlier than 30 days after the date of such notice, may
    demand that Lessee pay to Lessor, and Lessee shall pay to
    Lessor, on the payment date specified in such notice, as
    liquidated damages for loss of a bargain and not as a penalty
    (in lieu of the Basic Rent for such Unit due on or after the
    payment date specified in such notice), without duplication, any
    unpaid and accrued Rent for such Unit arising in any period up
    to but excluding the payment date specified in such notice
    plus whichever of the following amounts Lessor, in its
    sole discretion, shall specify in such notice:

 

    (i) an amount with respect to each Unit which represents
    the excess of the present value, at the time of such payment
    date, of all rentals for such Unit which would otherwise have
    accrued hereunder from such payment date for the remainder of
    the Basic Term over the then present value of the then Fair
    Market Rental Value of such Unit (taking into account its actual
    condition) for such period computed by discounting from the end
    of such term to such payment date rentals which Lessor
    reasonably estimates to be obtainable for the use of such Unit
    during such period, such present value to be computed in each
    case on a basis of a per annum discount at a rate per annum
    equal to the Late Rate, compounded semiannually from the
    respective dates upon which rentals should have been payable
    hereunder had this Lease not been terminated; or

 

    (ii) an amount equal to the excess, if any, of the
    Stipulated Loss Value for such Unit computed as of the payment
    date specified in such notice over the Fair Market Sales Value
    of such Unit (taking into account its actual condition) as of
    the payment date specified in such notice; and

 

    (f) if Lessor shall have sold any Unit pursuant to
    paragraph (c) above, Lessor, in lieu of exercising its
    rights under paragraph (e) above with respect to such
    Unit may, if it shall so elect, demand that Lessee pay to
    Lessor, and Lessee shall pay to Lessor, as liquidated damages
    for loss of a bargain and not as a penalty (in lieu of the Basic
    Rent and any Supplemental Rent for such Unit due for any periods
    subsequent to the Rent Payment Date immediately preceding the
    date of such sale), without duplication, any unpaid Basic Rent
    due prior to such payment date and any unpaid Supplemental Rent
    for such Unit arising in any period up to and including the date
    of such sale or, if that date is not a Rent Payment Date, the
    daily equivalent of any arrears Basic Rent for the period from
    the preceding Rent Payment Date to the date of such sale, plus
    the amount, if any, by which the Stipulated Loss Value of such
    Unit computed as of the Rent Payment Date next preceding the
    date of such sale or, if such sale occurs on a Rent Payment
    Date, then computed as of such Rent Payment Date, exceeds the
    net proceeds of such sale plus interest on such amounts from the
    date of such sale to the date of payment at the Late Rate.

 

    In addition, Lessee shall be liable, except as otherwise
    provided above, for any and all unpaid Rent due hereunder before
    or during the exercise of any of the foregoing remedies, and for
    legal fees and other costs and expenses incurred by reason of
    the occurrence of any Event of Default or the exercise of
    Lessor’s remedies with respect thereto, including without
    limitation the repayment in full of any costs and expenses

    

    18

 

    necessary to be expended in repairing any Unit in order to cause
    it to be in compliance with all maintenance and regulatory
    standards imposed by this Lease.

 

    Section 15.2.  Cumulative
    Remedies.  The remedies in this Lease provided in
    favor of Lessor shall not be deemed exclusive, but shall be
    cumulative and shall be in addition to all other remedies in its
    favor existing at law or in equity.

 

    Section 15.3.  No
    Waiver.  No delay or omission to exercise any
    right, power or remedy accruing to Lessor upon any breach or
    default by Lessee under this Lease shall impair any such right,
    power or remedy of Lessor, nor shall any such delay or omission
    be construed as a waiver of any breach or default, or of any
    similar breach or default hereafter occurring; nor shall any
    waiver of a single breach or default be deemed a waiver of any
    subsequent breach or default.

 

    Section 15.4.  Lessee’s
    Duty to Return Equipment Upon Default.  If Lessor
    or any assignee of Lessor shall terminate this Lease pursuant to
    this Section 15 and shall have provided to Lessee the
    written demand specified in Section 15.1(b), Lessee shall
    forthwith deliver possession of such Units to Lessor. For the
    purpose of delivering possession of any Unit to Lessor as above
    required, Lessee shall at its own cost, expense and risk:

 

    (i) forthwith place such Equipment upon such storage tracks
    of Lessee or, at the expense of Lessee, on any other storage
    tracks, as Lessee may select;

 

    (ii) permit Lessor to store such Equipment on such tracks
    without charge for insurance, rent or storage until the earlier
    of (x) nine months after such demand for storage and
    (y) the date such Equipment is sold, leased or otherwise
    disposed of by Lessor and during such period of storage Lessee
    shall continue to maintain all insurance required by
    Section 12 hereof; and

 

    (iii) transport the Equipment to the nearest point of
    interchange with a railroad in the 48 contiguous United States,
    when directed by Lessor.

 

    All Equipment returned shall be in the condition required by
    Section 6.2 hereof.

 

    Section 15.5.  Specific
    Performance; Lessor Appointed Lessee’s
    Agent.  The assembling, delivery, storage and
    transporting of the Equipment as provided in Section 15.4
    are of the essence of this Lease, and upon application to any
    court of equity having jurisdiction in the premises, Lessor
    shall be entitled to a decree against Lessee requiring specific
    performance of the covenants of Lessee so to assemble, deliver,
    store and transport the Equipment. Without in any way limiting
    the obligation of Lessee under the provisions of
    Section 15.4, Lessee hereby irrevocably appoints Lessor as
    the agent and attorney of Lessee, with full power and authority,
    at any time while Lessee is obligated to deliver possession of
    any Units to Lessor pursuant to this Section 15, to demand
    and take possession of such Unit in the name and on behalf of
    Lessee from whosoever shall be at the time in possession of such
    Unit.

 

    Section 16.  Filings;
    Further Assurances.

 

    Section 16.1.  Filings.  On
    or prior to the Closing Date, Lessee will (i) cause this
    Lease, or appropriate evidence thereof, to be duly filed and
    recorded with the STB in accordance with 49 U.S.C.
    § 11301, (ii) cause this Lease, or appropriate
    evidence thereof, to be deposited with the Registrar General of
    Canada pursuant to Section 105 of the Canada Transportation
    Act and cause notice of such deposit to be forthwith given in
    The Canada Gazette in accordance with said
    Section 105, and (iii) cause or permit such other
    filings and notices to be filed or made as necessary or
    appropriate to protect the interests of Lessor, and will furnish
    Lessor proof thereof.

 

    Section 16.2.  Further
    Assurances.  Lessee will duly execute and deliver
    to Lessor such further documents and assurances and take such
    further action as Lessor may from time to time reasonably
    request in order to effectively carry out the intent and purpose
    of this Lease and to establish and protect the rights and
    remedies created in favor of Lessor hereunder, including,
    without limitation, if requested by Lessor, the execution and
    delivery of supplements or amendments hereto, in recordable
    form, subjecting to this Lease any Replacement Unit and the
    recording or filing of counterparts hereof or thereof in
    accordance with the laws of

    

    19

 

    such jurisdiction as Lessor may from time to time deem
    advisable; provided that this sentence is not intended to
    impose upon Lessee any additional liabilities not otherwise
    contemplated by this Lease.

 

    During the Lease Term, Lessee, at its sole expense, shall
    prepare and file all statements, notices, registrations or
    instruments required by or customarily filed with the Mexican
    Railroad Registry with respect to the Equipment. Lessor hereby
    appoints and constitutes Lessee its agent and
    attorney-in-fact
    to file, record or register, in the name and for the account of
    Lessor and Lessee, as their interests may appear, statements or
    notices required by the Mexican Railroad Registry. Lessee shall
    promptly provide copies of any and all statements or notices
    filed by Lessee with the Mexican Railroad Registry with respect
    to the Equipment.

 

    Section 16.3.  Expenses.  Except
    as provided in Section 24 hereof, Lessee will pay all
    costs, charges and expenses (including reasonable
    attorneys’ fees) incident to any such filing, refiling,
    recording and rerecording or depositing and redepositing of any
    such instruments or incident to the taking of such action.

 

    Section 17.  Lessor’s
    Right to Perform.

 

    If Lessee fails to make any payment required to be made by it
    hereunder or fails to perform or comply with any of its other
    agreements contained herein and such failure can be cured with
    the payment of money, Lessor may itself make such payment or
    perform or comply with such agreement, after giving not less
    than five (5) Business Days’ prior notice thereof to
    Lessee in a reasonable manner, but shall not be obligated
    hereunder to do so, and the amount of such payment and of the
    reasonable expenses of Lessor incurred in connection with such
    payment or the performance of or compliance with such agreement,
    as the case may be, together with interest thereon at the Late
    Rate, to the extent permitted by applicable law, shall be deemed
    to be Supplemental Rent, payable by Lessee to Lessor on demand.

 

    Section 18.  Assignment.

 

    Section 18.1.  Assignment
    by Lessor.  Lessor agrees that it shall not assign
    or convey its right, title and interest in and to this Lease,
    the Equipment or any Unit, except as expressly permitted by and
    subject to the provisions of this Lease, 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 (independent of the transactions
    contemplated hereby) of at least $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 or (iii) any United States subsidiary or United
    States affiliate of the transferring Lessor if the transferring
    Lessor remains liable for all obligations of Lessor under each
    of the Operative Agreements and the Lessor Guarantor guarantees
    the obligations of the Transferee;

 

    (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
    Managers or the Board of Directors of Lessee or such Affiliate,
    as the case may be, 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 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;

    

    20

 

 

    (c) Lessee 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 18.1;

 

    (d) such Transferee enters into an agreement or agreements
    in form and substance reasonably satisfactory to Lessee whereby
    such Transferee confirms that it shall be deemed a party to this
    Lease and each other Operative Agreement to which the
    transferring Lessor 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 Lessor contained in, this Lease
    and such other Operative Agreements and in which the Transferee
    shall make representations and warranties comparable to those of
    Lessor 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 Brown Raysman & Steiner
    LLP, internal counsel to the Transferee or another counsel
    reasonably acceptable to Lessee), 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 may reasonably request,
    shall be provided, prior to such transfer, to Lessee, which
    opinion shall be in form and substance reasonably satisfactory
    to Lessee;

 

    (g) except as specifically consented to in writing by
    Lessee, 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 shall
    be paid by Lessor;

 

    (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;

 

    (j) as a result of such transfer, Lessor is not in default
    under any Lessor Agreement;

 

    (k) such transfer shall not result, based on the law in
    effect at the time of transfer, in an increase in Lessee’s
    obligations under any of the Operative Agreements; and

 

    (l) Lessor shall deliver an Officer’s Certificate to
    Lessee certifying as to compliance with the transfer
    requirements contained herein.

 

    Upon any such transfer, (i) except as the context otherwise
    requires, such Transferee shall be deemed the “Lessor”
    for all purposes, and shall enjoy the rights and privileges and
    perform the obligations of Lessor to the extent of the interest
    transferred hereunder and under each other Operative Agreement
    to which Lessor is a party, and, except as the context otherwise
    requires, each reference in this Lease and each other Operative
    Agreement to the “Lessor” 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 18.1(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 Lessor’s interest
    in the Units or this Lease in violation of this
    Section 18.1 shall be void and of no effect.

    

    21

 

 

    Section 18.2.  Assignment
    by Lessee.  Except as otherwise provided in
    Section 8.3 or in the case of any requisition for use by an
    agency or instrumentality of the United States government
    referred to in Section 11.1, Lessee will not, without the
    prior written consent of Lessor, assign any of its rights
    hereunder, except as provided in Section 18.4 hereof.

 

    Section 18.3.  Sublessee’s
    Performance and Rights.  Any obligation imposed on
    Lessee in this Lease shall require only that Lessee perform or
    cause to be performed such obligation, even if stated herein as
    a direct obligation, and the performance of any such obligation
    by any permitted assignee, sublessee or transferee under an
    assignment, sublease or transfer agreement then in effect and
    permitted by the terms of this Lease shall constitute
    performance by Lessee and discharge such obligation by Lessee.
    Except as otherwise expressly provided herein, any right granted
    to Lessee in this Lease shall grant Lessee the right to exercise
    such right or permit such right to be exercised by any such
    assignee, sublessee or transferee. The inclusion of specific
    references to obligations or rights of any such assignee,
    sublessee or transferee in certain provisions of this Lease
    shall not in any way prevent or diminish the application of the
    provisions of the two sentences immediately preceding with
    respect to obligations or rights in respect of which specific
    reference to any such assignee, sublessee or transferee has not
    been made in this Lease.

 

    Section 18.4.  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 Lessor an
    agreement containing the assumption by such successor
    corporation of the due and punctual performance and observance
    of each covenant and condition of this Lease and each of the
    other Lessee Agreements to be performed or observed by Lessee,
    (ii) immediately after giving effect to such transaction,
    (x) no Event of Default shall have occurred solely as a
    result of such consolidation or merger or such conveyance,
    transfer or lease and (y) except in the case of any such
    consolidation or merger or such conveyance, transfer, or lease
    among Lessee and any one or more of its Affiliates, the
    long-term unsecured debt obligations of such Person will be
    rated at least investment grade by S&P and Moody’s or
    at least equal to the ratings of Lessee’s long-term
    unsecured debt obligations immediately prior to the public
    announcement of such merger, conveyance, transfer or lease and
    there is no reduction in the tangible net worth of such Person
    as compared to the tangible net worth of Lessee immediately
    prior to such transaction, and (iii) the protections
    afforded to Lessor pursuant to Section 1168 of the
    Bankruptcy Code shall not be less than the protections afforded
    immediately prior to such consolidation, merger, transfer or
    lease. 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 18.4, 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 Lease 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 this
    Lease, the Person owning such leasehold interest after such
    event shall deliver to Lessor 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 19.  Net
    Lease, etc.

 

    This Lease is a net lease and Lessee’s obligation to pay
    all Rent payable hereunder shall be absolute and unconditional
    under any and all circumstances of any character including,
    without limitation, any abatement of Rent or setoff against
    Rent; nor, except as otherwise expressly provided herein, shall
    this Lease terminate, or the respective obligations of Lessor or
    Lessee be otherwise affected, by reason of any defect in, damage
    to or loss or destruction of, or requisitioning of, any Unit, by
    condemnation or otherwise, the prohibition of Lessee’s use
    of any Unit, the interference with such use by any Person or the
    lack of right, power or authority of Lessor or any other Person
    to enter into this Lease or any other Operative Agreement, or
    for any other cause, whether similar or dissimilar to the
    foregoing, any present or future law to the contrary
    notwithstanding, it being the

    

    22

 

    intention of the parties hereto that the Rent payable by Lessee
    hereunder shall continue to be payable in all events unless the
    obligation to pay the same shall be terminated in accordance
    with the terms of this Lease. To the extent permitted by
    applicable law, Lessee hereby waives any and all rights which it
    may now have or which at any time hereafter may be conferred
    upon it, by statute or otherwise, to terminate, cancel, quit or
    surrender this Lease with respect to any Unit, except in
    accordance with the express terms hereof. If for any reason
    whatsoever this Lease shall be terminated in whole or in part by
    operation of law or otherwise, except as specifically provided
    herein, Lessee nonetheless agrees to the maximum extent
    permitted by law, to pay to Lessor an amount equal to each
    installment of Basic Rent and all Supplemental Rent due and
    owing, at the time such payment would have become due and
    payable in accordance with the terms hereof had this Lease not
    been terminated in whole or in part. Nothing contained herein
    shall be construed to waive any claim which Lessee might have
    under any of the Operative Agreements or otherwise or to limit
    the right of Lessee to make any claim it might have against
    Lessor or any other Person or to pursue such claim in such
    manner as Lessee shall deem appropriate.

 

    Section 20.  Notices.

 

    Unless otherwise expressly specified or permitted by the terms
    hereof, all communications and notices provided for herein shall
    be in writing or by a telecommunications device capable of
    creating a written record (including electronic mail), and any
    such notice shall become effective (a) upon personal
    delivery thereof, including, without limitation, by overnight
    mail and courier service, (b) in the case of notice by
    United States mail, certified or registered, postage prepaid,
    return receipt requested, upon receipt thereof, or (c) in
    the case of notice by such a telecommunications device, upon
    transmission thereof, provided such transmission is promptly
    confirmed in writing by either of the methods set forth in
    clauses (a) and (b) above, in each case addressed to
    the following Person at its respective address set forth below
    or at such other address as such Person may from time to time
    designate by written notice to the other Persons listed below:

 

    If to Lessor:

 

    High Ridge Leasing LLC

    c/o General Electric Capital Corporation

    201 High Ridge Road

    Stamford, CT 06905

    Attention: Rail Portfolio

    Facsimile No.:
    (203) 585-0597

    Telephone No.:
    (203) 961-2195

 

    If to Lessee:

 

    Kansas City Southern de Mexico, S. de R.L. de C.V.

    Montes Urales #625

    Col. Lomas de Chapultepec C.P.

    11000 Mexico, DF

    Attention: Director Jurídico Ejecutivo

    Facsimile No.: 011 5255 9178 5604

    Telephone No.: 011 5255 9178 5647

 

    with a copy to:

 

    Address of Lessee for Mail Delivery:

    Kansas City Southern

    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

    

    

    23

 

    Address of Lessee for Courier and Similar Delivery:

    Kansas City Southern

    427 West
    12th Street

    Kansas City, MO 64105

    Attention: Senior Vice President — Finance &
    Treasurer

    Facsimile No.:
    (816) 983-1198

    Telephone No.:
    (816) 983-1802

    

    and

 

    Kansas City Southern

    427 West
    12th Street

    Kansas City, MO 64105

    Attention: Senior Vice President & General Counsel

    Facsimile No.:
    (816) 983-1227

    Telephone No.:
    (816) 983-1303

 

    Section 21.  Lessee’s
    Indemnities.
    

 

    Section 21.1.  General
    Tax Indemnity.

 

    (a) Tax Indemnitee Defined.  For purposes
    of this Section 21.1, “Tax Indemnitee”
    means Lessor and its 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, Lessee
    agrees to indemnify and hold harmless each Tax Indemnitee, on an
    After-Tax Basis, 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 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, importation, exportation, 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

 

    (v) otherwise with respect to the transactions contemplated
    by the Operative Agreements, including any payments thereunder.

 

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

 

    (i) Taxes imposed by any federal, state or local
    government, or any political subdivision thereof or any foreign
    government or taxing authority, which are based upon, measured
    by or in respect to gross or net income or gross or net receipts
    (including all Taxes which are in the nature of a gross or net
    income tax); Taxes on items of preference or any minimum tax;
    value added taxes which are imposed in substitution for or in
    lieu of a gross or net income tax; business and occupation
    taxes; franchise taxes; or Taxes based upon Lessor’s
    capital stock or net worth; provided that there shall not
    be excluded under this subparagraph (i) any Taxes
    which are (w) value added taxes except for value added
    taxes that are net income Taxes (it being understood and agreed
    that, as of the date hereof, Mexican value added taxes and
    Canadian value added taxes are not net income Taxes),
    (x) sales, use, property, license, rental, ad valorem or
    Taxes in the nature thereof (including, for the avoidance of
    doubt, the Mexican asset tax (impuesto al activo), it
    being understood and agreed that, as of the date hereof, the
    Mexican asset tax is in the nature

    24

 

    of a sales, use, property, license, rental or ad valorem tax)
    imposed by a state or local government of the United States or a
    foreign government or taxing authority, (y) imposed by any
    government or taxing authority of or in a foreign country if,
    and to the extent, such Taxes would have been imposed had the
    sole connection between the Tax Indemnitee and such foreign
    country been the presence in such country of any Unit or any
    part thereof or the presence or activities of Lessee or any user
    of the Equipment in, or the making of payments from, such
    country or (z) imposed in excess of Taxes that would have
    been imposed had title to the Units been transferred on the
    Settlement Date;

 

    (ii) Taxes imposed with respect to any period after
    (A) the satisfaction by Lessee of all of its obligations
    under the Operative Agreements and (B) the earliest of
    (x) the return of possession of the Equipment to Lessor or
    the placement of the Equipment in storage at the request of
    Lessor, in either case pursuant to Section 6 hereof and
    only so long as no Event of Default shall have occurred and be
    continuing, (y) the termination of the Lease Term pursuant
    to Section 10 hereof, 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 hereof, 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 Lessor due after the termination or
    expiration of this Lease if such payment relates to events
    occurring or matters arising prior to or simultaneously with
    such time);

 

    (iii) Taxes imposed upon a Tax Indemnitee which arise out
    of or are caused by 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 or any of the
    Operative Agreements or rights created thereunder other than a
    disposition attributable to (v) an Event of Default,
    (w) an Event of Loss, (x) the exercise by Lessee of
    the termination right pursuant to Section 10 hereof,
    (y) the exercise by Lessee of the purchase right pursuant
    to Section 23 hereof and (z) the replacement,
    substitution or interchange of any Unit by any Lessee Person;

 

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

 

    (vi) Taxes for which Lessee is obligated to indemnify
    Lessor under the Tax Indemnity Agreement;

 

    (vii) Taxes which result from Lessor’s engaging in
    transactions other than those permitted or contemplated by the
    Operative Agreements unless attributable to the exercise of
    default remedies pursuant to this Lease; or

 

    (viii) Taxes imposed on Basic Rent by withholding or
    deduction, which shall be indemnified to the extent provided in
    Section 21.1(d) hereof.

 

    (d) Withholding Tax Matters.  (i) All
    payments whatsoever under this Lease will be made by the Lessee
    free and clear of, and without liability or withholding or
    deduction for or on account of, any present or future Taxes of
    whatever nature imposed or levied by or on behalf of any
    jurisdiction other than the United States (or any political
    subdivision or taxing authority of or in such jurisdiction)
    (hereinafter a “Taxing Jurisdiction”), unless
    the withholding or deduction of such Tax is compelled by law. If
    withholding or deduction of Tax is compelled by law with respect
    to payments of Basic Rent under the Lease, Lessee shall make
    additional payments as provided in this Section 21.1(d).

 

    (ii) The Lessee shall have no obligation to make additional
    payments under this Section 21.1(d) in respect of any
    Mexican withholding or deduction to the extent Basic Rent is
    subject to a Mexican withholding or deduction of Tax at a rate
    of five percent or less. If any payment of Basic Rent is subject
    to withholding or deduction of Tax, (A) the Lessee will pay
    to the Taxing Jurisdiction the full amount required to be
    withheld, deducted or otherwise paid before penalties attach
    thereto or interest accrues thereon; and (B) unless such
    Tax is a Mexican withholding Tax at a rate of five percent or
    less, pay to the Lessor such additional amounts as may be
    necessary in order that the net amounts received by the Lessor
    after such deduction, withholding or

    

    25

 

    payment (including, without limitation, any required deduction
    or withholding of Tax on or with respect to such additional
    amount), shall be not less than the amounts the Lessor would
    have received had no such deductions or withholdings (other than
    any deduction or withholding imposed by Mexico at a rate of five
    percent or less) been required; provided that no payment
    of any additional amounts shall be required to be made for or on
    account of any Tax to the extent such Tax would not have been
    imposed but for a breach by Lessor of its obligations under
    clause (iv) of this Section 21.1(d).

 

    (iii) To the extent any payment of Basic Rent results in an
    additional payment by the Lessee pursuant to the preceding
    paragraph, such additional payment is intended to constitute a
    payment pursuant to a tax indemnity provision for purposes of
    Regulations § 1.467-1(h)(14) that shall be allocated
    to the same Lease period as such Basic Rent is allocated in
    accordance with Section 3.2 hereof.

 

    (iv) The Lessor agrees (A) on or prior to the date of
    the execution and delivery of this Lease to provide Lessee with
    duplicate executed originals of Internal Revenue Services
    (“IRS”)
    Form W-9,
    or any successor form, and (B) subject to the limitations
    below, thereafter within 60 days of its receipt of a
    written request from the Lessee, that it will (x) duly
    complete and deliver to or as reasonably directed by the Lessee
    all such forms, certificates, documents and returns provided to
    the Lessor by the Lessee (collectively, the
    “Forms”) required to be filed by or on behalf
    of the Lessor in order to avoid or reduce any such Tax pursuant
    to the provisions of an applicable statute, regulation or
    administrative practice of the relevant Taxing Jurisdiction or
    of a tax treaty between the United States and such Taxing
    Jurisdiction and (y) provide the Lessee with such
    information with respect to the Lessor as the Lessee may
    reasonably request in order to complete any such Forms,
    provided that (I) nothing in this
    Section 21.1(d)(iv) shall require the Lessor to provide
    information with respect to any such Form or otherwise if in the
    opinion of the Lessor such Form or disclosure of information
    would involve the disclosure of tax return or other information
    that is confidential or proprietary to the Lessor; (II) the
    filing of such Forms would not (in the Lessor’s reasonable
    judgment) impose any unreasonable burden (in time, resources or
    otherwise) on the Lessor; and (III) the Lessor shall be
    deemed to have complied with the requirements of this paragraph
    with respect to any Form upon the good faith completion and
    submission of such Form as may be specified in a written request
    of the Lessee no later than 60 days after receipt by the
    Lessor of such written request (which in the case of a
    Form 8802 or any similar Form shall be deemed to occur when
    such Form is submitted to the United States Internal Revenue
    Service in accordance with instructions contained in such Form)
    and, in the case of a transfer of the Lease, at least
    90 days prior to the relevant Rent Payment Date. Any
    written request for Forms by the Lessee shall be accompanied by
    copies of such Forms and related instructions, if any, all in
    the English language or with an English translation thereof.
    Lessor shall promptly after receipt thereof provide to Lessee an
    original of each IRS Form 6166, or any successor form,
    received by Lessor.

 

    (v) The Lessee will furnish the Lessor, promptly and in any
    event within 60 days after the date of any payment by the
    Lessee of any Tax in respect of any amounts paid under this
    Lease, the original tax receipt issued by the relevant taxation
    or other authorities involved for all amounts paid as aforesaid
    (or if such original tax receipt is not available or must
    legally be kept in the possession of the Lessee, a duly
    certified copy of the original tax receipt or any other
    reasonably satisfactory evidence of payment), together with such
    other documentary evidence with respect to such payments as may
    be reasonably requested from time to time by the Lessor.

 

    (vi) Upon receipt by Lessor of a refund or credit of all or
    part of any Taxes paid or indemnified against by Lessee pursuant
    to Section 21.1(d)(ii)(B), Lessor shall pay to the Lessee
    an amount equal to the amount of such refund or credit, as the
    case may be, plus any interest received by or credited to the
    Lessor with respect to such refund or credit increased or
    decreased, as the case may be, by the Lessor’s net
    additional or saved taxes attributable to the receipt or grant
    of such amounts from the taxing authority and the payment being
    made to Lessee hereunder, provided, however, that
    (A) the Lessor shall be required to make any such payment
    only to the extent such payment leaves the Lessor in an overall
    financial position no worse that it would have been had no
    deduction or withholding applied, (B) the Lessor shall not
    be obligated to make a payment pursuant to this clause (vi)
    to the Lessee as long as an Event of Default of the type
    specified in Section 14(a), (b), (c), (g) or
    (h) hereof shall have occurred and be continuing,
    (C) in no event shall Lessor be required to make any
    payment to Lessee with respect to any refund or credit
    attributable to any Mexican deduction or

    

    26

 

    withholding at a rate of five percent or less, and (D) to
    the extent the amount of such payment by the Lessor to the
    Lessee would exceed the amount of all prior payments by the
    Lessee to the Lessor pursuant to Section 21.1(d)(ii)(B)
    less the amount of all prior payments by the Lessor pursuant to
    this clause (vi), such excess shall not be paid by the
    Lessor but shall instead by carried forward and shall reduce the
    Lessee’s obligations to make subsequent payments under
    Section 21.1(d)(ii)(B) to the Lessor. Any subsequent loss
    or disallowance of such refund or credit in Taxes shall be
    treated as Taxes for which Lessee shall be obligated to
    reimburse and indemnify the Lessor unless such loss is
    attributable to a breach by Lessor of its obligations under
    clause (iv) of this Section 21.1(d). Nothing herein
    contained shall interfere with the right of the Lessor to
    arrange its tax affairs in its sole discretion in whatever
    manner it thinks fit and, in particular, the Lessor shall not be
    under any obligation to claim relief from its corporate profits
    or similar tax liability in respect of such Tax in priority to
    any other claims, reliefs, credits or deductions available to it
    or (other than as set forth in clause (iv) above or
    subsection (g)) oblige the Lessor to disclose any
    information relating to its tax affairs or any computations in
    respect thereof. Section 21.1(f) below shall not apply to
    any refund or credit with respect to Taxes indemnified pursuant
    to this subsection (d), which shall instead be governed
    solely by this clause (vi).

 

    (vii) If the Lessee makes payment to or for the account of
    the Lessor and the Lessor is entitled to a refund or credit of
    the Tax to which such payment is attributable upon the making of
    a filing (other than a Form described above), then the Lessor
    shall, as soon as practicable after receiving written request
    from the Lessee (which shall specify in reasonable detail and
    supply the refund forms to be filed) use reasonable efforts to
    complete and deliver such refund or credit forms to or as
    directed by the Lessee, subject, however, to the same
    limitations with respect to Forms as are set forth above.

 

    (e) All Tax Obligations in This Section,
    Etc.  Notwithstanding any other provision anywhere
    contained in the Operative Agreements except as expressly
    provided therein, it is understood that (i) all of
    Lessee’s obligations with respect to Taxes are set forth in
    this Section 21.1 and in the Tax Indemnity Agreement, and
    if Lessee shall be required under any provision of the Operative
    Agreements to pay any other tax not described in this sentence,
    it shall be entitled to prompt reimbursement of such amount from
    the party whose tax liability was paid and (ii) except as
    provided in Section 7.2, Lessor shall have no obligations
    with respect to Taxes.

 

    (f) Refund or Credit.  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 or
    credit, as the case may be, plus any interest received by or
    credited to such Tax Indemnitee with respect to such refund or
    credit 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, provided that
    (i) the Tax Indemnitee shall not be obligated to make a
    payment to Lessee pursuant to this subsection (f) as
    long as an Event of Default of the type specified in
    Section 14(a), (b), (c), (g) or (h) hereof 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 pursuant to this
    paragraph (f), 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. Any subsequent
    loss or disallowance of such refund or credit in Taxes shall be
    treated as Taxes subject to Lessee’s indemnity obligation
    pursuant to this Section 21.1, without regard to the
    provisions of paragraph (c).

 

    (g) Procedures.  Lessee shall pay any Tax
    indemnifiable hereunder directly to the appropriate taxing
    authority prior to the date such payment is due. Any amount
    payable to a Tax Indemnitee pursuant to
    paragraph (b) or paragraph (d) 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 (d) or
    paragraph (f) shall be paid within 30 days after
    the Tax Indemnitee receives a refund or credit giving rise to a
    payment under paragraph (d) or paragraph (f), as
    the case may be, and shall be accompanied by a written statement
    by the Tax Indemnitee

    

    27

 

    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 the 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 21.1(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 the lesser of (a) $25,000 and (b) 5%
    of the amount determined by such firm or (2) in the case of
    any amount payable to Lessee, greater than the amount determined
    by the Tax Indemnitee by the lesser of (a) $25,000 and
    (b) 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
    give Lessee notice in writing of such claim within 15 days
    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 any
    failure to provide such notice or furnish such information shall
    not reduce or affect Lessee’s indemnity obligations
    hereunder unless such failure precludes 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) 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 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 Event of
    Default of the type specified in Section 14(a), (b), (c),
    (g) or (h) hereof 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, (D) the amount of such
    claim exceeds $50,000, (E) Lessee shall have provided the
    Tax Indemnitee with a written acknowledgement of Lessee’s
    obligations to indemnify the Tax Indemnitee for such Taxes if
    and to the extent the contest is not successful and
    (F) Lessee shall have provided the Tax Indemnitee with an
    opinion of independent counsel selected by the Tax Indemnitee
    and reasonably acceptable to Lessee to the effect that a
    reasonable basis exists to contest such claim. 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, which will not be unreasonably withheld. 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

    

    28

 

    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.

 

    If a Tax Indemnitee determines in good faith that it must file a
    form with respect to or pay a Tax that is indemnifiable under
    this Section 21.1, such determination shall be treated as a
    written claim made against a Tax Indemnitee for Taxes with
    respect to which the Lessee may be liable for indemnity
    hereunder to which the contest provisions of this
    subsection (h) apply.

 

    (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 21.1, 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 Lessor’s expense such Tax Indemnitee with such
    information reasonably available to Lessee as 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 in Lessor 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.

 

    Section 21.2.  General
    Indemnification and Waiver of Certain Claims.

 

    (a) Claims Defined.  For the purposes of
    this Section 21.2, “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 21.2, shall
    include, but not be limited to, all reasonable
    out-of-pocket
    costs, disbursements and expenses (including legal fees and
    expenses) paid or incurred by an Indemnified Person in
    connection therewith or related thereto.

 

    (b) Indemnified Person Defined.  For the
    purposes of this Section 21.2, “Indemnified
    Person” means Lessor and its directors, officers,
    employees, successors and permitted assigns, agents and servants
    (the directors, officers, employees, successors and permitted
    assigns, agents and servants of Lessor together with Lessor
    being referred to herein collectively as the “Related
    Indemnitee Group” of Lessor), provided that as a
    condition of any obligations of Lessee to pay any indemnity or
    perform any action under this Section 21.2 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 21.2. 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 21.2(e) and (f), such
    Indemnified Person shall not be entitled to indemnity under this
    Section 21.2 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 this 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 Lease or any other Operative Agreement or any of
    the transactions contemplated hereby and thereby and the
    enforcement thereof and hereof and the ownership, lease,
    operation, possession, modification, use, non-use, maintenance,
    sublease, 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

    

    29

 

    environmental control, noise and pollution regulations) whether
    or not in compliance with the terms of this Lease;

 

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

 

    (iii) any act or omission (whether negligent or otherwise)
    and any breach of or failure to perform or observe, or any other
    non-compliance with, any covenant, condition or agreement to be
    performed by, or other obligation of, 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.

 

    (d) Lessee’s Claims Excluded.  The
    following are excluded from the agreement to indemnify under
    this Section 21.2:

 

    (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 hereof, the exercise by
    Lessee of an early termination option with respect to such Unit
    under Section 10 hereof or the occurrence of an Event of
    Loss with respect to such Unit under Section 11 hereof, the
    last to occur of (x) the payment of all amounts due from
    Lessee in connection with any such event and (y) legal
    transfer of title to such Unit to any Person other than Lessor
    or (B) in all other cases, the last to occur of
    (x) with respect to such Unit, the earlier to occur of the
    termination of this Lease or the expiration of the Lease Term
    and (y) with respect to each Unit, the return of such Unit
    to Lessor in accordance with the terms of this Lease (it being
    understood that the date of the placement of such Unit in
    storage as provided in Section 6 hereof constitutes the
    date of return of such Unit under this Lease);

 

    (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 21.1 hereof or
    the Tax Indemnity Agreement, except 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 are
    fully set out in Section 21.1 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 5.2 or any transfer (other than pursuant to
    Section 10, 11, 15 or 23 hereof) by such Indemnified
    Person of any interest in the Units or this Lease;

 

    (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 interest in this Lease, or any similar
    security, other than a transfer by such Indemnified Person of
    its interests in any Unit pursuant to Section 10, 11 or 23
    hereof or otherwise attributable to an Event of Default that has
    occurred and is continuing;

 

    (vi) [Intentionally Omitted];

 

    (vii) [Intentionally Omitted];

    

    30

 

 

    (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 Lease and the other Operative Agreements, other than
    such as have been requested by or consented to by Lessee or
    necessary or required to effectuate the purpose or intent of any
    Operative Agreement or as are expressly required by any
    Operative Agreements;

 

    (ix) [Intentionally Omitted];

 

    (x) [Intentionally Omitted];

 

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

 

    (xii) 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
    hereunder;

 

    (xiii) [Intentionally Omitted];

 

    (xiv) with respect to any particular Indemnified Person,
    any Claim resulting from the imposition of any Lessor’s
    Lien attributable to such Indemnified Person; or

 

    (xv) with respect to any particular Indemnified Person, any
    Claim, to the extent the risk thereof has been expressly assumed
    by such Indemnified Person in connection with the exercise by
    such Indemnified Person of the right of inspection granted under
    Section 6.1, 6.2 or 13.2 hereof.

 

    (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 this Lease
    or otherwise, each Indemnified Person agrees to provide
    reasonable cooperation at the expense 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.

 

    (f) Claims Procedure.  An Indemnified
    Person shall, upon becoming aware of any Claim for which
    indemnification is sought, promptly notify Lessee of such Claim;
    provided, however, that, notwithstanding the last
    sentence of Section 21.2(b), the failure to give such
    notice shall not release Lessee from any of its obligations
    under this Section 21, except to the extent that such
    failure to give notice shall have a material adverse effect on
    Lessee’s ability to defend such claim or recover proceeds
    under any insurance policies maintained by Lessee. 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 21.2 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
    Specified Default or Event of Default shall have occurred and be
    continuing or (2) such Claim would entail a significant
    risk to Lessor 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

    

    31

 

    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 21.2(f).
    Nothing contained in this Section 21.2(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 21.2 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 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.

 

    (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 21.2 are not
    intended to waive or supersede any specific provisions of, or
    any rights or remedies of Lessee under, this Lease or any other
    Operative Agreement to the extent such provisions apply to any
    Claim.

 

    Section 22.  Termination
    Upon Purchase by Lessee.

 

    If Lessee shall have exercised its option to purchase any Unit
    pursuant to Section 23, upon payment by Lessee of the
    purchase price with respect to such Unit as provided in
    Section 23, and upon payment by Lessee of all Rent then due
    and payable under this Lease with respect to such Unit, the
    Lease Term shall end with respect to such Unit and the
    obligations of Lessee to pay Rent hereunder with respect to such
    Unit (except for Supplemental Rent obligations surviving
    pursuant to Section 21 hereof or the Tax Indemnity
    Agreement or which have otherwise accrued but not been paid as
    of the date of such payment) shall cease.

 

    Section 23.  Lessee’s
    Options to Purchase Equipment.

 

    (a) So long as no Specified Default or Event of Default
    shall have occurred and be continuing, Lessee shall have the
    option:

 

    (i) [Intentionally Omitted];

 

    (ii) upon not less than 90 days’ prior
    irrevocable notice to Lessor to purchase on the EBO Fixed
    Purchase Price Date all (but not less than all) of the Units
    then subject to this Lease at a price equal to the EBO Fixed
    Purchase Price for such Units (as such EBO Fixed Purchase Price
    may be adjusted from time to time pursuant to and in accordance
    with Section 3.4 hereof); and

 

    (iii) upon not less than 90 days’ prior
    irrevocable notice to Lessor to purchase on the Basic Term
    Expiration Date all (but not less than all) of the Units then
    subject to this Lease at a price equal to the FPO Fixed Purchase
    Price for such Units.

 

    (b) If Lessee shall have exercised its option to purchase
    any Unit hereunder, on the date of such purchase (x) Lessor
    shall, subject to the payment in full of all amounts referred to
    in clauses (y) and (z) below, assign, transfer
    and convey to Lessee all right, title and interest of Lessor in
    and to each Unit being purchased on such date on an “as is,
    where is” basis, without recourse or warranty except as to
    Lessor’s Liens other than Permitted Liens, (y) Lessee
    shall pay, by 12:00 noon (New York City time) on such date by
    wire transfer in immediately

    

    32

 

    available funds, to Lessor the EBO Fixed Purchase Price or the
    FPO Fixed Purchase Price, as the case may be, with respect to
    the Units purchased on such date plus any sales, use or other
    similar taxes imposed on such purchase or transfer, and
    (z) Lessee shall pay pursuant to Section 22 all Basic
    Rent due and payable on or prior to such date of purchase
    plus all other Supplemental Rent due and payable as of
    such date of purchase.

 

    Section 24.  Transaction
    Costs.

 

    (a) If Lessor shall have made its investment provided for
    in Section 2.2 hereof and the transactions contemplated by
    this Lease are consummated, Lessor will promptly pay the
    following (the “Transaction Costs”):

 

    (i) the cost of reproducing and printing the Operative
    Agreements, including all costs and fees in connection with the
    initial filing and recording of appropriate evidence of this
    Lease 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 Brown
    Raysman & Steiner LLP, special counsel to Lessor and
    the Lessor Guarantor and Winston & Strawn LLP, special
    tax counsel to Lessor (in the amounts separately agreed to by
    Lessor and Lessee) and the reasonable fees and expenses of
    Mexican counsel to Lessor and Lessor Guarantor, if any (in the
    amount separately agreed to by Lessor and Lessee), for their
    services rendered in connection with the negotiation, execution
    and delivery of this Lease and the Operative Agreements related
    hereto;

 

    (iii) the reasonable fees and expenses of Chapman and
    Cutler LLP, special counsel to Lessee and the reasonable fees
    and expenses of Mexican counsel to Lessee, for their services
    rendered in connection with the negotiation, execution and
    delivery of this Lease and the Operative Agreements related
    hereto;

 

    (iv) 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;

 

    (v) 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

 

    (vi) the reasonable fees and expenses of Lessee’s
    independent accountants, in connection with the transactions
    contemplated by the Operative Agreements;

 

    provided, however, that if such Transaction Costs exceed
    the amount of Transaction Costs used in calculating Basic Rent
    and other amounts pursuant to Section 3.4(a) hereof on the
    Closing Date, Lessee shall pay such excess.

 

    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 Lease 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 Lease, Lessee agrees to pay when due the reasonable
    expenses of Lessor 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 3.4, except as
    expressly provided in Section 3.4(b)).

 

    (c) Notwithstanding the foregoing provisions of this
    Section 24, except as specifically provided in
    Section 21.2, Lessee shall have no liability for any costs
    or expenses relating to any voluntary transfer of Lessor’s
    interest in the Equipment including any transfer prior to the
    Closing Date of Lessor’s obligation to fund its
    participation (other than during the continuance of an Event of
    Default or in connection with the exercise of remedies as
    provided in Section 15 hereof, Lessee’s exercise of
    any purchase option pursuant to Section 23 hereof,
    Lessee’s exercise of its termination rights pursuant to
    Section 10 hereof or the transfer to Lessee of any Unit
    which has been the subject of an Event of Loss pursuant to
    Section 11 hereof) and no such costs or expenses shall
    constitute Transaction Costs and Lessee will not have any
    obligation with respect to

    

    33

 

    the costs and expenses resulting from any voluntary transfer of
    any equity interest by any transferee of Lessor, 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 hereof, Lessee’s exercise of
    any purchase option pursuant to Section 23 hereof,
    Lessee’s exercise of its termination rights pursuant to
    Section 10 hereof or the transfer to Lessee of any Unit
    which has been the subject of an Event of Loss pursuant to
    Section 11 hereof).

 

    Section 25.  Filing
    in Mexico.

 

    In the event that during the Lease Term (A) a central
    filing system becomes available in Mexico for the filing or
    recording of security interests or ownership rights in railroad
    rolling stock, (B) Lessee elects as a business practice to
    conduct such filings or recordings with respect to equipment
    owned or leased by Lessee that is used in a manner similar to
    the Units and (C) Lessee has not previously taken such
    action in accordance with the requirements of Section 16.1
    hereof, then Lessee will take, or cause to be taken, at
    Lessee’s cost and expense, such action with respect to the
    filing or recording of this Lease or any supplements hereto (or
    appropriate evidence thereof) and any financing statements or
    other instruments as may be necessary or reasonably required to
    maintain, so long as this Lease is in effect and such central
    filing system remains available, the benefit of such filing or
    recording in Mexico for the protection of any security interest
    that may be claimed to have been created by this Lease and the
    ownership interest of Lessor in each Unit to the extent such
    protection is available pursuant to such filing or recording in
    Mexico.

 

    Section 26.  Miscellaneous.

 

    Section 26.1.  Governing
    Law; Severability.  This Lease and any extensions,
    amendments, modifications, renewals or supplements hereto shall
    be governed by and construed in accordance with the internal
    laws and decisions (as opposed to conflicts of law provisions)
    of the State of New York; provided, however, that
    the parties shall be entitled to all rights conferred by any
    applicable Federal statute, rule or regulation. Whenever
    possible, each provision of this Lease shall be interpreted in
    such manner as to be effective and valid under applicable law,
    but if any provision of this Lease shall be prohibited by or
    invalid under the laws of any jurisdiction, such provision, as
    to such jurisdiction, shall be ineffective to the extent of such
    prohibition or invalidity, without invalidating the remainder of
    such provision or the remaining provisions of this Lease in any
    other jurisdiction.

 

    Section 26.2.  Execution
    in Counterparts.  This Lease may be executed in
    any number of counterparts, each executed counterpart
    constituting an original and in each case such counterparts
    shall constitute but one and the same instrument.

 

    Section 26.3.  Headings
    and Table of Contents;
    Section References.  The headings of the
    sections of this Lease and the Table of Contents are inserted
    for purposes of convenience only and shall not be construed to
    affect the meaning or construction of any of the provisions
    hereof. All references herein to numbered sections, unless
    otherwise indicated, are to sections of this Lease.

 

    Section 26.4.  Successors
    and Assigns.  This Lease shall be binding upon and
    shall inure to the benefit of, and shall be enforceable by, the
    parties hereto and their respective permitted successors and
    assigns.

 

    Section 26.5.  True
    Lease.  It is the intent of the parties to this
    Lease that it be, and this Lease shall be, a single and
    indivisible true lease of the Equipment for all purposes,
    including, without limitation, for Federal income tax purposes.
    Lessor shall at all times be the owner of each Unit which is the
    subject of this Lease for all purposes, this Lease conveying to
    Lessee no right, title or interest in any Unit except as lessee.
    Nothing contained in this Section 26.5 shall be construed
    to limit Lessee’s use or operation of any Unit or
    constitute a representation, warranty or covenant by Lessee as
    to tax consequences.

 

    Section 26.6.  Amendments
    and Waivers.  No term, covenant, agreement or
    condition of this Lease may be terminated, amended or compliance
    therewith waived (either generally or in a particular instance,
    retroactively or prospectively) except by an instrument or
    instruments in writing executed by each party hereto;
    provided, however, that any breach or default, once
    waived in writing, unless otherwise specified in such waiver,
    shall not be deemed continuing for any purpose of the Operative
    Agreements.

 

    Section 26.7.  Survival.  All
    warranties, representations, indemnities and covenants made by
    any party hereto, herein or in any certificate or other
    instrument delivered by any such party or on the behalf of any

    

    34

 

    such party under this Lease, shall be considered to have been
    relied upon by each other party hereto and shall survive the
    consummation of the transactions contemplated hereby on the
    Closing Date and on the Settlement Date regardless of any
    investigation made by any such party or on behalf of any such
    party.

 

    Section 26.8.  Business
    Days.  If any payment is to be made hereunder or
    any action is to be taken hereunder on any date that is not a
    Business Day, such payment or action otherwise required to be
    made or taken on such date shall be made or taken on the
    immediately succeeding Business Day with the same force and
    effect as if made or taken on such scheduled date and as to any
    payment (provided any such payment is made on such succeeding
    Business Day) no interest shall accrue on the amount of such
    payment from and after such scheduled date to the time of such
    payment on such next succeeding Business Day.

 

    Section 26.9.  Directly
    or Indirectly.  Where any provision in this Lease
    refers to action to be taken by any Person, or which such Person
    is prohibited from taking, such provision shall be applicable
    whether such action is taken directly or indirectly by such
    Person.

 

    Section 26.10.  Entitlement
    to §1168 Benefits.  It is the intent of the
    parties that Lessor would be entitled to the benefits of
    Section 1168 of the Bankruptcy Code in the event of any
    bankruptcy proceedings of Lessee filed under the
    U.S. Bankruptcy Code with respect to the right to repossess
    any Unit and to enforce any of its other rights or remedies as
    provided herein, and in any circumstances where more than one
    construction of the terms and conditions of this Lease is
    possible, a construction which would preserve such benefits
    shall control over any construction which would not preserve
    such benefits or would render them doubtful. To the extent
    consistent with the provisions of Section 1168 of the
    Bankruptcy Code or any analogous section of the Bankruptcy Code
    or other applicable law, it is hereby expressly agreed and
    provided that, notwithstanding any other provision of the
    Bankruptcy Code, any right of Lessor to take possession of any
    Unit and to enforce any of its other rights or remedies in
    compliance with the provisions of this Lease shall not be
    affected by the provisions of Sections 362 or 363 of the
    Bankruptcy Code or any analogous provision of any superseding
    statute or any power of a bankruptcy court to enjoin such
    undertaking or possession.

 

    Section 26.11.  Waiver
    of Jury
    Trial.  The
    parties hereto voluntarily and intentionally waive any rights
    they may have to a trial by jury in respect of any litigation
    based hereon, or arising out of, under, or in connection with
    this Lease or any other Operative Agreement, or any course of
    conduct, course of dealing, statements (whether verbal or
    written) or actions of any of the parties hereto and thereto.
    The parties hereto hereby agree that they will not seek to
    consolidate any such litigation with any other litigation in
    which a jury trial has not or cannot be waived.
    

 

    Section 26.12.  Reproduction
    of Documents.  This Lease 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 Closing Date, 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 26.12 shall not
    prohibit the parties hereto 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 26.13.  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 Lease, 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. 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.

    

    35

 

 

    Section 26.14.  Jurisdiction,
    Court Proceedings.  Any suit, action or proceeding
    against any party to this Lease or any other Operative Agreement
    arising out of or relating to this Lease, any other Operative
    Agreement or any transaction contemplated hereby or thereby may
    be brought in any Federal or state court located in New York,
    New York, and each such party hereby submits to the exclusive
    jurisdiction of such courts for the purpose of any such suit,
    action or proceeding. Each of the parties to this Lease (that is
    a resident of the United States of America), in the event that
    service of process by mail is permitted by applicable law, each
    such party irrevocably consents to the service of process in any
    such suit, action or proceeding in such courts by the mailing of
    such process by registered or certified mail, postage prepaid,
    at its address for notices provided for in Section 20. Each
    such party irrevocably agrees not to assert any objection which
    it may ever have to the laying of venue of any such suit, action
    or proceeding in any Federal or state court located in New York,
    New York, including without limitation, objections regarding
    jurisdiction to which they may be entitled by reason of their
    current or future domiciles; and any claim that any such suit,
    action or proceeding brought in any such court has been brought
    in an inconvenient forum.

 

    Each of the parties to this Lease (that are not residents of the
    United States of America), hereby irrevocably designate, appoint
    and empower CT Corporation as its lawful agent to receive for
    and on its behalf service of process in the State of New York in
    any action or proceeding described in this Section 26.14
    and irrevocably consents to the service of process outside the
    territorial jurisdiction of said courts in any such action or
    proceeding. Any service made on such agent or its successor
    shall be effective when delivered regardless of whether notice
    thereof is given to affected party. If any person or firm
    designated as agent hereunder shall no longer serve as agent of
    such party to receive service of process in the State of New
    York, the party so affected shall be obligated promptly to
    appoint a successor to so serve; and, unless and until such
    successor is appointed and the parties hereto notified of the
    same in writing, service upon the last designated agent shall be
    good and effective. The parties to this Lease agree that a final
    judgment in any such action or proceeding shall be conclusive
    and may be enforced in other jurisdictions by suit on the
    judgment or in any other manner provided by law.

 

    Section 26.15.  Judgment
    Currency.  This is an international transaction in
    accordance with which the specification of Dollars is of the
    essence, and Dollars shall be the currency of account in the
    case of all obligations under the Operative Agreements. The
    payment obligations of the parties under the Operative
    Agreements shall not be discharged by an amount paid in a
    currency or in a place other than that specified with respect to
    such obligations, whether pursuant to a judgment or otherwise,
    to the extent that the amount so paid on prompt conversion to
    Dollars and transfer to the specified place of payment under
    normal banking procedures does not yield the amount of Dollars,
    in such place, due under the governing Operative Agreements. In
    the event that any payment, whether pursuant to a judgment or
    otherwise, upon conversion and transfer does not result in
    payment of such amount of Dollars in the specified place of
    payment, the obligee of such payment shall have a separate cause
    of action against the party making the same for the additional
    amount necessary to yield the amount due and owing under such
    Operative Agreements. If, for the purpose of obtaining a
    judgment in any court with respect to any obligation of a party
    under any of the Operative Agreements or any of the agreements
    contemplated thereby, it shall be necessary to convert to any
    other currency any amount in Dollars due thereunder and a change
    shall occur between the rate of exchange applied in making such
    conversion and the rate of exchange prevailing on the date of
    payment of such judgment, the respective judgment debtor agrees
    to pay such additional amounts (if any) as may be necessary to
    insure that the amount paid on the date of payment is the amount
    in such other currency which, when converted into Dollars and
    transferred to New York, New York, in accordance with normal
    banking procedures, will result in the amount then due under the
    respective Operative Agreement in Dollars. Any amount due from
    the respective judgment debtor shall be due as a separate debt
    and shall not be affected by or merged into any judgment being
    obtained for any other sum due under or in respect of any
    Operative Agreement. In no event, however, shall the respective
    judgment debtor be required to pay a larger amount in such other
    currency at the rate of exchange in effect on the date of
    payment than the amount of Dollars stated to be due under the
    respective Operative Agreement, so that in any event the
    obligations of the respective judgment debtor under the
    Operative Agreement will be effectively maintained as Dollar
    obligations.

    

    36

 

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

 

    Lessor:

 

    High Ridge Leasing LLC
    

 

			
	 	    By: 
	
    General Electric Capital Corporation,

    its Member

 

			
	 	    By: 
	
    /s/  Andrea
    J. Brantner

    Name: Andrea J. Brantner

			
	 	    Title: 
	
    Attorney-in-Fact

 

    Lessee:

 

    Kansas City Southern de
    Mexico, S. de R.L. de C.V.
    

 

			
	 	    By: 
	
    /s/  Paul
    J. Weyandt

    Name: Paul J. Weyandt

			
	 	    Title: 
	
    Attorney-in-Fact
    and Treasurerexv10w1

 

    Exhibit 10.1

 

 

    Equipment
    Lease Agreement

    (KCSM
    2007-1)

    dated
    as of April 4, 2007

    between

    High Ridge Leasing
    LLC,

    Lessor

    and

    Kansas City Southern de
    Mexico, S. de R.L. de C.V.,

    Lessee

    30 GE ES44AC Locomotives
    

 

    Memorandum of Equipment Lease Agreement (KCSM
    2007-1)
    filed with the Surface Transportation Board pursuant to
    49 U.S.C. § 11301 on April 4, 2007 at
    4:10 p.m., Recordation Number 26908, and deposited in the
    Office of the Registrar General of Canada pursuant to
    Section 105 of the Canada Transportation Act on
    April 5, 2007 at 12:19 p.m.

 

 

    Table
    of Contents

 

	 	 	 	 	 	 	 
	

    Section

	
 
	

    Heading

	
 
	
    Page

	 

	

    Section 1.
    

	
 
	
    Definitions
    
	
 
	
	
    1
    
	

	

    Section 2.
    

	
 
	
    Acceptance
    and Leasing of Equipment
    
	
 
	
	
    1
    
	

	

    Section 2.1.
    

	
 
	
    Sale and Purchase; Participation
    in Equipment Cost
    
	
 
	
	
    1
    
	

	

    Section 2.2.
    

	
 
	
    Settlement Date; Procedure for
    Participation
    
	
 
	
	
    1
    
	

	

    Section 3.
    

	
 
	
    Term and
    Rent
    
	
 
	
	
    2
    
	

	

    Section 3.1.
    

	
 
	
    Lease Term
    
	
 
	
	
    2
    
	

	

    Section 3.2.
    

	
 
	
    Basic Rent
    
	
 
	
	
    2
    
	

	

    Section 3.3.
    

	
 
	
    Supplemental Rent
    
	
 
	
	
    2
    
	

	

    Section 3.4.
    

	
 
	
    Calculation of Adjustments to
    Basic Rent, Stipulated Loss Value, Termination Value, EBO Fixed
    Purchase Price and FPO Fixed Purchase Price; Confirmation and
    Verification
    
	
 
	
	
    3
    
	

	

    Section 3.5.
    

	
 
	
    Manner of Payments
    
	
 
	
	
    4
    
	

	

    Section 4.
    

	
 
	
    Ownership
    and Marking of Equipment
    
	
 
	
	
    5
    
	

	

    Section 4.1.
    

	
 
	
    Retention of Title
    
	
 
	
	
    5
    
	

	

    Section 4.2.
    

	
 
	
    Duty to Number and Mark Equipment
    
	
 
	
	
    5
    
	

	

    Section 4.3.
    

	
 
	
    Prohibition against Certain
    Designations
    
	
 
	
	
    5
    
	

	

    Section 5.
    

	
 
	
    Disclaimer
    of Warranties; Right of Quiet Enjoyment
    
	
 
	
	
    5
    
	

	

    Section 5.1.
    

	
 
	
    Disclaimer of Warranties
    
	
 
	
	
    5
    
	

	

    Section 5.2.
    

	
 
	
    Quiet Enjoyment
    
	
 
	
	
    6
    
	

	

    Section 6.
    

	
 
	
    Return
    of Equipment; Storage
    
	
 
	
	
    6
    
	

	

    Section 6.1.
    

	
 
	
    General
    
	
 
	
	
    6
    
	

	

    Section 6.2.
    

	
 
	
    Condition of Equipment
    
	
 
	
	
    7
    
	

	

    Section 6.3.
    

	
 
	
    Storage
    
	
 
	
	
    7
    
	

	

    Section 6.4.
    

	
 
	
    Termination of Lease
    
	
 
	
	
    8
    
	

	

    Section 7.
    

	
 
	
    Liens
    
	
 
	
	
    8
    
	

	

    Section 7.1.
    

	
 
	
    Lessee Liens
    
	
 
	
	
    8
    
	

	

    Section 7.2.
    

	
 
	
    Lessor Liens
    
	
 
	
	
    8
    
	

	

    Section 8.
    

	
 
	
    Maintenance;
    Operation; Sublease
    
	
 
	
	
    8
    
	

	

    Section 8.1.
    

	
 
	
    Maintenance
    
	
 
	
	
    8
    
	

	

    Section 8.2.
    

	
 
	
    Operation
    
	
 
	
	
    8
    
	

	

    Section 8.3.
    

	
 
	
    Sublease
    
	
 
	
	
    9
    
	

	

    Section 9.
    

	
 
	
    Modifications
    
	
 
	
	
    9
    
	

	

    Section 9.1.
    

	
 
	
    Required Modifications
    
	
 
	
	
    9
    
	

	

    Section 9.2.
    

	
 
	
    Optional Modifications
    
	
 
	
	
    9
    
	

	

    Section 9.3.
    

	
 
	
    Removal of Proprietary and
    Communications Equipment
    
	
 
	
	
    10
    
	

	

    Section 9.4.
    

	
 
	
    Retention of Equipment by Lessor
    
	
 
	
	
    10
    
	

	

    Section 10.
    

	
 
	
    Voluntary
    Termination
    
	
 
	
	
    10
    
	

	

    Section 10.1.
    

	
 
	
    Right of Termination
    
	
 
	
	
    10
    
	

	

    Section 10.2.
    

	
 
	
    Sale of Equipment
    
	
 
	
	
    11
    
	

	

    Section 10.3.
    

	
 
	
    Retention of Equipment by Lessor
    
	
 
	
	
    11
    
	

	

    Section 10.4.
    

	
 
	
    Termination of Lease
    
	
 
	
	
    12
    
	

    

    i

 

	 	 	 	 	 	 	 
	

    Section

	
 
	

    Heading

	
 
	
    Page

	 

	

    Section 11.
    

	
 
	
    Loss,
    Destruction, Requisition,
    Etc. 
    
	
 
	
	
    12
    
	

	

    Section 11.1.
    

	
 
	
    Event of Loss
    
	
 
	
	
    12
    
	

	

    Section 11.2.
    

	
 
	
    Replacement or Payment upon Event
    of Loss
    
	
 
	
	
    12
    
	

	

    Section 11.3.
    

	
 
	
    Rent Termination
    
	
 
	
	
    13
    
	

	

    Section 11.4.
    

	
 
	
    Disposition of Equipment;
    Replacement of Unit
    
	
 
	
	
    13
    
	

	

    Section 11.5.
    

	
 
	
    Eminent Domain
    
	
 
	
	
    13
    
	

	

    Section 12.
    

	
 
	
    Insurance
    
	
 
	
	
    14
    
	

	

    Section 12.1.
    

	
 
	
    Property Damage and Public
    Liability Insurance
    
	
 
	
	
    14
    
	

	

    Section 12.2.
    

	
 
	
    Proceeds of Insurance
    
	
 
	
	
    15
    
	

	

    Section 12.3.
    

	
 
	
    Additional Insurance
    
	
 
	
	
    15
    
	

	

    Section 13.
    

	
 
	
    Reports;
    Inspection
    
	
 
	
	
    15
    
	

	

    Section 13.1.
    

	
 
	
    Duty of Lessee to Furnish
    
	
 
	
	
    15
    
	

	

    Section 13.2.
    

	
 
	
    Lessor’s Inspection Rights
    
	
 
	
	
    15
    
	

	

    Section 13.3.
    

	
 
	
    Financial and Other Reports of
    Lessee
    
	
 
	
	
    15
    
	

	

    Section 14.
    

	
 
	
    Events
    of Default
    
	
 
	
	
    16
    
	

	

    Section 15.
    

	
 
	
    Remedies
    
	
 
	
	
    17
    
	

	

    Section 15.1.
    

	
 
	
    Remedies
    
	
 
	
	
    17
    
	

	

    Section 15.2.
    

	
 
	
    Cumulative Remedies
    
	
 
	
	
    19
    
	

	

    Section 15.3.
    

	
 
	
    No Waiver
    
	
 
	
	
    19
    
	

	

    Section 15.4.
    

	
 
	
    Lessee’s Duty to Return
    Equipment Upon Default
    
	
 
	
	
    19
    
	

	

    Section 15.5.
    

	
 
	
    Specific Performance; Lessor
    Appointed Lessee’s Agent
    
	
 
	
	
    19
    
	

	

    Section 16.
    

	
 
	
    Filings;
    Further Assurances
    
	
 
	
	
    19
    
	

	

    Section 16.1.
    

	
 
	
    Filings
    
	
 
	
	
    19
    
	

	

    Section 16.2.
    

	
 
	
    Further Assurances
    
	
 
	
	
    19
    
	

	

    Section 16.3.
    

	
 
	
    Expenses
    
	
 
	
	
    20
    
	

	

    Section 17.
    

	
 
	
    Lessor’s
    Right to Perform
    
	
 
	
	
    20
    
	

	

    Section 18.
    

	
 
	
    Assignment
    
	
 
	
	
    20
    
	

	

    Section 18.1.
    

	
 
	
    Assignment by Lessor
    
	
 
	
	
    20
    
	

	

    Section 18.2.
    

	
 
	
    Assignment by Lessee
    
	
 
	
	
    22
    
	

	

    Section 18.3.
    

	
 
	
    Sublessee’s Performance and
    Rights
    
	
 
	
	
    22
    
	

	

    Section 18.4.
    

	
 
	
    Merger Covenant
    
	
 
	
	
    22
    
	

	

    Section 19.
    

	
 
	
    Net
    Lease, etc. 
    
	
 
	
	
    22
    
	

	

    Section 20.
    

	
 
	
    Notices
    
	
 
	
	
    23
    
	

	

    Section 21.
    

	
 
	
    Lessee’s
    Indemnities
    
	
 
	
	
    24
    
	

	

    Section 21.1.
    

	
 
	
    General Tax Indemnity
    
	
 
	
	
    24
    
	

	

    Section 21.2.
    

	
 
	
    General Indemnification and Waiver
    of Certain Claims
    
	
 
	
	
    29
    
	

	

    Section 22.
    

	
 
	
    Termination
    Upon Purchase by Lessee
    
	
 
	
	
    32
    
	

	

    Section 23.
    

	
 
	
    Lessee’s
    Options to Purchase Equipment
    
	
 
	
	
    32
    
	

	

    Section 24.
    

	
 
	
    Transaction
    Costs
    
	
 
	
	
    33
    
	

	

    Section 25.
    

	
 
	
    Filing
    in Mexico
    
	
 
	
	
    34
    
	

	

    Section 26.
    

	
 
	
    Miscellaneous
    
	
 
	
	
    34
    
	

	

    Section 26.1.
    

	
 
	
    Governing Law; Severability
    
	
 
	
	
    34
    
	

	

    Section 26.2.
    

	
 
	
    Execution in Counterparts
    
	
 
	
	
    34
    
	

	

    Section 26.3.
    

	
 
	
    Headings and Table of Contents;
    Section References
    
	
 
	
	
    34
    
	

    

    ii

 

	 	 	 	 	 	 	 
	

    Section

	
 
	

    Heading

	
 
	
    Page

	 

	

    Section 26.4.
    

	
 
	
    Successors and Assigns
    
	
 
	
	
    34
    
	

	

    Section 26.5.
    

	
 
	
    True Lease
    
	
 
	
	
    34
    
	

	

    Section 26.6.
    

	
 
	
    Amendments and Waivers
    
	
 
	
	
    34
    
	

	

    Section 26.7.
    

	
 
	
    Survival
    
	
 
	
	
    34
    
	

	

    Section 26.8.
    

	
 
	
    Business Days
    
	
 
	
	
    35
    
	

	

    Section 26.9.
    

	
 
	
    Directly or Indirectly
    
	
 
	
	
    35
    
	

	

    Section 26.10.
    

	
 
	
    Entitlement to §1168 Benefits
    
	
 
	
	
    35
    
	

	

    Section 26.11.
    

	
 
	
    Waiver of Jury Trial
    
	
 
	
	
    35
    
	

	

    Section 26.12.
    

	
 
	
    Reproduction of Documents
    
	
 
	
	
    35
    
	

	

    Section 26.13.
    

	
 
	
    Tax Disclosure
    
	
 
	
	
    35
    
	

	

    Section 26.14.
    

	
 
	
    Jurisdiction, Court Proceedings
    
	
 
	
	
    36
    
	

	

    Section 26.15.
    

	
 
	
    Judgment Currency
    
	
 
	
	
    36
    
	

	

    Attachments to Equipment Lease
    Agreement:
    

	

    Exhibit A — Closing
    and Settlement Conditions
    

	

    Exhibit B — Form
    of Certificate of Acceptance
    

	

    Exhibit C — Form
    of Lease Supplement
    

	

    Exhibit D — Form
    of Lessee Officer’s Certificate
    

	

    Exhibit E — Form
    of Lessor Officer’s Certificate
    

	

    Exhibit F — Form
    of Bill of Sale
    

	

    Appendix
    A — Definitions
    

	

    Schedule 1 — Price
    Assumptions and Pro Forma Schedules
    

    

    iii

 

    Equipment
    Lease Agreement

    (KCSM
    2007-1)

 

    This Equipment Lease
    Agreement (KCSM
    2007-1),
    dated as of April 4, 2007 (this “Lease”),
    between High Ridge
    Leasing LLC, a Delaware limited liability company
    (“Lessor”), and
    Kansas City Southern de
    Mexico, S. de R.L. de C.V., a corporation incorporated
    under the laws of Mexico (“Lessee”),

 

    Witnesseth:

 

    WHEREAS, Lessee has acquired thirty (30) General Electric
    ES44AC locomotives that were newly built and delivered within
    the last six months; and

 

    WHEREAS, Lessee desires to sell such locomotives to Lessor and
    to simultaneously lease such locomotives from Lessor in
    accordance with the terms of this Lease; and

 

    NOW THEREFORE, in consideration of the forgoing, Lessor and
    Lessee agree to consummate the sale and leaseback of such
    locomotives subject to the terms and conditions set forth herein.

 

    Section 1.  Definitions.

 

    Unless the context otherwise requires, all capitalized terms
    used herein without definition shall have the respective
    meanings set forth in Appendix A hereto for all purposes of
    this Lease.

 

    Section 2.  Acceptance
    and Leasing of Equipment.

 

    Section 2.1.  Sale
    and Purchase; Participation in Equipment
    Cost.  Subject to the terms and conditions hereof
    (and the satisfaction or waiver of the applicable conditions
    precedent set forth in Exhibit A attached hereto), on each
    Delivery Date (as defined below), Lessee agrees to sell to
    Lessor and Lessor agrees to purchase from Lessee, the Units of
    Equipment to be delivered on such Delivery Date as described in
    the Bill of Sale delivered on the Settlement Date (as defined
    below), and, in connection therewith, Lessor agrees to pay to
    Lessee the purchase price of $2,176,320 for each Unit of
    Equipment purchased; provided, however, that Lessee shall
    not be obligated to sell and Lessor shall not be obligated to
    purchase on the Settlement Date any Unit that is destroyed,
    damaged or otherwise unacceptable to Lessee for lease pursuant
    to this Lease on the Settlement Date; provided further
    that Lessor’s maximum commitment for all Units shall
    not exceed $66,000,000. Lessee shall deliver the applicable
    Equipment to Lessor at a location in the contiguous 48
    United States and Lessee shall, as authorized
    representative and on behalf of Lessor, accept such delivery on
    one or more delivery dates (each a “Delivery
    Date”) occurring during the period commencing on the
    date of the execution and delivery of this Lease and the Tax
    Indemnity Agreement and ending on the Settlement Date (as
    defined below).

 

    Section 2.2.  Settlement
    Date; Procedure for Participation.

 

    (a) Notice of Settlement Date.  Lessee
    shall give Lessor notice (the “Notice of
    Settlement”) by telex, telegraph, facsimile or other
    form of telecommunication or telephone of the Settlement Date
    not later than 1:00 P.M., New York City time, on the second
    Business Day preceding the Settlement Date, which Notice of
    Settlement shall specify in reasonable detail the number and
    type of Units to be settled on such date and the aggregate
    Equipment Cost of such Units required to be paid with respect to
    such Units. Prior to 11:00 A.M., New York City time, on the
    Settlement Date, Lessor shall make the amount of the Equipment
    Cost required to be paid on the Settlement Date available to
    Lessee, or its designee, by transferring or delivering such
    amounts in funds immediately available on the Settlement Date,
    to Lessee’s account at Bank of America (ABA
    No. 026009593), for credit to account number 629082687,
    Account Name: Kansas City Southern de Mexico, S. de R.L. de
    C.V., re: (KCSM
    2007-1) or
    such other account as designated by Lessee. The making available
    by Lessor of the amount of the Equipment Cost shall be deemed a
    waiver of the Notice of Settlement by Lessor.

 

    (b) Settlement.  The closing with respect
    to the settlement of the purchase price of the applicable Units
    (the “Settlement”) shall commence at
    9:00 A.M., New York City time at the offices of Chapman and
    Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603 or
    at such other place or time as the parties hereto shall

 

    agree on the date designated by Lessee in the Notice of
    Settlement described in Section 2.2(a) (such date being
    referred to as the “Settlement Date”);
    provided that the Settlement Date shall occur on or after
    April 4, 2007 and on or prior to April 30, 2007. Upon
    receipt by Lessee on the Settlement Date of the full amount of
    the Equipment Cost in respect of the Units delivered on or prior
    to the Settlement Date, (i) Lessee shall deliver the Bill
    of Sale for such Units to Lessor, (ii) Lessor shall have
    accepted such Units, such acceptance to be conclusively
    evidenced by the execution and delivery by Lessor or its
    authorized representative of a Certificate of Acceptance with
    respect to the applicable Units in the form attached hereto as
    Exhibit B (a “Certificate of Acceptance”),
    and (iii) Lessor shall, pursuant to this Lease, lease such
    Equipment as and when delivered and accepted on or prior to the
    Settlement Date to Lessee, and Lessee, pursuant to this Lease,
    shall accept delivery of such Units under this Lease, such
    lease, delivery and acceptance of such Units under this Lease to
    be conclusively evidenced by the execution and delivery by
    Lessee of a Certificate of Acceptance covering the Equipment so
    delivered subject to the condition subsequent that Lessee shall
    receive the purchase price for such Equipment on the Settlement
    Date.

 

    Section 3.  Term
    and Rent.

 

    Section 3.1.  Lease
    Term.  The interim term of this Lease (the
    “Interim Term”) for each Unit shall commence on
    the Delivery Date for such Unit and shall terminate at
    11:59 P.M. (New York City time) on the day before the Basic
    Term Commencement Date for such Unit. The basic term of this
    Lease (the “Basic Term”) for each Unit shall
    commence on the Basic Term Commencement Date for such Unit and,
    subject to earlier termination pursuant to
    Sections 10, 11, 15, 22.1 and 23, shall expire at
    11:59 P.M. (New York City time) on the Basic Term
    Expiration Date for such Unit.

 

    Section 3.2.  Basic
    Rent.  Lessee and Lessor hereby agree that no Rent
    (other than Supplemental Rent, if any) shall be payable to the
    Lessor during the Interim Term. Lessee hereby agrees to pay
    Lessor Basic Rent for each Unit throughout the Basic Term
    applicable thereto on the first Rent Payment Date and in
    consecutive semi-annual installments thereafter payable on each
    Rent Payment Date. Each payment of Basic Rent shall be in an
    amount equal to the product of the Equipment Cost for such Unit
    multiplied by the Basic Rent percentage for such Unit set forth
    opposite such Rent Payment Date on Schedule 2 to the Lease
    Supplement for such Units (as such Schedule 2 shall be
    adjusted pursuant to Section 3.4 hereof). Basic Rent shall
    be payable on the Rent Payment Dates as set forth in
    Schedule 2 to the Lease Supplement for the applicable
    Units. Basic Rent shall be allocated to and accrue for the use
    of the Units as specified in Schedule 5 to the Lease
    Supplement for such Units. For the avoidance of doubt, and
    notwithstanding anything to the contrary herein, the parties
    agree that irrespective of Lessee’s payment obligation on
    each Rent Payment Date, Lessee’s liability on account of
    the use of each Unit shall be allocated to each Lease period in
    the amount set forth in Schedule 5 to the Lease Supplement
    for the applicable Units. Basic Rent allocated to any Lease
    period shall be further allocated ratably to each day within
    such Lease period. Basic Rent shall be allocated to each
    calendar year in the Lease Term based upon the assumption that
    each calendar year in the Lease Term is 360 days,
    consisting of four
    90-day
    quarters and twelve
    30-day
    months. It is the intention of Lessor and Lessee that the
    allocations of Basic Rent to each Lease period in the amount set
    forth in Schedule 5 to the Lease Supplement constitute
    specific allocations of fixed rent within the meaning of
    Treasury Regulation
    section 1.467-1(c)(2)(ii)
    with the intended effect that the Lease will not have
    “prepaid rent” or “deferred rent” within the
    meaning of Treasury Regulation
    sections 1.467-1(c)(3)(i)
    or (ii). The parties hereto agree that for Mexican tax purposes
    each payment of Basic Rent pursuant to this Section 3.2
    shall constitute the payment of royalty for the temporary use of
    the Equipment during the term of this Lease.

 

    Section 3.3.  Supplemental
    Rent.  Lessee also agrees to pay to Lessor, or to
    whomsoever shall be entitled thereto, any and all Supplemental
    Rent, promptly as the same shall become due and owing, or where
    no due date is specified, promptly after demand by the Person
    entitled thereto, and in the event of any failure on the part of
    Lessee to pay any Supplemental Rent, Lessor shall have all
    rights, powers and remedies provided for herein or by law or
    equity or otherwise as in the case of nonpayment of Basic Rent.
    Without limiting the generality of the foregoing, Lessee will
    pay, as Supplemental Rent, (i) on demand, to the extent
    permitted by applicable law, an amount equal to interest at the
    applicable Late Rate on any part of any installment of Basic
    Rent not paid when due for any period for which the same shall
    be overdue and on any payment of Supplemental Rent not paid when
    due or demanded, as the case may be, for the period from such

    

    2

 

    due date or demand until the same shall be paid and (ii) on
    demand, any payments required under the Tax Indemnity Agreement
    or Section 21 hereof. All Supplemental Rent to be paid
    pursuant to this Section 3.3 shall be payable in the type
    of funds and in the manner set forth in Section 3.5.

 

    Section 3.4.  Calculation
    of Adjustments to Basic Rent, Stipulated Loss Value, Termination
    Value, EBO Fixed Purchase Price and FPO Fixed Purchase Price;
    Confirmation and Verification.

 

    (a) Schedules.  Schedule 1 hereto
    sets forth pricing assumptions (the “Pricing
    Assumptions”) and pro forma schedules of Basic Rent,
    Rent Payment Dates, Stipulated Loss Values, Termination Values,
    EBO Fixed Purchase Price, EBO Fixed Purchase Price Date, FPO
    Fixed Purchase Price and Allocation of Basic Rent. Promptly
    after receipt of the Notice of Settlement, Lessor shall prepare
    Schedules 2 through 7 for the Lease Supplement to be delivered
    on the Settlement Date setting forth the actual Basic Rent, Rent
    Payment Dates, Stipulated Loss Values, Termination Values, EBO
    Fixed Purchase Price, EBO Fixed Purchase Price Date, FPO Fixed
    Purchase Price, Allocation of Basic Rent, Overpayment of Basic
    Rent and Underpayment of Basic Rent, in each case in respect of
    the Units to be settled on the Settlement Date. Lessor shall
    also advise Lessee if there shall have occurred a Change in Tax
    Law that will result in an adjustment to economic schedules.
    After having been advised in writing by Lessor of such Change in
    Tax Law and the proposed adjustment to the payments of Basic
    Rent resulting therefrom as provided below, Lessee may decline
    to proceed with the transaction.

 

    In preparing such schedules, Lessor shall first increase or
    decrease the nominal after-tax yield component of Lessor’s
    Net Economic Return in an amount equal to 54.955% of the
    difference between (x) the Lessor’s Funding Index Rate
    on the second Business Day preceding the Settlement Date and
    (y) 5.05%, and then recalculate the payments or amounts, as
    the case may be, of Basic Rent, Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO Fixed
    Purchase Price:

 

    (i) to preserve the Net Economic Return, as adjusted, that
    Lessor would have realized had there been no change in the
    Pricing Assumptions or, if applicable, had no Change in Tax Law
    occurred prior to the Settlement Date, 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 for purposes of the foregoing
    being computed using the discount rate of 7.5%, semiannually
    compounded, and discounting to the Settlement Date).

 

    In performing any such recalculation and in determining
    Lessor’s Net Economic Return, Lessor shall utilize the same
    methods, tax constraints and assumptions originally used to
    calculate the payments of Basic Rent, Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO Fixed
    Purchase Price with respect to the Basic Term set forth in the
    pro forma schedules on Schedule 1 hereto (other than the
    changes in Pricing Assumptions 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 this Lease could not be treated as a
    “disqualified leaseback” or “long term
    agreement” within the meaning of section 467 of the
    Code). On the Settlement Date, Lessor and Lessee shall execute
    and deliver a Lease Supplement containing such revised schedules
    and attaching a list of the Units subject thereto.

 

    (b) Post Settlement Adjustments.  In the
    event (A) any amount is paid by Lessee to Lessor pursuant
    to Section 5.5(i) or 5.5(iii) of the Tax Indemnity
    Agreement, or (B) Lessee elects to make payments to Lessor
    pursuant to Section 5.5(ii) of the Tax Indemnity Agreement,
    then, in each case, Lessor shall recalculate the payments or
    amounts, as the case may be, of Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO Fixed
    Purchase Price:

 

    (i) to preserve the Net Economic Return that Lessor would
    have realized 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, and

    

    3

 

 

    (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 for purposes of the foregoing
    being computed using the discount rate of 7.5%, semiannually
    compounded, and discounting to the Settlement Date).

 

    In performing any such recalculation and in determining
    Lessor’s Net Economic Return, Lessor shall utilize the same
    methods, tax constraints and assumptions originally used to
    calculate the payments of Basic Rent, Stipulated Loss Values,
    Termination Values, EBO Fixed Purchase Price and FPO 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) and (B) 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 this Lease could not be treated as a
    “disqualified leaseback” or “long term
    agreement” within the meaning of section 467 of the
    Code).

 

    (c) Confirmation and Verification.  Upon
    completion of any recalculation described above in this
    Section 3.4 a duly authorized officer of Lessor shall
    provide a certificate to Lessee either (x) stating that the
    payments of Basic Rent, Stipulated Loss Values, Termination
    Values, EBO Fixed Purchase Price and FPO Fixed Purchase Price
    with respect to the Basic Term as are then set forth in this
    Lease do not require change, or (y) setting forth such
    adjustments to the payments of Basic Rent, Stipulated Loss
    Values, Termination Values, EBO Fixed Purchase Price or and FPO
    Fixed Purchase Price with respect to the Basic Term as have been
    calculated by Lessor in accordance with Section 3.4(b)
    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 3.4 shall be verified by a nationally recognized
    firm of independent accountants selected by Lessor and
    reasonably acceptable to Lessee and any such recalculation of
    such adjustment as so verified shall be binding on Lessee and
    Lessor. Such accounting firm shall be requested to make its
    determination within 30 days. Lessor 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 Lessor and the methods used by Lessor in the
    original calculation of, and any recalculation of, Basic Rent,
    Stipulated Loss Values, Termination Values, EBO Fixed Purchase
    Price and FPO 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 Lease. 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 Lessor pursuant to this
    Section 3.4(c) 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 a discount rate
    of 7.75% per annum, semiannually compounded, and
    discounting to the Settlement Date) to decline by 10 basis
    points or more from 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 a discount rate of 7.75% per annum, semiannually
    compounded, and discounting to the Settlement Date) certified by
    Lessor pursuant to this Section 3.4(c), or (2) any
    payment of Stipulated Loss Value, Termination Value, EBO Fixed
    Purchase Price or FPO Fixed Purchase Price is adjusted and such
    adjustment causes such Stipulated Loss Value, Termination Value,
    EBO Fixed Purchase Price or FPO Fixed Purchase Price to decline
    by 10 basis points or more from such Stipulated Loss Value,
    Termination Value, EBO Fixed Purchase Price or FPO Fixed
    Purchase Price certified by Lessor pursuant to this
    Section 3.4(c), in which case Lessor shall be responsible
    for the reasonable costs of such verification.

 

    (d) Invoices.  All invoices in respect of
    Transaction Costs shall be directed to Lessor at the address set
    forth in Section 20, with a copy to Lessee.

 

    Section 3.5.  Manner
    of Payments.  All Rent (other than Supplemental
    Rent payable to Persons other than Lessor, which shall be
    payable to such other Persons in accordance with written
    instructions furnished to

    

    4

 

    Lessee by such Persons, as otherwise provided in any of the
    Operative Agreements or as required by law) shall be paid by
    Lessee to Lessor at:

 

    Deutsche Bank Trust Company Americas

    ABA Number 021 001 033

    Account Name: GE Transportation Finance, Inc.

    Account Number
    50-276-558

    Reference: KCSM 2007

 

    All Rent shall be paid by Lessee in U.S. Dollars, which
    shall be immediately available to the recipient not later than
    12:00 noon (New York City time) on the date of such payment.

 

    Section 4.  Ownership
    and Marking of Equipment.

 

    Section 4.1.  Retention
    of Title.  Lessor shall and hereby does retain
    full legal title to and ownership of the Equipment
    notwithstanding the delivery of the Equipment to Lessee
    hereunder.

 

    Section 4.2.  Duty
    to Number and Mark Equipment.  On or before the
    applicable Delivery Date, Lessee shall cause each Unit to be
    numbered with the reporting mark shown on the Lease Supplement
    for such Unit dated the Settlement Date and, within 30 days
    of the Settlement Date and at all times thereafter, shall cause
    each Unit to be plainly, distinctly, permanently and
    conspicuously marked by a plate or stencil printed in
    contrasting colors upon each side of each Unit, in letters not
    less than one inch in height, a legend substantially as follows:

 

    “Subject
    to a Lease Agreement recorded

    with the Surface Transportation Board”

    or

    “Ownership subject to a Lease Agreement filed

    with the Surface Transportation Board”
    

 

    with appropriate changes thereof and additions thereto as from
    time to time may be required by law in order to protect
    Lessor’s right, title and interest in and to such Unit and
    its rights under this Lease. Except as provided hereinabove,
    Lessee will not place any such Units in operation or exercise
    any control or dominion over the same until the required legend
    shall have been so marked on both sides thereof, and will
    replace promptly any such word or words in such legend which may
    be removed, defaced, obliterated or destroyed. Lessee will not
    change the reporting mark of any Unit except in accordance with
    a statement of new reporting marks to be substituted therefor,
    which statement shall be delivered to Lessor by Lessee and a
    supplement to this Lease with respect to such new reporting
    marks shall be filed or recorded by Lessee in all public offices
    where this Lease shall have been filed or recorded, in each case
    promptly after a Responsible Officer of Lessee obtains actual
    knowledge of such change.

 

    Section 4.3.  Prohibition
    against Certain Designations.  Except as above
    provided, Lessee will not allow the name of any Person to be
    placed on any Unit as a designation that might reasonably be
    interpreted as a claim of ownership; provided however,
    that subject to the delivery of the statement specified in the
    last sentence of Section 4.2, Lessee may cause the
    Equipment to be lettered with the names or initials or other
    insignia customarily used by Lessee or any permitted sublessees
    or any of their respective Affiliates on railroad equipment used
    by it of the same or a similar type.

 

    Section 5.  Disclaimer
    of Warranties; Right of Quiet Enjoyment.

 

    Section 5.1.  Disclaimer
    of Warranties.  Without waiving any claim Lessee
    may have against any seller, supplier or manufacturer,
    Lessee acknowledges and
    agrees that, (i) each Unit is of a size, design, capacity
    and manufacture selected by and acceptable to Lessee,
    (ii) Lessee is satisfied that each Unit is suitable for its
    purposes, (iii) Lessor is not a manufacturer or a dealer in
    property of such kind, (iv) each Unit is leased hereunder
    subject to all applicable laws and governmental regulations now
    in effect or hereinafter adopted, and (v) Lessor leases and
    Lessee takes each Unit “as-is”, “where-is”
    and “with all faults”, and Lessee acknowledges that
    Lessor does not make nor shall be deemed to have made, and
    expressly disclaims,
    

    

    5

 

    any and all rights,
    claims, warranties or representations either express or implied,
    as to the value, condition, fitness for any particular purpose,
    design, operation, merchantability thereof or as to the title of
    the equipment, the quality of the material or workmanship
    thereof or conformity thereof to specifications, freedom from
    patent, copyright or trademark infringement, the absence of any
    latent or other defect, whether or not discoverable, or as to
    the absence of any obligations based on strict liability in tort
    or any other express or implied representation or warranty
    whatsoever with respect thereto, except that Lessor
    represents and warrants that on each Delivery Date, Lessor shall
    have received whatever title to the Equipment delivered under
    this Lease on such Delivery Date as was conveyed to Lessor by
    Lessee and each Unit will be free of Lessor’s Liens. During
    the Lease Term so long as no Event of Default shall have
    occurred and be continuing, Lessor hereby appoints and
    constitutes Lessee its agent and
    attorney-in-fact
    during the Lease Term to assert and enforce, from time to time,
    in the name and for the account of Lessor and Lessee, as their
    interests may appear, but in all cases at the sole cost and
    expense of Lessee, whatever claims and rights Lessor may have as
    owner of the Equipment against the manufacturers or any prior
    owner thereof.

 

    Section 5.2.  Quiet
    Enjoyment.  Each party to this Lease acknowledges
    notice of, and consents in all respects to, the terms of this
    Lease, and expressly, severally and as to its own actions only,
    agrees that, notwithstanding any other provision of any of the
    Operative Agreements, so long as no Event of Default has
    occurred and is continuing, it shall not take or cause to be
    taken any action inconsistent with Lessee’s rights under
    this Lease or otherwise through its own actions in any way
    interfere with or interrupt the quiet enjoyment of the use,
    operation and possession of any Unit by Lessee.

 

    Section 6.  Return
    of Equipment; Storage.

 

    Section 6.1.  General.  (a) If
    Lessee determines not to give a notice of its election to
    repurchase the Units pursuant to Section 23(a)(iii), Lessee
    shall give Lessor at least 90 days prior notice of its
    intention to return the Units at the expiration of the Term. On
    the expiration of the Lease Term with respect to any Unit which
    has not been purchased by Lessee, Lessee will, at its own cost
    and expense, deliver possession of such Unit to Lessor at not
    more than three interchange points on the tracks of Lessee or an
    Affiliate of Lessee in the 48 contiguous United States, f.o.b.
    such interchange point, as Lessor may reasonably designate to
    Lessee in writing at least 60 days before the end of the
    Lease Term or, in the absence of such designation, as Lessee may
    reasonably select or, if Lessor has requested storage pursuant
    to Section 6.3, to the location determined in accordance
    with Section 6.3. Upon expiration of the Lease Term with
    respect to such Unit, compliance with the terms hereof and
    tender of such Unit at the location determined in accordance
    with this Section 6.1(a), this Lease and the obligation to
    pay Basic Rent and all other Rent for such Unit accruing
    subsequent to such expiration (except for Supplemental Rent
    obligations with respect to such Unit surviving pursuant to
    Section 21 hereof or the Tax Indemnity Agreement or which
    have otherwise accrued but not been paid as of the date of the
    expiration of the Lease Term) shall terminate.

 

    (b) In the event any Unit is not returned as hereinabove
    provided upon the scheduled expiration of the Lease Term with
    respect to such Unit, Lessee may retain custody and control of
    such Unit so long as Lessee is attempting to remedy any
    condition delaying such return, and in any case the covenants of
    Lessee (other than with respect to Basic Rent) under this Lease
    (including those pertaining to indemnities, Liens, maintenance
    and insurance) shall continue with respect to such Unit until
    such return of such Unit and, regardless of whether such delay
    shall be attributable to Lessee or any permitted sublessee,
    Lessee shall pay to Lessor, for each day from and after the
    scheduled expiration of this Lease, Basic Rent in an amount
    equal to the greater of the Fair Market Rental Value of such
    Unit and the daily equivalent of the arithmetic average of the
    Basic Rent payable during the Basic Term for such Unit.

 

    (c) In the event any Unit is not returned as hereinabove
    provided within 90 days after the expiration of the Lease
    Term with respect to such Unit, Lessee may retain custody and
    control of such Unit so long as Lessee is attempting to remedy
    any condition delaying such return, and in any case the
    covenants of Lessee (other than with respect to Basic Rent)
    under this Lease (including those pertaining to indemnities,
    Liens, maintenance and insurance) shall continue with respect to
    such Unit until such return of such Unit and, regardless of
    whether such delay shall be attributable to Lessee or any
    permitted sublessee, Lessee shall pay to Lessor, for each day
    from and after the expiration of such
    90-day
    period, Basic Rent in an amount equal to the

    

    6

 

    greater of the Fair Market Rental Value of such Unit and 150% of
    the daily equivalent of the arithmetic average of the Basic Rent
    payable during the Basic Term.

 

    (d) In the event any Unit is not returned as hereinabove
    provided within 180 days after the expiration of the Lease
    Term with respect to such Unit, Lessee may retain custody and
    control of such Unit so long as Lessee is attempting to remedy
    any condition delaying such return, and in any case the
    covenants of Lessee (other than with respect to Basic Rent)
    under this Lease (including those pertaining to indemnities,
    Liens, maintenance and insurance) shall continue with respect to
    such Unit until such return of such Unit and, regardless of
    whether such delay shall be attributable to Lessee or any
    permitted sublessee, Lessor may, at its option, upon notice to
    Lessee on any Business Day after the expiration of such
    180-day
    period deem such failure to return such Unit to be an Event of
    Loss, whereupon the provisions of Sections 11.2, 11.3 and
    11.4 shall apply to such Unit.

 

    (e) The provision for payment pursuant to
    Section 6.1(b) and Section 6.1(c) above shall not be
    in abrogation of Lessor’s right under Section 6.1(a)
    to have such Unit returned to it hereunder or prevent Lessor
    from exercising any other remedies set forth herein.

 

    Section 6.2.  Condition
    of Equipment.  Each Unit when returned to Lessor
    pursuant to Section 6.1(a) shall (i) be in the
    condition required by Sections 8.1 and 9.3, (ii) be
    capable of performing the functions for which it was designed
    covered by Section 8.1 and (iii) be free and clear of
    all Liens except Lessor’s Liens and Permitted Liens,
    provided that Lessee agrees to promptly discharge any
    such Permitted Lien upon return of the Unit with Lessor’s
    sole remedy for any breach of this clause (iii) being
    damages at law or specific performance at equity. To the extent
    that any maintenance or overhaul logs are kept by Lessee with
    respect to any Unit returned pursuant to Section 6.1 and
    such maintenance logs are customarily made available to the
    purchaser of equipment of a type similar to such Unit, upon the
    request of Lessor and at Lessee’s expense, such maintenance
    and overhaul logs shall be made available to Lessor or its
    designee upon the return of such Unit. Except as expressly
    provided in this Section 6.2, there will be no further
    requirements imposed upon Lessee with respect to the condition
    of any Unit upon its return in accordance with the provisions of
    Section 6.1 hereof and this Section 6.2.

 

    Section 6.3.  Storage.  Upon
    the expiration of the Lease Term with respect to each Unit, upon
    written request of Lessor received at least 60 days prior
    to the end of the Lease Term with respect to such Unit, Lessee
    shall permit Lessor to store each such Unit, free of charge,
    except as provided below, at such location on the tracks of
    Lessee used by Lessee for the storage of surplus rolling stock
    or locomotives or rolling stock or locomotives available for
    sale as shall be reasonably designated by Lessor (taking into
    account, among other things, Lessee’s storage capacity,
    security and access) in its request for storage pursuant to this
    Section 6.3 for a period (the “Storage
    Period”) beginning on the expiration of the Lease Term
    and ending not more than 60 days after the later of the
    expiration of the Lease Term with respect to such Units or the
    date on which 65% of all Units to be returned at the expiration
    of the Lease Term have been returned. Any storage facilities
    provided by Lessee pursuant to this Section 6.3 shall, in
    all cases, be at the cost to Lessor of insurance and
    Lessee’s
    out-of-pocket
    costs in connection with providing any services not contemplated
    hereby to be provided during the Storage Period and at the risk
    of Lessor, including but not limited to any deterioration of any
    Unit caused by moisture or any weather-related cost to the
    extent such cost arises during such period of storage and not as
    a result of Lessee’s violation of its obligations under
    this Lease (except, with respect to any injury to, or death of,
    any person exercising, either on behalf of Lessor or any
    prospective purchaser or user, the inspection rights granted
    pursuant to this Section 6.3, Lessee’s gross
    negligence or willful misconduct). With respect to the Units
    stored pursuant hereto, Lessee will carry and maintain with
    respect to stored Units, during the Storage Period, under
    Lessee’s insurance policies, property damage insurance and
    public liability insurance with respect to third party personal
    and property damage as Lessee then maintains in respect of
    equipment owned or leased by it similar in type to the
    Equipment; provided that (i) Lessor pays all
    incremental costs associated with such insurance coverage,
    (ii) such insurance coverage does not negatively impact
    upon Lessee’s loss insurance rating and (iii) any
    coverage provided is above Lessee’s deductibles or
    self-insurance retention amounts. On not more than one occasion
    with respect to each stored Unit and upon not less than
    15 days’ prior written notice from Lessor to Lessee,
    Lessee will, during the Storage Period, transport such Units, in
    groups of not fewer than five (5), at Lessee’s cost and
    expense, to an

    

    7

 

    interchange point, f.o.b., such interchange point, on the lines
    of Lessee or an Affiliate of Lessee in the 48 contiguous United
    States reasonably specified by Lessor, whereupon Lessee shall
    have no further liability or obligation with respect to such
    Units. During the Storage Period, Lessee will permit Lessor or
    any person designated by it, including the authorized
    representative or representatives of any prospective purchaser
    or user of such Unit, to inspect the same; provided,
    however, that such inspection shall not interfere with the
    normal conduct of Lessee’s business and such person shall
    be insured to the reasonable satisfaction of Lessee with respect
    to any risks incurred in connection with any such inspections
    and Lessee (except in the case of Lessee’s gross negligence
    or willful misconduct) shall not be liable for any injury to, or
    the death of, any person exercising, either on behalf of Lessor
    or any prospective purchaser or user, the rights of inspection
    granted pursuant hereto. Lessee shall not be required to store
    the Equipment after the Storage Period. If Lessee stores any
    Unit after the Storage Period, such storage shall be at the sole
    expense and risk of Lessor.

 

    Section 6.4.  Termination
    of Lease.  Upon the later of (i) expiration
    of the Lease Term with respect to such Unit and payment of all
    sums due hereunder, (ii) tender of such Unit at the
    location determined in accordance with Section 6.1(a) or,
    as applicable, the tender of such Unit for storage in accordance
    with Section 6.3, and (iii) compliance by such Unit
    with Section 6.2, this Lease and the obligation to pay Rent
    (except for Supplemental Rent obligations surviving pursuant to
    Section 21 hereof) for such Unit accruing subsequent to the
    expiration of the Lease Term with respect to such Unit shall
    terminate.

 

    Section 7.  Liens.

 

    Section 7.1.  Lessee
    Liens.  Lessee will not directly or indirectly
    create, incur, assume or suffer to exist any Lien on or with
    respect to any Units or Lessee’s leasehold interest therein
    under this Lease, except Permitted Liens, and Lessee shall
    promptly, at its own expense, take such action as may be
    necessary to duly discharge (by bonding or otherwise) any such
    Lien not excepted above if the same shall arise at any time.

 

    Section 7.2.  Lessor
    Liens.  Lessor will not directly or indirectly
    create, incur, assume or suffer to exist any Lessor’s Lien
    on or with respect to any Units or Lessor’s interest
    therein, and Lessor shall promptly, at its own expense, take
    such action as may be necessary to duly discharge (by bonding or
    otherwise) any such Lessor’s Lien if the same shall arise
    at any time.

 

    Section 8.  Maintenance;
    Operation; Sublease.

 

    Section 8.1.  Maintenance.  Lessee,
    at its own cost and expense, shall service, maintain, repair and
    keep each Unit (i) in good repair and operating condition,
    ordinary wear and tear excepted, (ii) in accordance with
    (a) prudent Class I railroad industry maintenance
    practices in existence from time to time and
    (b) manufacturer’s recommendations to the extent
    required to maintain such manufacturer’s warranties in
    effect with respect to such Unit, (iii) in a manner
    consistent with service, maintenance, overhaul and repair
    practices used by Lessee in respect of equipment owned or leased
    by Lessee similar in type to such Unit and without
    discrimination between owned and leased equipment and
    (iv) in compliance, in all material respects, with all
    applicable laws and regulations, including any applicable AAR
    Mechanical Standards and Federal Railroad Administration
    regulations as applicable to continued use by Lessee;
    provided, however, that Lessee may, in good faith and by
    appropriate proceedings diligently conducted, contest the
    validity or application of any such law, regulation, requirement
    or rule in any reasonable manner which does not materially
    adversely affect the rights or interests of Lessor in the
    Equipment or hereunder or otherwise expose Lessor to criminal
    sanctions or release Lessee from the obligation to return the
    Equipment in compliance with the provisions of Section 6.2.

 

    Section 8.2.  Operation.  Lessee
    shall be entitled to the possession of the Equipment and to the
    use of the Equipment by it or any Affiliate in the general
    operation of Lessee’s or any such Affiliate’s freight
    rail business upon lines of railroad owned or operated by it or
    any such Affiliate, upon lines of railroad over which Lessee or
    any such Affiliate has trackage or other operating rights or
    over which railroad equipment of Lessee or any such Affiliate is
    regularly operated pursuant to contract and on railroad lines of
    other railroads (including in connection with barge-related rail
    transportation) in Mexico, the United States and Canada, in the
    usual interchange of traffic or in through or run-through
    service and shall be entitled to permit the use of the Equipment
    upon lines of railroad of connecting and other carriers in the
    usual interchange of traffic or pursuant to through or
    run-through agreements; provided Lessee shall use the
    Equipment only for the purpose

    

    8

 

    and in the manner for which it was designed and intended and in
    compliance, in all material respects, with all laws, regulations
    and guidelines of any governmental body, the Association of
    American Railroads, the Federal Railroad Administration and the
    Surface Transportation Board and their successors and assigns.
    Nothing in this Section 8.2 shall be deemed to constitute
    permission by Lessor to any Person that acquires possession of
    any Unit to take any action inconsistent with the terms and
    provisions of this Lease and any of the other Operative
    Agreements. The rights of any person that acquires possession of
    any Unit pursuant to this Section 8.2 shall be subject and
    subordinate to the rights of Lessor hereunder.

 

    Section 8.3.  Sublease.  So
    long as no Specified Default or Event of Default shall have
    occurred and be continuing and subject to Lessor’s prior
    written consent to any sublease for a term in excess of one year
    to a
    non-Class I
    railroad, Lessee shall have the right, without the prior written
    consent of Lessor, to sublease any Unit to or permit its use by
    a user organized under the federal laws or the laws of any state
    of Mexico, incorporated under the federal laws or the laws of
    any state of the United States or organized under the federal
    laws or the laws of any province of Canada, for use by such
    sublessee or user upon lines of railroad owned or operated by
    Lessee, any Affiliate of Lessee, such sublessee or user or by a
    railroad company or companies organized under the federal laws
    or the laws of any state of Mexico, incorporated under the
    federal laws or laws of any state of the United States or
    organized under the federal laws or the laws of any province in
    Canada, over which Lessee, such Affiliate of Lessee, such
    sublessee or user or such railroad company or companies has
    trackage or other operating rights, and upon lines of railroad
    of connecting and other carriers in the usual interchange of
    traffic or pursuant to through or run-through service
    agreements; provided such sublessee shall not, at the
    time of such sublease, be insolvent or subject to insolvency or
    bankruptcy proceedings. Each sublease shall be subject and
    subordinate to this Lease (including the duration of the
    sublease term, which term may not expire after the expiration of
    the Basic Term) and no such sublease shall contain a purchase
    option. No sublease shall in any way discharge or diminish any
    of Lessee’s obligations hereunder, and Lessee shall remain
    primarily liable hereunder for the performance of all the terms,
    conditions and provisions of this Lease and the other Lessee
    Agreements to the same extent as if such sublease had not been
    entered into. Nothing in this Section 8.3 shall be deemed
    to constitute permission to any Person in possession of any Unit
    pursuant to any such sublease to take any action inconsistent
    with the terms and provisions of this Lease or any of the other
    Operative Agreements.

 

    Section 9.  Modifications.
    

 

    Section 9.1.  Required
    Modifications.  In the event the Association of
    American Railroads, the United States Department of
    Transportation, or any other Mexican, United States or Canadian
    federal, state or local governmental authority having
    jurisdiction over the operation, safety or use of any Unit
    requires that such Unit be altered, replaced or modified (a
    “Required Modification”), Lessee agrees to make
    such Required Modification at its own expense; provided,
    however, that Lessee may, in good faith and by appropriate
    proceedings diligently conducted, contest the validity or
    application of any such law, regulation, requirement or rule in
    any reasonable manner which does not materially adversely affect
    the rights or interests of Lessor in the Equipment or hereunder
    or otherwise expose Lessor to criminal sanctions or relieve
    Lessee of the obligation to return the Equipment in compliance
    with the provisions of Section 6.2. Subject to
    Section 9.3, title to any Required Modification shall
    immediately vest in Lessor. Notwithstanding anything herein to
    the contrary, if Lessee determines in good faith that any
    Required Modification to a Unit would be economically
    impractical, it shall provide written notice of such
    determination to Lessor and the parties hereto shall treat such
    Unit as if an Event of Loss had occurred as of the date of such
    written notice with respect to such Unit and the provisions of
    Sections 11.2, 11.3 and 11.4 with respect to rent,
    termination and disposition shall apply with respect to such
    Unit unless Lessor, within 15 Business Days of such notice,
    elects to retain such Unit pursuant to Section 9.4.

 

    Section 9.2.  Optional
    Modifications.  Lessee at any time may modify,
    alter or improve any Unit (a “Modification”);
    provided that no Modification shall diminish in more than
    a de minimis respect the current fair market value,
    utility, expected residual value or remaining useful life of
    such Unit below the current fair market value, utility, expected
    residual value or remaining useful life thereof immediately
    prior to such Modification, assuming such Unit was then in the
    condition required to be maintained by the terms of this Lease.
    Title to any Non-Severable Modifications shall be immediately
    vested in Lessor. Title to any Severable

    

    9

 

    Modifications shall remain with Lessee. If Lessee shall at its
    cost cause such Severable Modifications to be made to any Unit
    and such Severable Modifications are reasonably necessary for
    the economic operation of any such Unit, Lessor shall have the
    right, prior to the return of such Unit to Lessor hereunder, to
    purchase such Severable Modifications (other than Severable
    Modifications consisting of proprietary or communications
    equipment) at their then Fair Market Sales Value (taking into
    account their actual condition). If Lessor does not elect to
    purchase such Severable Modifications, Lessee may remove, and
    shall remove if requested by Lessor, such Severable
    Modifications at Lessee’s cost and expense.

 

    Section 9.3.  Removal
    of Proprietary and Communications
    Equipment.  Notwithstanding anything to the
    contrary contained herein, Lessee shall at all times own and be
    entitled to remove at Lessee’s cost and expense, any
    Severable Modification consisting of proprietary or
    communications equipment from any Unit prior to the return of
    such Unit; provided that if Lessee removes such Severable
    Modification that is (i) a Required Modification and
    (ii) such equipment is not customarily provided by the
    user, Lessee shall replace such proprietary or communications
    equipment with non-proprietary equipment of comparable utility.

 

    Section 9.4.  Retention
    of Equipment by Lessor.  Notwithstanding the
    provisions of the last sentence of Section 9.1, Lessor may
    irrevocably elect by written notice to Lessee, no later than 15
    Business Days after receipt of Lessee’s notice of
    determination of economic impracticality pursuant to
    Section 9.1, not to declare an Event of Loss as provided in
    Section 9.1, whereupon Lessee shall not be liable for the
    Stipulated Loss Value for the affected Units but shall
    (i) deliver the affected Units to Lessor in the same manner
    and in the same condition as if delivery were made pursuant to
    Section 6 (except that Lessee shall not be required to
    correct the conditions which gave rise to the notice of economic
    impracticality), treating the applicable date for payment
    specified in Section 11.2(ii) as the termination date of
    the Lease Term with respect to the affected Units, and
    (ii) pay to Lessor, or to the Persons entitled thereto, all
    Basic Rent and Supplemental Rent due and owing on such
    termination date and unpaid and the Underpayment of Basic Rent
    for such Units as of such termination date. On such termination
    date, if Lessee shall have paid all amounts due hereunder,
    Lessor shall pay to Lessee the Overpayment of Basic Rent for
    such Units as of such termination date. If Lessor shall fail to
    perform any of its obligations pursuant to this Section 9.4
    on the scheduled termination date for any affected Unit, the
    parties hereto shall treat such Unit as if an Event of Loss had
    occurred as of the date of Lessee’s written notice with
    respect to such Unit pursuant to Section 9.1 and the
    provisions of Sections 11.2, 11.3 and 11.4 with respect to
    rent, termination and disposition shall apply with respect to
    such Unit and Lessor shall thereafter no longer be entitled to
    exercise its election to retain such affected Units.

 

    Section 10.  Voluntary
    Termination.

 

    Section 10.1.  Right
    of Termination.  So long as no Specified Default
    or Event of Default shall have occurred and be continuing, if
    Lessee determines in good faith (as evidenced by a certificate
    executed by the Chief Financial Officer of Lessee), either
    (x) that the Units have become obsolete or surplus to
    Lessee’s requirements or (z) that a Section 10
    Change in Tax Law has occurred and as a result thereof, Lessee
    is subject either (A) to a new or increased indemnity
    obligation to Lessor with respect to Mexican Taxes (which
    indemnity Lessor has not waived in writing) or (B) Lessee
    is subject to a new or increased Mexican Tax with respect to the
    transactions contemplated by this Lease and the net present
    value of such new or increased indemnity obligation or Taxes
    from and after the Termination Date for the remainder of the
    Lease Term, is greater than 5% of the net present value of the
    Basic Rent for the remainder of the Lease Term, in each case
    discounted at the Discount Rate, Lessee shall have the right
    with respect to, at the sole discretion of Lessee, all but not
    less than all of the Equipment in the case of obsolescence or
    any such tax law change and with respect to lots of one
    (1) or more Units in the case of surplusage (the
    “Terminated Units”), at its option at any time
    or from time to time on or after the fifth anniversary of the
    Settlement Date in the case of obsolescence or surplusage and at
    any time or from time to time in the case of any such tax law
    change, to terminate this Lease with respect to the Terminated
    Units by delivering at least 120 days’ prior notice to
    Lessor specifying a proposed date of termination for such Units
    (the “Termination Date”), which date shall be a
    Determination Date, any such termination to be effective on the
    Termination Date. Except as expressly provided herein, there
    will be no conditions to Lessee’s right to terminate this
    Lease with respect to the Terminated Units pursuant to this
    Section 10.1. So long as Lessor shall not have given Lessee
    a notice of election to retain the Terminated Units in
    accordance with Section 10.3, Lessee may withdraw the
    termination notice referred to above at any

    

    10

 

    time prior to the 20th day preceding the scheduled
    Termination Date, whereupon this Lease shall continue in full
    force and effect; provided that (i) Lessee shall pay
    all reasonable costs of Lessor incurred in connection with any
    proposed or withdrawn termination and (ii) Lessee may not
    withdraw a notice hereunder more than two times.

 

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

 

    Section 10.3.  Retention
    of Equipment by Lessor.  Notwithstanding the
    provisions of Sections 10.1 and 10.2, Lessor may
    irrevocably elect by written notice to Lessee, no later than
    30 days after receipt of Lessee’s notice of
    termination, not to sell the Terminated Units on the Termination
    Date, whereupon Lessee shall (i) deliver the Terminated
    Units to Lessor in the same manner and condition as if delivery
    were made to Lessor pursuant to Section 6, treating the
    Termination Date as the termination date of the Lease Term with
    respect to the Terminated Units, and (ii) pay to Lessor, or
    to the Persons entitled thereto, all Basic Rent and Supplemental
    Rent due and owing on the Termination Date and unpaid, and the
    Underpayment of Basic Rent for such Units as of such Termination
    Date. On such Termination Date, if Lessee shall have paid all
    amounts due hereunder, Lessor shall pay to Lessee the
    Overpayment of Basic Rent for such Units as of such Termination
    Date. If Lessor shall fail to perform any of its obligations
    pursuant to this Section 10.3 and as a result thereof this
    Lease shall not be terminated with respect to the Terminated
    Units on a proposed Termination Date, Lessor shall thereafter no
    longer be entitled to exercise its election to retain such
    Terminated Units and Lessee may at its option at any time
    thereafter submit a new termination notice pursuant to
    Section 10.1 with respect to such Terminated Units
    specifying a proposed Termination Date occurring not earlier
    than five Business Days from the date of such notice.

    

    11

 

 

    Section 10.4.  Termination
    of Lease.  In the event of any such sale and
    receipt by Lessor of all of the amounts provided herein, and
    upon compliance by Lessee with the other provisions of this
    Section 10, the Lease Term for the Terminated Units shall
    end and the obligation to pay Basic Rent and all other Rent for
    such Terminated Units (except for Supplemental Rent obligations
    with respect to such Terminated Units surviving pursuant to
    Section 21 hereof or the Tax Indemnity Agreement or which
    have otherwise accrued but not been paid as of the date of the
    expiration of the Lease Term) shall terminate.

 

    Section 11.  Loss,
    Destruction, Requisition, Etc.

 

    Section 11.1.  Event
    of Loss.  In the event that any Unit
    (i) shall suffer destruction, damage, contamination or wear
    which, in Lessee’s good faith opinion, makes repair
    uneconomic or renders such Unit unfit for commercial use,
    (ii) shall suffer theft or disappearance, (iii) shall
    be permanently returned to the manufacturer pursuant to any
    warranty or patent indemnity provisions, (iv) shall have
    title thereto taken or appropriated by any governmental
    authority under the power of eminent domain or otherwise,
    (v) shall be taken or requisitioned for use by any
    governmental authority (other than the United States government
    or any agency or instrumentality thereof) under the power of
    eminent domain or otherwise and such taking or requisition is
    continuing in excess of 180 days or, if earlier, on the
    last day of the Basic Term, or (vi) shall be taken or
    requisitioned for use by the United States government or any
    agency or instrumentality thereof and such taking or requisition
    is continuing on the last day of the Basic Term (any such
    occurrence being hereinafter called an “Event of
    Loss”), Lessee, in accordance with the terms of
    Section 11.2, shall promptly and fully inform Lessor of
    such Event of Loss.

 

    Section 11.2.  Replacement
    or Payment upon Event of Loss.  Upon the
    occurrence of an Event of Loss or the deemed occurrence of an
    Event of Loss pursuant to Section 9.1 or Section 9.4
    with respect to any Unit, Lessee shall within 60 days after
    a Responsible Officer of Lessee shall have actual knowledge of
    such occurrence or deemed occurrence give Lessor notice of such
    occurrence or deemed occurrence of such Event of Loss and of its
    election to perform one of the following options (it being
    agreed that if Lessee shall not have given notice of such
    election within such 60 days after such actual knowledge of
    such occurrence or deemed occurrence, Lessee shall be deemed to
    have elected to perform the option set forth in the following
    paragraph (ii)):

 

    (i) So long as no Specified Default or Event of Default
    shall have occurred and be continuing, as promptly as
    practicable, and in any event on or before the Business Day next
    preceding the 91st day next following the date on which a
    Responsible Officer of Lessee shall have actual knowledge of the
    occurrence or deemed occurrence of such Event of Loss, Lessee
    shall comply with Section 11.4(b) and shall convey or cause
    to be conveyed to Lessor a Replacement Unit to be leased to
    Lessee hereunder, such Replacement Unit to be free and clear of
    all Liens (other than Permitted Liens) and to have a current
    fair market value, utility, expected residual value and
    remaining useful life at least equal to the Unit so replaced
    (assuming such Unit was in the condition required to be
    maintained by the terms of this Lease); provided that, if
    Lessee shall not perform its obligation to effect such
    replacement under this paragraph (i) during the period
    of time provided herein, then Lessee shall pay on a
    Determination Date selected by Lessee that is within
    20 days after the end of such period to Lessor, or in the
    case of Supplemental Rent, to the Person entitled thereto, the
    amounts specified in paragraph (ii) below; or

 

    (ii) on or before the next succeeding Rent Payment Date
    that is at least 30 days after the date of notice of such
    Event of Loss or deemed Event of Loss or on the date specified
    in the proviso to paragraph (i) above, Lessee shall
    pay or cause to be paid on the applicable Determination Date to
    Lessor or, in the case of Supplemental Rent, to the Persons
    entitled thereto, in funds of the type specified in
    Section 3.5, (A) an amount equal to the Stipulated
    Loss Value of each such Unit determined as of such Determination
    Date, (B) all unpaid Basic Rent with respect to each such
    Unit due on or prior to such Determination Date and (C) in
    the case of a deemed Event of Loss pursuant to Section 9.1
    or the last sentence of Section 9.4, Breakage, if any, with
    respect to each such Unit and (D) without duplication, all
    other Rent (other than Basic Rent) then due and payable
    hereunder, it being understood that until such Stipulated Loss
    Value is paid, there shall be no abatement or reduction of Basic
    Rent.

    

    12

 

 

    Section 11.3.  Rent
    Termination.  Upon the payment of all sums
    required to be paid pursuant to Section 11.2(ii) hereof in
    respect of any Unit or Units for which Lessee has elected to pay
    or deemed to have elected to pay pursuant to the proviso to
    Section 11.2(i) the amounts specified in
    paragraph 11.2(ii), the Lease Term with respect to such
    Unit or Units and the obligation to pay Rent for such Unit or
    Units (except for Supplemental Rent obligations with respect to
    such Unit or Units surviving pursuant to Section 21 hereof
    or the Tax Indemnity Agreement or which have otherwise accrued
    but not been paid as of the date of the expiration of the Lease
    Term) shall terminate; provided that Lessee shall be
    obligated to pay all Rent in respect of such Unit or Units which
    has accrued up to and including the date of payment of
    Stipulated Loss Value pursuant to Section 11.2.

 

    Section 11.4.  Disposition
    of Equipment; Replacement of Unit.  (a) Upon
    the payment of all sums required to be paid pursuant to
    Section 11.2 in respect of any Unit or Units, Lessor will
    convey to Lessee or its designee all right, title and interest
    of Lessor in and to such Unit or Units, “as is”,
    “where is”, without recourse or warranty, except for a
    warranty against Lessor’s Liens, and shall execute and
    deliver to Lessee or its designee such bills of sale and other
    documents and instruments as Lessee or its designee may
    reasonably request to evidence such conveyance. As to each
    separate Unit so disposed of, Lessee or its designee shall be
    entitled to any amounts arising from such disposition, plus any
    awards, insurance (other than insurance maintained by Lessor for
    its own account in accordance with Section 12.3) or other
    proceeds and damages (including any Association of American
    Railroads interline settlement paid upon an Event of Loss)
    received by Lessee or Lessor by reason of such Event of Loss
    after having paid the Stipulated Loss Value attributable
    thereto; provided that any proceeds from condemnation
    awards in excess of the applicable Stipulated Loss Value shall
    be divided between Lessor and Lessee as their interests appear.

 

    (b) At the time of or prior to any replacement of any Unit,
    Lessee, at its own expense, shall (A) furnish Lessor with a
    full warranty bill of sale and an assignment of warranties with
    respect to the Replacement Unit, (B) cause a Lease
    Supplement substantially in the form of Exhibit C hereto,
    subjecting such Replacement Unit to this Lease, duly executed by
    Lessee, to be delivered to Lessor for execution and, upon such
    execution, to be filed for recordation in the same manner as
    provided for in the original Lease Supplement in
    Section 16.1, (C) furnish Lessor with an opinion of
    Lessee’s counsel (which may be Lessee’s internal
    counsel), to the effect that (w) Lessor shall be entitled
    to the benefits of Section 1168 of the Bankruptcy Code in
    respect of such Replacement Unit to the same extent that Lessor
    would have been entitled to such benefits in respect of the Unit
    being replaced in the event of any bankruptcy proceedings of
    Lessee filed under the U.S. Bankruptcy Code, (x) the
    bill of sale referred to in clause (A) above
    constitutes an effective instrument for the conveyance of title
    to the Replacement Unit to Lessor, (y) good and marketable
    title to the Replacement Unit has been delivered to Lessor, free
    and clear of all Liens (other than Permitted Liens), and
    (z) all filings, recordings and other action necessary or
    appropriate to perfect and protect Lessor’s interests in
    the Replacement Unit have been accomplished, (D) furnish
    Lessor with a certificate of a qualified engineer (who may be a
    mechanical officer of Lessee) certifying that the Replacement
    Unit has a fair market value, estimated residual value, utility
    and remaining useful life at least equal to the Unit so replaced
    (assuming such Unit was in the condition required to be
    maintained by the terms of this Lease) and
    (E) (x) furnish Lessor with an opinion of independent
    tax counsel selected by Lessor and reasonably acceptable to
    Lessee to the effect that such replacement will not result in
    any adverse tax consequences to Lessor, or (y) furnish
    Lessor with an opinion of such tax counsel to the effect that
    such replacement should not result in any adverse tax
    consequences to Lessor and enter into an agreement in form and
    substance satisfactory to Lessor to indemnify Lessor against any
    adverse tax consequences resulting from such replacement. For
    all purposes hereof, upon passage of title thereto to Lessor,
    the Replacement Unit shall be deemed part of the property leased
    hereunder and the Replacement Unit shall be deemed a
    “Unit” of Equipment as defined herein. Upon such
    passage of title, Lessor will transfer to Lessee, without
    recourse or warranty (except as to Lessor’s Liens), all
    Lessor’s right, title and interest in and to the replaced
    Unit.

 

    Section 11.5.  Eminent
    Domain.  In the event that during the Lease Term
    the use of any Unit is requisitioned or taken by any
    governmental authority under the power of eminent domain or
    otherwise for a period which does not constitute an Event of
    Loss, Lessee’s obligation to pay all installments of Basic
    Rent shall continue for the duration of such requisitioning or
    taking. Lessee shall be entitled to receive and retain

    

    13

 

    for its own account all sums payable for any such period by such
    governmental authority as compensation for requisition or taking
    of possession. Any amount referred to in this Section 11.5
    which is payable to Lessee shall not be paid to Lessee, or if it
    has been previously paid directly to Lessee, shall not be
    retained by Lessee, if at the time of such payment a Specified
    Default or an Event of Default shall have occurred and be
    continuing, but shall be paid to and held by Lessor as security
    for the obligations of Lessee under this Lease, and upon the
    earlier of (i) 200 days after Lessor shall have
    received such amount provided Lessor has not proceeded to
    exercise remedies under Section 15 and (ii) such time
    as there shall not be continuing any Specified Default or Event
    of Default, such amount shall be paid to Lessee.

 

    Section 12.  Insurance.

 

    Section 12.1.  Property
    Damage and Public Liability Insurance.

 

    (a) Coverages.  Lessee will, at all times
    prior to the return of the Units to Lessor, at its own expense,
    cause to be carried and maintained all risk property insurance
    in respect of the Units in an amount not less than $10,000,000
    and public liability insurance against loss or damage for
    personal injury, death or property damage suffered upon, in or
    about any premises occupied by Lessee or occurring as a result
    of the use, maintenance or operation of the Units in an amount
    not less than $25,000,000 and against such risks, with such
    insurance companies and with such terms (including co-insurance,
    deductibles, limits of liability and loss payment provisions) as
    are customary under Lessee’s risk management program;
    provided, however, that Lessee may self insure
    and/or
    provide for deductibles with respect to any or all of the above
    risks if customary under such risk management program;
    provided further that so long as Lessee maintains its own
    property insurance described herein separate from its United
    States Affiliates, such self-insurance and deductibles shall not
    exceed $3,000,000 per occurrence so long as purchased
    third-party property insurance is available at commercially
    reasonable rates and in no event shall such self-insurance or
    deductibles be greater than what is customary for Class I
    railroads generally. Notwithstanding the foregoing, all
    insurance coverages (including, without limitation,
    self-insurance) with respect to the Units required under this
    Lease shall be comparable to, and no less favorable than,
    insurance coverages applicable to equipment owned or leased by
    Lessee which is comparable to the Units. Lessee shall, at its
    own expense, be entitled to make all proofs of loss and take all
    other steps necessary to collect the proceeds of such insurance.

 

    (b) Certificate of Insurance.  Lessee
    shall, on or prior to the Closing Date, furnish Lessor with a
    certificate of insurance signed by the insurer or an independent
    insurance broker showing the insurance then maintained as
    required by Section 12.1(a) above, up to $100,000,000, if
    any, with respect to the Units. Lessor may, but not more than
    once in any twelve-month period, request from Lessee and Lessee
    shall promptly thereafter furnish to Lessor, a certificate of
    insurance signed by an independent insurance broker, setting
    forth all insurance maintained by Lessee pursuant to
    Section 12.1(a) above and describing such policies up to
    $100,000,000, if any, including the amounts of coverage, any
    deductible amounts and the names of the insurance providers.
    Such public liability insurance and all risk property insurance
    shall name Lessor as an additional insured with respect to such
    insurance then maintained as its interest may appear. Lessee
    agrees that such insurer or such broker will endeavor to provide
    written notice to Lessor at least 30 days prior to the
    cancellation or lapse of any insurance required to be maintained
    by Lessee in accordance with Section 12.1(a) above, and
    Lessee shall, if Lessor shall not have received such notice from
    such insurer or broker, promptly forward to Lessor any such
    notice received by Lessee from such insurer or broker. Any
    insurance maintained pursuant to this Section 12 shall
    (i) provide insurer’s waiver of its right of
    subrogation, set-off or counterclaim or any other deduction,
    whether by attachment or otherwise, in respect of any liability
    against any additional insured except for claims as shall arise
    from the willful misconduct or gross negligence of such
    additional insured, (ii) to the extent commercially
    available, provide that such all risk property insurance as to
    the interest of Lessor shall not be invalidated by any action or
    inaction of Lessee or any other Person (other than such
    claimant), regardless of any breach or violation of any
    warranty, declaration or condition contained in such policies by
    Lessee or any other Person (other than such claimant), and
    (iii) provide that all such insurance is primary without
    right of contribution from any other insurance which might
    otherwise be maintained by Lessor and shall expressly provide a
    severability of interest clause. Any insurance maintained by
    Lessor shall not be considered co-insurance with any insurance
    maintained by Lessee.

    

    14

 

 

    Section 12.2.  Proceeds
    of Insurance.  The entire proceeds of any property
    insurance purchased by Lessee (including any Association of
    American Railroads interline settlements) received by Lessor
    shall be promptly paid over to, and retained by, Lessee;
    provided, however, if an Event of Default shall
    have occurred and be continuing, such proceeds shall be paid
    over to Lessor to be held as security for Lessee’s
    obligations hereunder and under the other Operative Agreements.

 

    Section 12.3.  Additional
    Insurance.  At any time Lessor may at its own
    expense carry insurance with respect to its interest in the
    Units, provided that such insurance does not interfere
    with Lessee’s ability to insure the Units as required by
    this Section 12 or adversely affect Lessee’s insurance
    or the cost thereof, it being understood that all salvage rights
    to each Unit and all primary subrogation rights shall remain
    with Lessee’s insurers at all times. Any insurance payments
    received from policies maintained by Lessor pursuant to the
    previous sentence shall be retained by Lessor without reducing
    or otherwise affecting Lessee’s obligations hereunder.

 

    Section 13.  Reports;
    Inspection.

 

    Section 13.1.  Duty
    of Lessee to Furnish.  On or before June 30,
    2008, and on or before each June 30 thereafter, Lessee will
    furnish to Lessor (i) an accurate statement, as of the
    preceding December 31, showing the reporting marks of the
    Units then leased hereunder, identifying each Unit that may have
    suffered an Event of Loss during the 12 months ending on
    such December 31 (or since the initial Settlement Date, in
    the case of the first such statement) and (ii) such other
    information regarding the condition or repair of the Equipment
    as Lessor may reasonably request.

 

    Section 13.2.  Lessor’s
    Inspection Rights.  Lessor shall have the right,
    but not the obligation, at its sole cost and expense (unless, in
    the case of any such expense, a Specified Default or an Event of
    Default shall have occurred and be continuing) and risk
    (including, without limitation, the risk of personal injury or
    death), by its authorized representatives, to the extent within
    Lessee’s control: on not more than one occasion in any
    12-month
    period (unless a Specified Default or an Event of Default shall
    have occurred and be continuing) or during the last
    12 months of the Lease Term, to inspect the Equipment and
    Lessee’s records with respect thereto, during Lessee’s
    normal business hours and upon reasonable prior notice to
    Lessee; provided, however, that Lessee shall not be
    liable for any injury to, or the death of, any Person
    exercising, either on behalf of Lessor or any prospective user,
    the rights of inspection granted under this Section 13.2
    except as may result or arise from Lessee’s gross
    negligence or willful misconduct. No inspection pursuant to this
    Section 13.2 shall interfere with the use, operation or
    maintenance of the Equipment or the normal conduct of
    Lessee’s business, and Lessee shall not be required to
    undertake or incur any additional liabilities in connection
    therewith.

 

    Section 13.3.  Financial
    and Other Reports of Lessee.  Lessee agrees that
    it will furnish directly to Lessor 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 Lessee, and its
    consolidated Subsidiaries as at the end of such period, together
    with the related consolidated statements of income and cash
    flows of Lessee 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
    U.S. generally accepted accounting principles and certified
    by any Vice President, the Treasurer, the Chief Financial
    Officer or any Assistant Treasurer of Lessee;

 

    (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 Lessee’s annual
    audited report covering the operations of Lessee and its
    consolidated Subsidiaries, including consolidated balance
    sheets, and related consolidated statements of income and
    retained earnings and consolidated statement of cash flows of
    Lessee 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 U.S. generally accepted accounting
    principles applied on a

    

    15

 

    consistent basis, which statements will have been certified by a
    firm of independent public accountants of recognized national
    standing selected by Lessee;

 

    (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 Lessee with the SEC or any successor agency,
    provided that, as long as Lessee 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 at the time
    such Participant may electronically access such reports and
    forms by means of the SEC’s homepage on the internet or at
    Lessee’s homepage on the internet, provided,
    further, in the event that Lessee shall cease to be subject
    to such informational requirements, Lessee will provide Lessor
    with 90 days’ advance written notice and thereafter
    Lessee shall directly furnish such reports and forms to Lessor;

 

    (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, or if an 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 an Event
    of Default, specifying such Lease Event of Default and all such
    events and the nature and status thereof; and

 

    (e) from time to time, such additional information kept by
    Lessee in the ordinary course of business reasonably related to
    the transactions contemplated hereby as Lessor may reasonably
    request.

 

    Section 14.  Events
    of Default.

 

    The following events shall constitute Events of Default
    hereunder (whether any such event shall be voluntary or
    involuntary or come about or be effected by operation of law or
    pursuant to or in compliance with any judgment, decree or order
    of any court or any order, rule or regulation of any
    administrative or governmental body) and each such Event of
    Default shall be deemed to exist and continue so long as, but
    only as long as, it shall not have been remedied:

 

    (a) Lessee shall fail to make any payment of Basic Rent
    within 10 Business Days after the same shall have become due and
    payable; or

 

    (b) Lessee shall fail to make any payment of Stipulated
    Loss Value or Termination Value after the same shall have become
    due and such failure shall continue unremedied for 10 Business
    Days after receipt by Lessee of written notice of such failure
    from Lessor; or

 

    (c) Lessee shall fail to make any other payment of
    Supplemental Rent after the same shall have become due and such
    failure shall continue unremedied for a period of 10 Business
    Days after receipt by Lessee of written notice of such failure
    from Lessor; or

 

    (d) Lessee shall operate any Unit in service when any
    public liability insurance policy required by Section 12
    hereof shall have terminated or lapsed; or

 

    (e) Lessee shall make or permit any unauthorized assignment
    or transfer of this Lease in violation of Section 18.2 and
    such unauthorized assignment or transfer shall continue
    unremedied for 30 days; or

 

    (f) any representation or warranty made by Lessee in this
    Lease is untrue or incorrect in any material respect as of the
    date of issuance or making thereof and such untruth or
    incorrectness shall continue to be material and unremedied for a
    period of 30 days after receipt by Lessee of written notice
    thereof from Lessor; provided that, unless such untruth
    or incorrectness results from Lessee’s willful or
    intentional misconduct or failure to disclose, if such untruth
    or incorrectness is capable of being remedied, no such untruth
    or incorrectness shall constitute an Event of Default hereunder
    for a period of 180 days after receipt of such notice so
    long as Lessee is diligently proceeding to remedy such untruth
    or incorrectness; or

    

    16

 

 

    (g) Lessee shall (i) commence a voluntary case or
    other proceeding seeking liquidation, reorganization or other
    relief with respect to itself or its debts under any bankruptcy,
    insolvency or other similar law now or hereafter in effect, or
    seeking the appointment of a trustee, receiver, liquidator,
    custodian or other similar official of it or any substantial
    part of its property, or (ii) consent to any such relief or
    to the appointment of or taking possession by any such official
    in any voluntary case or other proceeding commenced against it,
    or (iii) admit in writing its inability to pay its debts
    generally as they come due, or (iv) make a general
    assignment for the benefit of creditors, or (v) take any
    corporate action to authorize any of the foregoing; or

 

    (h) an involuntary case or other proceeding shall be
    commenced against Lessee seeking liquidation, reorganization or
    other relief with respect to it or its debts under any
    bankruptcy, insolvency or other similar law now or hereafter in
    effect, or seeking the appointment of a trustee, receiver,
    liquidator, custodian or other similar official of it or any
    substantial part of its property, and such involuntary case or
    other proceeding shall remain undismissed and unstayed for a
    period of 90 days; or

 

    (i) Lessee shall fail to observe or perform any other of
    the covenants or agreements to be observed or performed by
    Lessee hereunder and such failure shall continue unremedied for
    30 days after notice from Lessor to Lessee, specifying the
    failure and demanding the same to be remedied; provided
    that, if such failure is capable of being remedied, no such
    failure shall constitute an Event of Default hereunder for a
    period of 180 days after receipt of such notice so long as
    Lessee is diligently proceeding to remedy such failure;

 

    provided that, notwithstanding anything to the contrary
    contained in this Lease, any failure of Lessee to perform or
    observe any covenant or agreement herein shall not constitute an
    Event of Default if such failure is caused solely by reason of
    an event referred to in the definition of “Event of
    Loss” so long as Lessee is continuing to comply with
    the applicable terms of Section 11. Lessor shall notify
    Lessee promptly upon Lessee’s failure to make any payment
    of Basic Rent, after the same shall have become due; provided
    that the giving of such notice by Lessor shall not be a
    condition to the start of the 10 Business Days period referred
    to in paragraph (a) of this Section 14 and the
    failure or delay in giving such notice shall not prejudice the
    rights or remedies of Lessor hereunder.

 

    Section 15.  Remedies.

 

    Section 15.1.  Remedies.  Upon
    the occurrence of any Event of Default and at any time
    thereafter so long as the same shall be continuing, Lessor may,
    at its option, declare this Lease to be in default by a written
    notice to Lessee (provided that upon the occurrence of an
    Event of Default under Section 14(g) or 14(h), the Lease
    shall automatically be in default without the need for any
    declaration by Lessor and any giving of notice); and at any time
    thereafter, so long as Lessee shall not have remedied all
    outstanding Events of Default prior to the commencement of
    remedies hereunder, Lessor may do one or more of the following
    as Lessor in its sole discretion shall elect, to the extent
    permitted by, and subject to compliance with any mandatory
    requirements of, applicable law then in effect:

 

    (a) proceed by appropriate court action or actions, either
    at law or in equity, to enforce performance by Lessee of the
    applicable covenants of this Lease or to recover damages for the
    breach thereof;

 

    (b) by notice in writing to Lessee, cancel this Lease,
    whereupon all right of Lessee to the possession and use of the
    Equipment shall absolutely cease and terminate, but Lessee shall
    remain liable as hereinafter provided; and thereupon, Lessor may
    demand that Lessee, and Lessee shall, upon written demand of
    Lessor and at Lessee’s expense forthwith return all of the
    Equipment to Lessor or its order in the manner and condition
    required by, and otherwise in accordance with all of the
    provisions of Section 6, except Section 6.1(b) and
    those provisions relating to periods of notice; or Lessor may by
    its agents enter upon the premises of Lessee or other premises
    where any of the Equipment may be located and take possession of
    and remove all or any of the Units and thenceforth hold, possess
    and enjoy the same free from any right of Lessee, or its
    successor or assigns, to use such Units for any purpose whatever;

 

    (c) sell any Unit at public or private sale, as Lessor may
    determine, free and clear of any rights of Lessee and without
    any duty to account to Lessee with respect to such sale or for
    the proceeds thereof

    

    17

 

    (except to the extent required by paragraph (e) or
    (f) below if Lessor elects to exercise its rights under
    said paragraph in which case such sale shall be conducted at
    arm’s length and on a commercially reasonable basis), in
    which event Lessee’s obligation to pay Basic Rent and
    Supplemental Rent with respect to such Unit hereunder due for
    any periods subsequent to the date of such sale shall terminate
    (except to the extent that Basic Rent and Supplemental Rent are
    to be included in computations under paragraph (e) or
    (f) below if Lessor elects to exercise its rights under
    either of said paragraphs);

 

    (d) hold, keep idle or lease to others any Unit as Lessor
    in its sole discretion may determine, free and clear of any
    rights of Lessee and without any duty to account to Lessee with
    respect to such action or inaction or for any proceeds with
    respect thereto, except that Lessee’s obligation to pay
    Basic Rent and Supplemental Rent with respect to such Unit due
    for any periods subsequent to the date upon which Lessee shall
    have been deprived of possession and use of such Unit pursuant
    to this Section 15 and prior to the Determination Date
    specified in paragraph (e) or (f) below shall be
    reduced by the net proceeds, if any, received by Lessor from
    leasing such Unit to any Person other than Lessee;

 

    (e) whether or not Lessor shall have exercised, or shall
    thereafter at any time exercise, any of its rights under
    paragraph (a), (b) or (c) above with respect to
    any Unit, Lessor, by written notice to Lessee specifying a
    payment date (which date shall be a Determination Date for the
    purposes of computing Stipulated Loss Value) which shall be not
    earlier than 30 days after the date of such notice, may
    demand that Lessee pay to Lessor, and Lessee shall pay to
    Lessor, on the payment date specified in such notice, as
    liquidated damages for loss of a bargain and not as a penalty
    (in lieu of the Basic Rent for such Unit due on or after the
    payment date specified in such notice), without duplication, any
    unpaid and accrued Rent for such Unit arising in any period up
    to but excluding the payment date specified in such notice
    plus whichever of the following amounts Lessor, in its
    sole discretion, shall specify in such notice:

 

    (i) an amount with respect to each Unit which represents
    the excess of the present value, at the time of such payment
    date, of all rentals for such Unit which would otherwise have
    accrued hereunder from such payment date for the remainder of
    the Basic Term over the then present value of the then Fair
    Market Rental Value of such Unit (taking into account its actual
    condition) for such period computed by discounting from the end
    of such term to such payment date rentals which Lessor
    reasonably estimates to be obtainable for the use of such Unit
    during such period, such present value to be computed in each
    case on a basis of a per annum discount at a rate per annum
    equal to the Late Rate, compounded semiannually from the
    respective dates upon which rentals should have been payable
    hereunder had this Lease not been terminated; or

 

    (ii) an amount equal to the excess, if any, of the
    Stipulated Loss Value for such Unit computed as of the payment
    date specified in such notice over the Fair Market Sales Value
    of such Unit (taking into account its actual condition) as of
    the payment date specified in such notice; and

 

    (f) if Lessor shall have sold any Unit pursuant to
    paragraph (c) above, Lessor, in lieu of exercising its
    rights under paragraph (e) above with respect to such
    Unit may, if it shall so elect, demand that Lessee pay to
    Lessor, and Lessee shall pay to Lessor, as liquidated damages
    for loss of a bargain and not as a penalty (in lieu of the Basic
    Rent and any Supplemental Rent for such Unit due for any periods
    subsequent to the Rent Payment Date immediately preceding the
    date of such sale), without duplication, any unpaid Basic Rent
    due prior to such payment date and any unpaid Supplemental Rent
    for such Unit arising in any period up to and including the date
    of such sale or, if that date is not a Rent Payment Date, the
    daily equivalent of any arrears Basic Rent for the period from
    the preceding Rent Payment Date to the date of such sale, plus
    the amount, if any, by which the Stipulated Loss Value of such
    Unit computed as of the Rent Payment Date next preceding the
    date of such sale or, if such sale occurs on a Rent Payment
    Date, then computed as of such Rent Payment Date, exceeds the
    net proceeds of such sale plus interest on such amounts from the
    date of such sale to the date of payment at the Late Rate.

 

    In addition, Lessee shall be liable, except as otherwise
    provided above, for any and all unpaid Rent due hereunder before
    or during the exercise of any of the foregoing remedies, and for
    legal fees and other costs and expenses incurred by reason of
    the occurrence of any Event of Default or the exercise of
    Lessor’s remedies with respect thereto, including without
    limitation the repayment in full of any costs and expenses

    

    18

 

    necessary to be expended in repairing any Unit in order to cause
    it to be in compliance with all maintenance and regulatory
    standards imposed by this Lease.

 

    Section 15.2.  Cumulative
    Remedies.  The remedies in this Lease provided in
    favor of Lessor shall not be deemed exclusive, but shall be
    cumulative and shall be in addition to all other remedies in its
    favor existing at law or in equity.

 

    Section 15.3.  No
    Waiver.  No delay or omission to exercise any
    right, power or remedy accruing to Lessor upon any breach or
    default by Lessee under this Lease shall impair any such right,
    power or remedy of Lessor, nor shall any such delay or omission
    be construed as a waiver of any breach or default, or of any
    similar breach or default hereafter occurring; nor shall any
    waiver of a single breach or default be deemed a waiver of any
    subsequent breach or default.

 

    Section 15.4.  Lessee’s
    Duty to Return Equipment Upon Default.  If Lessor
    or any assignee of Lessor shall terminate this Lease pursuant to
    this Section 15 and shall have provided to Lessee the
    written demand specified in Section 15.1(b), Lessee shall
    forthwith deliver possession of such Units to Lessor. For the
    purpose of delivering possession of any Unit to Lessor as above
    required, Lessee shall at its own cost, expense and risk:

 

    (i) forthwith place such Equipment upon such storage tracks
    of Lessee or, at the expense of Lessee, on any other storage
    tracks, as Lessee may select;

 

    (ii) permit Lessor to store such Equipment on such tracks
    without charge for insurance, rent or storage until the earlier
    of (x) nine months after such demand for storage and
    (y) the date such Equipment is sold, leased or otherwise
    disposed of by Lessor and during such period of storage Lessee
    shall continue to maintain all insurance required by
    Section 12 hereof; and

 

    (iii) transport the Equipment to the nearest point of
    interchange with a railroad in the 48 contiguous United States,
    when directed by Lessor.

 

    All Equipment returned shall be in the condition required by
    Section 6.2 hereof.

 

    Section 15.5.  Specific
    Performance; Lessor Appointed Lessee’s
    Agent.  The assembling, delivery, storage and
    transporting of the Equipment as provided in Section 15.4
    are of the essence of this Lease, and upon application to any
    court of equity having jurisdiction in the premises, Lessor
    shall be entitled to a decree against Lessee requiring specific
    performance of the covenants of Lessee so to assemble, deliver,
    store and transport the Equipment. Without in any way limiting
    the obligation of Lessee under the provisions of
    Section 15.4, Lessee hereby irrevocably appoints Lessor as
    the agent and attorney of Lessee, with full power and authority,
    at any time while Lessee is obligated to deliver possession of
    any Units to Lessor pursuant to this Section 15, to demand
    and take possession of such Unit in the name and on behalf of
    Lessee from whosoever shall be at the time in possession of such
    Unit.

 

    Section 16.  Filings;
    Further Assurances.

 

    Section 16.1.  Filings.  On
    or prior to the Closing Date, Lessee will (i) cause this
    Lease, or appropriate evidence thereof, to be duly filed and
    recorded with the STB in accordance with 49 U.S.C.
    § 11301, (ii) cause this Lease, or appropriate
    evidence thereof, to be deposited with the Registrar General of
    Canada pursuant to Section 105 of the Canada Transportation
    Act and cause notice of such deposit to be forthwith given in
    The Canada Gazette in accordance with said
    Section 105, and (iii) cause or permit such other
    filings and notices to be filed or made as necessary or
    appropriate to protect the interests of Lessor, and will furnish
    Lessor proof thereof.

 

    Section 16.2.  Further
    Assurances.  Lessee will duly execute and deliver
    to Lessor such further documents and assurances and take such
    further action as Lessor may from time to time reasonably
    request in order to effectively carry out the intent and purpose
    of this Lease and to establish and protect the rights and
    remedies created in favor of Lessor hereunder, including,
    without limitation, if requested by Lessor, the execution and
    delivery of supplements or amendments hereto, in recordable
    form, subjecting to this Lease any Replacement Unit and the
    recording or filing of counterparts hereof or thereof in
    accordance with the laws of

    

    19

 

    such jurisdiction as Lessor may from time to time deem
    advisable; provided that this sentence is not intended to
    impose upon Lessee any additional liabilities not otherwise
    contemplated by this Lease.

 

    During the Lease Term, Lessee, at its sole expense, shall
    prepare and file all statements, notices, registrations or
    instruments required by or customarily filed with the Mexican
    Railroad Registry with respect to the Equipment. Lessor hereby
    appoints and constitutes Lessee its agent and
    attorney-in-fact
    to file, record or register, in the name and for the account of
    Lessor and Lessee, as their interests may appear, statements or
    notices required by the Mexican Railroad Registry. Lessee shall
    promptly provide copies of any and all statements or notices
    filed by Lessee with the Mexican Railroad Registry with respect
    to the Equipment.

 

    Section 16.3.  Expenses.  Except
    as provided in Section 24 hereof, Lessee will pay all
    costs, charges and expenses (including reasonable
    attorneys’ fees) incident to any such filing, refiling,
    recording and rerecording or depositing and redepositing of any
    such instruments or incident to the taking of such action.

 

    Section 17.  Lessor’s
    Right to Perform.

 

    If Lessee fails to make any payment required to be made by it
    hereunder or fails to perform or comply with any of its other
    agreements contained herein and such failure can be cured with
    the payment of money, Lessor may itself make such payment or
    perform or comply with such agreement, after giving not less
    than five (5) Business Days’ prior notice thereof to
    Lessee in a reasonable manner, but shall not be obligated
    hereunder to do so, and the amount of such payment and of the
    reasonable expenses of Lessor incurred in connection with such
    payment or the performance of or compliance with such agreement,
    as the case may be, together with interest thereon at the Late
    Rate, to the extent permitted by applicable law, shall be deemed
    to be Supplemental Rent, payable by Lessee to Lessor on demand.

 

    Section 18.  Assignment.

 

    Section 18.1.  Assignment
    by Lessor.  Lessor agrees that it shall not assign
    or convey its right, title and interest in and to this Lease,
    the Equipment or any Unit, except as expressly permitted by and
    subject to the provisions of this Lease, 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 (independent of the transactions
    contemplated hereby) of at least $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 or (iii) any United States subsidiary or United
    States affiliate of the transferring Lessor if the transferring
    Lessor remains liable for all obligations of Lessor under each
    of the Operative Agreements and the Lessor Guarantor guarantees
    the obligations of the Transferee;

 

    (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
    Managers or the Board of Directors of Lessee or such Affiliate,
    as the case may be, 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 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;

    

    20

 

 

    (c) Lessee 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 18.1;

 

    (d) such Transferee enters into an agreement or agreements
    in form and substance reasonably satisfactory to Lessee whereby
    such Transferee confirms that it shall be deemed a party to this
    Lease and each other Operative Agreement to which the
    transferring Lessor 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 Lessor contained in, this Lease
    and such other Operative Agreements and in which the Transferee
    shall make representations and warranties comparable to those of
    Lessor 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 Brown Raysman & Steiner
    LLP, internal counsel to the Transferee or another counsel
    reasonably acceptable to Lessee), 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 may reasonably request,
    shall be provided, prior to such transfer, to Lessee, which
    opinion shall be in form and substance reasonably satisfactory
    to Lessee;

 

    (g) except as specifically consented to in writing by
    Lessee, 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 shall
    be paid by Lessor;

 

    (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;

 

    (j) as a result of such transfer, Lessor is not in default
    under any Lessor Agreement;

 

    (k) such transfer shall not result, based on the law in
    effect at the time of transfer, in an increase in Lessee’s
    obligations under any of the Operative Agreements; and

 

    (l) Lessor shall deliver an Officer’s Certificate to
    Lessee certifying as to compliance with the transfer
    requirements contained herein.

 

    Upon any such transfer, (i) except as the context otherwise
    requires, such Transferee shall be deemed the “Lessor”
    for all purposes, and shall enjoy the rights and privileges and
    perform the obligations of Lessor to the extent of the interest
    transferred hereunder and under each other Operative Agreement
    to which Lessor is a party, and, except as the context otherwise
    requires, each reference in this Lease and each other Operative
    Agreement to the “Lessor” 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 18.1(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 Lessor’s interest
    in the Units or this Lease in violation of this
    Section 18.1 shall be void and of no effect.

    

    21

 

 

    Section 18.2.  Assignment
    by Lessee.  Except as otherwise provided in
    Section 8.3 or in the case of any requisition for use by an
    agency or instrumentality of the United States government
    referred to in Section 11.1, Lessee will not, without the
    prior written consent of Lessor, assign any of its rights
    hereunder, except as provided in Section 18.4 hereof.

 

    Section 18.3.  Sublessee’s
    Performance and Rights.  Any obligation imposed on
    Lessee in this Lease shall require only that Lessee perform or
    cause to be performed such obligation, even if stated herein as
    a direct obligation, and the performance of any such obligation
    by any permitted assignee, sublessee or transferee under an
    assignment, sublease or transfer agreement then in effect and
    permitted by the terms of this Lease shall constitute
    performance by Lessee and discharge such obligation by Lessee.
    Except as otherwise expressly provided herein, any right granted
    to Lessee in this Lease shall grant Lessee the right to exercise
    such right or permit such right to be exercised by any such
    assignee, sublessee or transferee. The inclusion of specific
    references to obligations or rights of any such assignee,
    sublessee or transferee in certain provisions of this Lease
    shall not in any way prevent or diminish the application of the
    provisions of the two sentences immediately preceding with
    respect to obligations or rights in respect of which specific
    reference to any such assignee, sublessee or transferee has not
    been made in this Lease.

 

    Section 18.4.  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 Lessor an
    agreement containing the assumption by such successor
    corporation of the due and punctual performance and observance
    of each covenant and condition of this Lease and each of the
    other Lessee Agreements to be performed or observed by Lessee,
    (ii) immediately after giving effect to such transaction,
    (x) no Event of Default shall have occurred solely as a
    result of such consolidation or merger or such conveyance,
    transfer or lease and (y) except in the case of any such
    consolidation or merger or such conveyance, transfer, or lease
    among Lessee and any one or more of its Affiliates, the
    long-term unsecured debt obligations of such Person will be
    rated at least investment grade by S&P and Moody’s or
    at least equal to the ratings of Lessee’s long-term
    unsecured debt obligations immediately prior to the public
    announcement of such merger, conveyance, transfer or lease and
    there is no reduction in the tangible net worth of such Person
    as compared to the tangible net worth of Lessee immediately
    prior to such transaction, and (iii) the protections
    afforded to Lessor pursuant to Section 1168 of the
    Bankruptcy Code shall not be less than the protections afforded
    immediately prior to such consolidation, merger, transfer or
    lease. 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 18.4, 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 Lease 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 this
    Lease, the Person owning such leasehold interest after such
    event shall deliver to Lessor 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 19.  Net
    Lease, etc.

 

    This Lease is a net lease and Lessee’s obligation to pay
    all Rent payable hereunder shall be absolute and unconditional
    under any and all circumstances of any character including,
    without limitation, any abatement of Rent or setoff against
    Rent; nor, except as otherwise expressly provided herein, shall
    this Lease terminate, or the respective obligations of Lessor or
    Lessee be otherwise affected, by reason of any defect in, damage
    to or loss or destruction of, or requisitioning of, any Unit, by
    condemnation or otherwise, the prohibition of Lessee’s use
    of any Unit, the interference with such use by any Person or the
    lack of right, power or authority of Lessor or any other Person
    to enter into this Lease or any other Operative Agreement, or
    for any other cause, whether similar or dissimilar to the
    foregoing, any present or future law to the contrary
    notwithstanding, it being the

    

    22

 

    intention of the parties hereto that the Rent payable by Lessee
    hereunder shall continue to be payable in all events unless the
    obligation to pay the same shall be terminated in accordance
    with the terms of this Lease. To the extent permitted by
    applicable law, Lessee hereby waives any and all rights which it
    may now have or which at any time hereafter may be conferred
    upon it, by statute or otherwise, to terminate, cancel, quit or
    surrender this Lease with respect to any Unit, except in
    accordance with the express terms hereof. If for any reason
    whatsoever this Lease shall be terminated in whole or in part by
    operation of law or otherwise, except as specifically provided
    herein, Lessee nonetheless agrees to the maximum extent
    permitted by law, to pay to Lessor an amount equal to each
    installment of Basic Rent and all Supplemental Rent due and
    owing, at the time such payment would have become due and
    payable in accordance with the terms hereof had this Lease not
    been terminated in whole or in part. Nothing contained herein
    shall be construed to waive any claim which Lessee might have
    under any of the Operative Agreements or otherwise or to limit
    the right of Lessee to make any claim it might have against
    Lessor or any other Person or to pursue such claim in such
    manner as Lessee shall deem appropriate.

 

    Section 20.  Notices.

 

    Unless otherwise expressly specified or permitted by the terms
    hereof, all communications and notices provided for herein shall
    be in writing or by a telecommunications device capable of
    creating a written record (including electronic mail), and any
    such notice shall become effective (a) upon personal
    delivery thereof, including, without limitation, by overnight
    mail and courier service, (b) in the case of notice by
    United States mail, certified or registered, postage prepaid,
    return receipt requested, upon receipt thereof, or (c) in
    the case of notice by such a telecommunications device, upon
    transmission thereof, provided such transmission is promptly
    confirmed in writing by either of the methods set forth in
    clauses (a) and (b) above, in each case addressed to
    the following Person at its respective address set forth below
    or at such other address as such Person may from time to time
    designate by written notice to the other Persons listed below:

 

    If to Lessor:

 

    High Ridge Leasing LLC

    c/o General Electric Capital Corporation

    201 High Ridge Road

    Stamford, CT 06905

    Attention: Rail Portfolio

    Facsimile No.:
    (203) 585-0597

    Telephone No.:
    (203) 961-2195

 

    If to Lessee:

 

    Kansas City Southern de Mexico, S. de R.L. de C.V.

    Montes Urales #625

    Col. Lomas de Chapultepec C.P.

    11000 Mexico, DF

    Attention: Director Jurídico Ejecutivo

    Facsimile No.: 011 5255 9178 5604

    Telephone No.: 011 5255 9178 5647

 

    with a copy to:

 

    Address of Lessee for Mail Delivery:

    Kansas City Southern

    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

    

    

    23

 

    Address of Lessee for Courier and Similar Delivery:

    Kansas City Southern

    427 West
    12th Street

    Kansas City, MO 64105

    Attention: Senior Vice President — Finance &
    Treasurer

    Facsimile No.:
    (816) 983-1198

    Telephone No.:
    (816) 983-1802

    

    and

 

    Kansas City Southern

    427 West
    12th Street

    Kansas City, MO 64105

    Attention: Senior Vice President & General Counsel

    Facsimile No.:
    (816) 983-1227

    Telephone No.:
    (816) 983-1303

 

    Section 21.  Lessee’s
    Indemnities.
    

 

    Section 21.1.  General
    Tax Indemnity.

 

    (a) Tax Indemnitee Defined.  For purposes
    of this Section 21.1, “Tax Indemnitee”
    means Lessor and its 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, Lessee
    agrees to indemnify and hold harmless each Tax Indemnitee, on an
    After-Tax Basis, 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 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, importation, exportation, 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

 

    (v) otherwise with respect to the transactions contemplated
    by the Operative Agreements, including any payments thereunder.

 

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

 

    (i) Taxes imposed by any federal, state or local
    government, or any political subdivision thereof or any foreign
    government or taxing authority, which are based upon, measured
    by or in respect to gross or net income or gross or net receipts
    (including all Taxes which are in the nature of a gross or net
    income tax); Taxes on items of preference or any minimum tax;
    value added taxes which are imposed in substitution for or in
    lieu of a gross or net income tax; business and occupation
    taxes; franchise taxes; or Taxes based upon Lessor’s
    capital stock or net worth; provided that there shall not
    be excluded under this subparagraph (i) any Taxes
    which are (w) value added taxes except for value added
    taxes that are net income Taxes (it being understood and agreed
    that, as of the date hereof, Mexican value added taxes and
    Canadian value added taxes are not net income Taxes),
    (x) sales, use, property, license, rental, ad valorem or
    Taxes in the nature thereof (including, for the avoidance of
    doubt, the Mexican asset tax (impuesto al activo), it
    being understood and agreed that, as of the date hereof, the
    Mexican asset tax is in the nature

    24

 

    of a sales, use, property, license, rental or ad valorem tax)
    imposed by a state or local government of the United States or a
    foreign government or taxing authority, (y) imposed by any
    government or taxing authority of or in a foreign country if,
    and to the extent, such Taxes would have been imposed had the
    sole connection between the Tax Indemnitee and such foreign
    country been the presence in such country of any Unit or any
    part thereof or the presence or activities of Lessee or any user
    of the Equipment in, or the making of payments from, such
    country or (z) imposed in excess of Taxes that would have
    been imposed had title to the Units been transferred on the
    Settlement Date;

 

    (ii) Taxes imposed with respect to any period after
    (A) the satisfaction by Lessee of all of its obligations
    under the Operative Agreements and (B) the earliest of
    (x) the return of possession of the Equipment to Lessor or
    the placement of the Equipment in storage at the request of
    Lessor, in either case pursuant to Section 6 hereof and
    only so long as no Event of Default shall have occurred and be
    continuing, (y) the termination of the Lease Term pursuant
    to Section 10 hereof, 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 hereof, 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 Lessor due after the termination or
    expiration of this Lease if such payment relates to events
    occurring or matters arising prior to or simultaneously with
    such time);

 

    (iii) Taxes imposed upon a Tax Indemnitee which arise out
    of or are caused by 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 or any of the
    Operative Agreements or rights created thereunder other than a
    disposition attributable to (v) an Event of Default,
    (w) an Event of Loss, (x) the exercise by Lessee of
    the termination right pursuant to Section 10 hereof,
    (y) the exercise by Lessee of the purchase right pursuant
    to Section 23 hereof and (z) the replacement,
    substitution or interchange of any Unit by any Lessee Person;

 

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

 

    (vi) Taxes for which Lessee is obligated to indemnify
    Lessor under the Tax Indemnity Agreement;

 

    (vii) Taxes which result from Lessor’s engaging in
    transactions other than those permitted or contemplated by the
    Operative Agreements unless attributable to the exercise of
    default remedies pursuant to this Lease; or

 

    (viii) Taxes imposed on Basic Rent by withholding or
    deduction, which shall be indemnified to the extent provided in
    Section 21.1(d) hereof.

 

    (d) Withholding Tax Matters.  (i) All
    payments whatsoever under this Lease will be made by the Lessee
    free and clear of, and without liability or withholding or
    deduction for or on account of, any present or future Taxes of
    whatever nature imposed or levied by or on behalf of any
    jurisdiction other than the United States (or any political
    subdivision or taxing authority of or in such jurisdiction)
    (hereinafter a “Taxing Jurisdiction”), unless
    the withholding or deduction of such Tax is compelled by law. If
    withholding or deduction of Tax is compelled by law with respect
    to payments of Basic Rent under the Lease, Lessee shall make
    additional payments as provided in this Section 21.1(d).

 

    (ii) The Lessee shall have no obligation to make additional
    payments under this Section 21.1(d) in respect of any
    Mexican withholding or deduction to the extent Basic Rent is
    subject to a Mexican withholding or deduction of Tax at a rate
    of five percent or less. If any payment of Basic Rent is subject
    to withholding or deduction of Tax, (A) the Lessee will pay
    to the Taxing Jurisdiction the full amount required to be
    withheld, deducted or otherwise paid before penalties attach
    thereto or interest accrues thereon; and (B) unless such
    Tax is a Mexican withholding Tax at a rate of five percent or
    less, pay to the Lessor such additional amounts as may be
    necessary in order that the net amounts received by the Lessor
    after such deduction, withholding or

    

    25

 

    payment (including, without limitation, any required deduction
    or withholding of Tax on or with respect to such additional
    amount), shall be not less than the amounts the Lessor would
    have received had no such deductions or withholdings (other than
    any deduction or withholding imposed by Mexico at a rate of five
    percent or less) been required; provided that no payment
    of any additional amounts shall be required to be made for or on
    account of any Tax to the extent such Tax would not have been
    imposed but for a breach by Lessor of its obligations under
    clause (iv) of this Section 21.1(d).

 

    (iii) To the extent any payment of Basic Rent results in an
    additional payment by the Lessee pursuant to the preceding
    paragraph, such additional payment is intended to constitute a
    payment pursuant to a tax indemnity provision for purposes of
    Regulations § 1.467-1(h)(14) that shall be allocated
    to the same Lease period as such Basic Rent is allocated in
    accordance with Section 3.2 hereof.

 

    (iv) The Lessor agrees (A) on or prior to the date of
    the execution and delivery of this Lease to provide Lessee with
    duplicate executed originals of Internal Revenue Services
    (“IRS”)
    Form W-9,
    or any successor form, and (B) subject to the limitations
    below, thereafter within 60 days of its receipt of a
    written request from the Lessee, that it will (x) duly
    complete and deliver to or as reasonably directed by the Lessee
    all such forms, certificates, documents and returns provided to
    the Lessor by the Lessee (collectively, the
    “Forms”) required to be filed by or on behalf
    of the Lessor in order to avoid or reduce any such Tax pursuant
    to the provisions of an applicable statute, regulation or
    administrative practice of the relevant Taxing Jurisdiction or
    of a tax treaty between the United States and such Taxing
    Jurisdiction and (y) provide the Lessee with such
    information with respect to the Lessor as the Lessee may
    reasonably request in order to complete any such Forms,
    provided that (I) nothing in this
    Section 21.1(d)(iv) shall require the Lessor to provide
    information with respect to any such Form or otherwise if in the
    opinion of the Lessor such Form or disclosure of information
    would involve the disclosure of tax return or other information
    that is confidential or proprietary to the Lessor; (II) the
    filing of such Forms would not (in the Lessor’s reasonable
    judgment) impose any unreasonable burden (in time, resources or
    otherwise) on the Lessor; and (III) the Lessor shall be
    deemed to have complied with the requirements of this paragraph
    with respect to any Form upon the good faith completion and
    submission of such Form as may be specified in a written request
    of the Lessee no later than 60 days after receipt by the
    Lessor of such written request (which in the case of a
    Form 8802 or any similar Form shall be deemed to occur when
    such Form is submitted to the United States Internal Revenue
    Service in accordance with instructions contained in such Form)
    and, in the case of a transfer of the Lease, at least
    90 days prior to the relevant Rent Payment Date. Any
    written request for Forms by the Lessee shall be accompanied by
    copies of such Forms and related instructions, if any, all in
    the English language or with an English translation thereof.
    Lessor shall promptly after receipt thereof provide to Lessee an
    original of each IRS Form 6166, or any successor form,
    received by Lessor.

 

    (v) The Lessee will furnish the Lessor, promptly and in any
    event within 60 days after the date of any payment by the
    Lessee of any Tax in respect of any amounts paid under this
    Lease, the original tax receipt issued by the relevant taxation
    or other authorities involved for all amounts paid as aforesaid
    (or if such original tax receipt is not available or must
    legally be kept in the possession of the Lessee, a duly
    certified copy of the original tax receipt or any other
    reasonably satisfactory evidence of payment), together with such
    other documentary evidence with respect to such payments as may
    be reasonably requested from time to time by the Lessor.

 

    (vi) Upon receipt by Lessor of a refund or credit of all or
    part of any Taxes paid or indemnified against by Lessee pursuant
    to Section 21.1(d)(ii)(B), Lessor shall pay to the Lessee
    an amount equal to the amount of such refund or credit, as the
    case may be, plus any interest received by or credited to the
    Lessor with respect to such refund or credit increased or
    decreased, as the case may be, by the Lessor’s net
    additional or saved taxes attributable to the receipt or grant
    of such amounts from the taxing authority and the payment being
    made to Lessee hereunder, provided, however, that
    (A) the Lessor shall be required to make any such payment
    only to the extent such payment leaves the Lessor in an overall
    financial position no worse that it would have been had no
    deduction or withholding applied, (B) the Lessor shall not
    be obligated to make a payment pursuant to this clause (vi)
    to the Lessee as long as an Event of Default of the type
    specified in Section 14(a), (b), (c), (g) or
    (h) hereof shall have occurred and be continuing,
    (C) in no event shall Lessor be required to make any
    payment to Lessee with respect to any refund or credit
    attributable to any Mexican deduction or

    

    26

 

    withholding at a rate of five percent or less, and (D) to
    the extent the amount of such payment by the Lessor to the
    Lessee would exceed the amount of all prior payments by the
    Lessee to the Lessor pursuant to Section 21.1(d)(ii)(B)
    less the amount of all prior payments by the Lessor pursuant to
    this clause (vi), such excess shall not be paid by the
    Lessor but shall instead by carried forward and shall reduce the
    Lessee’s obligations to make subsequent payments under
    Section 21.1(d)(ii)(B) to the Lessor. Any subsequent loss
    or disallowance of such refund or credit in Taxes shall be
    treated as Taxes for which Lessee shall be obligated to
    reimburse and indemnify the Lessor unless such loss is
    attributable to a breach by Lessor of its obligations under
    clause (iv) of this Section 21.1(d). Nothing herein
    contained shall interfere with the right of the Lessor to
    arrange its tax affairs in its sole discretion in whatever
    manner it thinks fit and, in particular, the Lessor shall not be
    under any obligation to claim relief from its corporate profits
    or similar tax liability in respect of such Tax in priority to
    any other claims, reliefs, credits or deductions available to it
    or (other than as set forth in clause (iv) above or
    subsection (g)) oblige the Lessor to disclose any
    information relating to its tax affairs or any computations in
    respect thereof. Section 21.1(f) below shall not apply to
    any refund or credit with respect to Taxes indemnified pursuant
    to this subsection (d), which shall instead be governed
    solely by this clause (vi).

 

    (vii) If the Lessee makes payment to or for the account of
    the Lessor and the Lessor is entitled to a refund or credit of
    the Tax to which such payment is attributable upon the making of
    a filing (other than a Form described above), then the Lessor
    shall, as soon as practicable after receiving written request
    from the Lessee (which shall specify in reasonable detail and
    supply the refund forms to be filed) use reasonable efforts to
    complete and deliver such refund or credit forms to or as
    directed by the Lessee, subject, however, to the same
    limitations with respect to Forms as are set forth above.

 

    (e) All Tax Obligations in This Section,
    Etc.  Notwithstanding any other provision anywhere
    contained in the Operative Agreements except as expressly
    provided therein, it is understood that (i) all of
    Lessee’s obligations with respect to Taxes are set forth in
    this Section 21.1 and in the Tax Indemnity Agreement, and
    if Lessee shall be required under any provision of the Operative
    Agreements to pay any other tax not described in this sentence,
    it shall be entitled to prompt reimbursement of such amount from
    the party whose tax liability was paid and (ii) except as
    provided in Section 7.2, Lessor shall have no obligations
    with respect to Taxes.

 

    (f) Refund or Credit.  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 or
    credit, as the case may be, plus any interest received by or
    credited to such Tax Indemnitee with respect to such refund or
    credit 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, provided that
    (i) the Tax Indemnitee shall not be obligated to make a
    payment to Lessee pursuant to this subsection (f) as
    long as an Event of Default of the type specified in
    Section 14(a), (b), (c), (g) or (h) hereof 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 pursuant to this
    paragraph (f), 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. Any subsequent
    loss or disallowance of such refund or credit in Taxes shall be
    treated as Taxes subject to Lessee’s indemnity obligation
    pursuant to this Section 21.1, without regard to the
    provisions of paragraph (c).

 

    (g) Procedures.  Lessee shall pay any Tax
    indemnifiable hereunder directly to the appropriate taxing
    authority prior to the date such payment is due. Any amount
    payable to a Tax Indemnitee pursuant to
    paragraph (b) or paragraph (d) 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 (d) or
    paragraph (f) shall be paid within 30 days after
    the Tax Indemnitee receives a refund or credit giving rise to a
    payment under paragraph (d) or paragraph (f), as
    the case may be, and shall be accompanied by a written statement
    by the Tax Indemnitee

    

    27

 

    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 the 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 21.1(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 the lesser of (a) $25,000 and (b) 5%
    of the amount determined by such firm or (2) in the case of
    any amount payable to Lessee, greater than the amount determined
    by the Tax Indemnitee by the lesser of (a) $25,000 and
    (b) 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
    give Lessee notice in writing of such claim within 15 days
    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 any
    failure to provide such notice or furnish such information shall
    not reduce or affect Lessee’s indemnity obligations
    hereunder unless such failure precludes 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) 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 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 Event of
    Default of the type specified in Section 14(a), (b), (c),
    (g) or (h) hereof 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, (D) the amount of such
    claim exceeds $50,000, (E) Lessee shall have provided the
    Tax Indemnitee with a written acknowledgement of Lessee’s
    obligations to indemnify the Tax Indemnitee for such Taxes if
    and to the extent the contest is not successful and
    (F) Lessee shall have provided the Tax Indemnitee with an
    opinion of independent counsel selected by the Tax Indemnitee
    and reasonably acceptable to Lessee to the effect that a
    reasonable basis exists to contest such claim. 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, which will not be unreasonably withheld. If it does so
    in the absence of such permission, Lessee’s obligation to
    indemnify with respect to such

    

    28

 

    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.

 

    If a Tax Indemnitee determines in good faith that it must file a
    form with respect to or pay a Tax that is indemnifiable under
    this Section 21.1, such determination shall be treated as a
    written claim made against a Tax Indemnitee for Taxes with
    respect to which the Lessee may be liable for indemnity
    hereunder to which the contest provisions of this
    subsection (h) apply.

 

    (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 21.1, 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 Lessor’s expense such Tax Indemnitee with such
    information reasonably available to Lessee as 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 in Lessor 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.

 

    Section 21.2.  General
    Indemnification and Waiver of Certain Claims.

 

    (a) Claims Defined.  For the purposes of
    this Section 21.2, “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 21.2, shall
    include, but not be limited to, all reasonable
    out-of-pocket
    costs, disbursements and expenses (including legal fees and
    expenses) paid or incurred by an Indemnified Person in
    connection therewith or related thereto.

 

    (b) Indemnified Person Defined.  For the
    purposes of this Section 21.2, “Indemnified
    Person” means Lessor and its directors, officers,
    employees, successors and permitted assigns, agents and servants
    (the directors, officers, employees, successors and permitted
    assigns, agents and servants of Lessor together with Lessor
    being referred to herein collectively as the “Related
    Indemnitee Group” of Lessor), provided that as a
    condition of any obligations of Lessee to pay any indemnity or
    perform any action under this Section 21.2 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 21.2. 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 21.2(e) and (f), such
    Indemnified Person shall not be entitled to indemnity under this
    Section 21.2 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 this 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 Lease or any other Operative Agreement or any of
    the transactions contemplated hereby and thereby and the
    enforcement thereof and hereof and the ownership, lease,
    operation, possession, modification, use, non-use, maintenance,
    sublease, 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

    

    29

 

    (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 this Lease;

 

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

 

    (iii) any act or omission (whether negligent or otherwise)
    and any breach of or failure to perform or observe, or any other
    non-compliance with, any covenant, condition or agreement to be
    performed by, or other obligation of, 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.

 

    (d) Lessee’s Claims Excluded.  The
    following are excluded from the agreement to indemnify under
    this Section 21.2:

 

    (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 hereof, the exercise by
    Lessee of an early termination option with respect to such Unit
    under Section 10 hereof or the occurrence of an Event of
    Loss with respect to such Unit under Section 11 hereof, the
    last to occur of (x) the payment of all amounts due from
    Lessee in connection with any such event and (y) legal
    transfer of title to such Unit to any Person other than Lessor
    or (B) in all other cases, the last to occur of
    (x) with respect to such Unit, the earlier to occur of the
    termination of this Lease or the expiration of the Lease Term
    and (y) with respect to each Unit, the return of such Unit
    to Lessor in accordance with the terms of this Lease (it being
    understood that the date of the placement of such Unit in
    storage as provided in Section 6 hereof constitutes the
    date of return of such Unit under this Lease);

 

    (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 21.1 hereof or
    the Tax Indemnity Agreement, except 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 are
    fully set out in Section 21.1 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 5.2 or any transfer (other than pursuant to
    Section 10, 11, 15 or 23 hereof) by such Indemnified
    Person of any interest in the Units or this Lease;

 

    (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 interest in this Lease, or any similar
    security, other than a transfer by such Indemnified Person of
    its interests in any Unit pursuant to Section 10, 11 or 23
    hereof or otherwise attributable to an Event of Default that has
    occurred and is continuing;

 

    (vi) [Intentionally Omitted];

 

    (vii) [Intentionally Omitted];

    

    30

 

 

    (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 Lease and the other Operative Agreements, other than
    such as have been requested by or consented to by Lessee or
    necessary or required to effectuate the purpose or intent of any
    Operative Agreement or as are expressly required by any
    Operative Agreements;

 

    (ix) [Intentionally Omitted];

 

    (x) [Intentionally Omitted];

 

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

 

    (xii) 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
    hereunder;

 

    (xiii) [Intentionally Omitted];

 

    (xiv) with respect to any particular Indemnified Person,
    any Claim resulting from the imposition of any Lessor’s
    Lien attributable to such Indemnified Person; or

 

    (xv) with respect to any particular Indemnified Person, any
    Claim, to the extent the risk thereof has been expressly assumed
    by such Indemnified Person in connection with the exercise by
    such Indemnified Person of the right of inspection granted under
    Section 6.1, 6.2 or 13.2 hereof.

 

    (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 this Lease
    or otherwise, each Indemnified Person agrees to provide
    reasonable cooperation at the expense 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.

 

    (f) Claims Procedure.  An Indemnified
    Person shall, upon becoming aware of any Claim for which
    indemnification is sought, promptly notify Lessee of such Claim;
    provided, however, that, notwithstanding the last
    sentence of Section 21.2(b), the failure to give such
    notice shall not release Lessee from any of its obligations
    under this Section 21, except to the extent that such
    failure to give notice shall have a material adverse effect on
    Lessee’s ability to defend such claim or recover proceeds
    under any insurance policies maintained by Lessee. 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 21.2 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
    Specified Default or Event of Default shall have occurred and be
    continuing or (2) such Claim would entail a significant
    risk to Lessor 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

    

    31

 

    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 21.2(f).
    Nothing contained in this Section 21.2(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 21.2 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 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.

 

    (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 21.2 are not
    intended to waive or supersede any specific provisions of, or
    any rights or remedies of Lessee under, this Lease or any other
    Operative Agreement to the extent such provisions apply to any
    Claim.

 

    Section 22.  Termination
    Upon Purchase by Lessee.

 

    If Lessee shall have exercised its option to purchase any Unit
    pursuant to Section 23, upon payment by Lessee of the
    purchase price with respect to such Unit as provided in
    Section 23, and upon payment by Lessee of all Rent then due
    and payable under this Lease with respect to such Unit, the
    Lease Term shall end with respect to such Unit and the
    obligations of Lessee to pay Rent hereunder with respect to such
    Unit (except for Supplemental Rent obligations surviving
    pursuant to Section 21 hereof or the Tax Indemnity
    Agreement or which have otherwise accrued but not been paid as
    of the date of such payment) shall cease.

 

    Section 23.  Lessee’s
    Options to Purchase Equipment.

 

    (a) So long as no Specified Default or Event of Default
    shall have occurred and be continuing, Lessee shall have the
    option:

 

    (i) [Intentionally Omitted];

 

    (ii) upon not less than 90 days’ prior
    irrevocable notice to Lessor to purchase on the EBO Fixed
    Purchase Price Date all (but not less than all) of the Units
    then subject to this Lease at a price equal to the EBO Fixed
    Purchase Price for such Units (as such EBO Fixed Purchase Price
    may be adjusted from time to time pursuant to and in accordance
    with Section 3.4 hereof); and

 

    (iii) upon not less than 90 days’ prior
    irrevocable notice to Lessor to purchase on the Basic Term
    Expiration Date all (but not less than all) of the Units then
    subject to this Lease at a price equal to the FPO Fixed Purchase
    Price for such Units.

 

    (b) If Lessee shall have exercised its option to purchase
    any Unit hereunder, on the date of such purchase (x) Lessor
    shall, subject to the payment in full of all amounts referred to
    in clauses (y) and (z) below, assign, transfer
    and convey to Lessee all right, title and interest of Lessor in
    and to each Unit being purchased on such date on an “as is,
    where is” basis, without recourse or warranty except as to
    Lessor’s Liens other than Permitted Liens, (y) Lessee
    shall pay, by 12:00 noon (New York City time) on such date by
    wire transfer in immediately

    

    32

 

    available funds, to Lessor the EBO Fixed Purchase Price or the
    FPO Fixed Purchase Price, as the case may be, with respect to
    the Units purchased on such date plus any sales, use or other
    similar taxes imposed on such purchase or transfer, and
    (z) Lessee shall pay pursuant to Section 22 all Basic
    Rent due and payable on or prior to such date of purchase
    plus all other Supplemental Rent due and payable as of
    such date of purchase.

 

    Section 24.  Transaction
    Costs.

 

    (a) If Lessor shall have made its investment provided for
    in Section 2.2 hereof and the transactions contemplated by
    this Lease are consummated, Lessor will promptly pay the
    following (the “Transaction Costs”):

 

    (i) the cost of reproducing and printing the Operative
    Agreements, including all costs and fees in connection with the
    initial filing and recording of appropriate evidence of this
    Lease 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 Brown
    Raysman & Steiner LLP, special counsel to Lessor and
    the Lessor Guarantor and Winston & Strawn LLP, special
    tax counsel to Lessor (in the amounts separately agreed to by
    Lessor and Lessee) and the reasonable fees and expenses of
    Mexican counsel to Lessor and Lessor Guarantor, if any (in the
    amount separately agreed to by Lessor and Lessee), for their
    services rendered in connection with the negotiation, execution
    and delivery of this Lease and the Operative Agreements related
    hereto;

 

    (iii) the reasonable fees and expenses of Chapman and
    Cutler LLP, special counsel to Lessee and the reasonable fees
    and expenses of Mexican counsel to Lessee, for their services
    rendered in connection with the negotiation, execution and
    delivery of this Lease and the Operative Agreements related
    hereto;

 

    (iv) 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;

 

    (v) 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

 

    (vi) the reasonable fees and expenses of Lessee’s
    independent accountants, in connection with the transactions
    contemplated by the Operative Agreements;

 

    provided, however, that if such Transaction Costs exceed
    the amount of Transaction Costs used in calculating Basic Rent
    and other amounts pursuant to Section 3.4(a) hereof on the
    Closing Date, Lessee shall pay such excess.

 

    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 Lease 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 Lease, Lessee agrees to pay when due the reasonable
    expenses of Lessor 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 3.4, except as
    expressly provided in Section 3.4(b)).

 

    (c) Notwithstanding the foregoing provisions of this
    Section 24, except as specifically provided in
    Section 21.2, Lessee shall have no liability for any costs
    or expenses relating to any voluntary transfer of Lessor’s
    interest in the Equipment including any transfer prior to the
    Closing Date of Lessor’s obligation to fund its
    participation (other than during the continuance of an Event of
    Default or in connection with the exercise of remedies as
    provided in Section 15 hereof, Lessee’s exercise of
    any purchase option pursuant to Section 23 hereof,
    Lessee’s exercise of its termination rights pursuant to
    Section 10 hereof or the transfer to Lessee of any Unit
    which has been the subject of an Event of Loss pursuant to
    Section 11 hereof) and no such costs or expenses shall
    constitute Transaction Costs and Lessee will not have any
    obligation with respect to

    

    33

 

    the costs and expenses resulting from any voluntary transfer of
    any equity interest by any transferee of Lessor, 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 hereof, Lessee’s exercise of
    any purchase option pursuant to Section 23 hereof,
    Lessee’s exercise of its termination rights pursuant to
    Section 10 hereof or the transfer to Lessee of any Unit
    which has been the subject of an Event of Loss pursuant to
    Section 11 hereof).

 

    Section 25.  Filing
    in Mexico.

 

    In the event that during the Lease Term (A) a central
    filing system becomes available in Mexico for the filing or
    recording of security interests or ownership rights in railroad
    rolling stock, (B) Lessee elects as a business practice to
    conduct such filings or recordings with respect to equipment
    owned or leased by Lessee that is used in a manner similar to
    the Units and (C) Lessee has not previously taken such
    action in accordance with the requirements of Section 16.1
    hereof, then Lessee will take, or cause to be taken, at
    Lessee’s cost and expense, such action with respect to the
    filing or recording of this Lease or any supplements hereto (or
    appropriate evidence thereof) and any financing statements or
    other instruments as may be necessary or reasonably required to
    maintain, so long as this Lease is in effect and such central
    filing system remains available, the benefit of such filing or
    recording in Mexico for the protection of any security interest
    that may be claimed to have been created by this Lease and the
    ownership interest of Lessor in each Unit to the extent such
    protection is available pursuant to such filing or recording in
    Mexico.

 

    Section 26.  Miscellaneous.

 

    Section 26.1.  Governing
    Law; Severability.  This Lease and any extensions,
    amendments, modifications, renewals or supplements hereto shall
    be governed by and construed in accordance with the internal
    laws and decisions (as opposed to conflicts of law provisions)
    of the State of New York; provided, however, that
    the parties shall be entitled to all rights conferred by any
    applicable Federal statute, rule or regulation. Whenever
    possible, each provision of this Lease shall be interpreted in
    such manner as to be effective and valid under applicable law,
    but if any provision of this Lease shall be prohibited by or
    invalid under the laws of any jurisdiction, such provision, as
    to such jurisdiction, shall be ineffective to the extent of such
    prohibition or invalidity, without invalidating the remainder of
    such provision or the remaining provisions of this Lease in any
    other jurisdiction.

 

    Section 26.2.  Execution
    in Counterparts.  This Lease may be executed in
    any number of counterparts, each executed counterpart
    constituting an original and in each case such counterparts
    shall constitute but one and the same instrument.

 

    Section 26.3.  Headings
    and Table of Contents;
    Section References.  The headings of the
    sections of this Lease and the Table of Contents are inserted
    for purposes of convenience only and shall not be construed to
    affect the meaning or construction of any of the provisions
    hereof. All references herein to numbered sections, unless
    otherwise indicated, are to sections of this Lease.

 

    Section 26.4.  Successors
    and Assigns.  This Lease shall be binding upon and
    shall inure to the benefit of, and shall be enforceable by, the
    parties hereto and their respective permitted successors and
    assigns.

 

    Section 26.5.  True
    Lease.  It is the intent of the parties to this
    Lease that it be, and this Lease shall be, a single and
    indivisible true lease of the Equipment for all purposes,
    including, without limitation, for Federal income tax purposes.
    Lessor shall at all times be the owner of each Unit which is the
    subject of this Lease for all purposes, this Lease conveying to
    Lessee no right, title or interest in any Unit except as lessee.
    Nothing contained in this Section 26.5 shall be construed
    to limit Lessee’s use or operation of any Unit or
    constitute a representation, warranty or covenant by Lessee as
    to tax consequences.

 

    Section 26.6.  Amendments
    and Waivers.  No term, covenant, agreement or
    condition of this Lease may be terminated, amended or compliance
    therewith waived (either generally or in a particular instance,
    retroactively or prospectively) except by an instrument or
    instruments in writing executed by each party hereto;
    provided, however, that any breach or default, once
    waived in writing, unless otherwise specified in such waiver,
    shall not be deemed continuing for any purpose of the Operative
    Agreements.

 

    Section 26.7.  Survival.  All
    warranties, representations, indemnities and covenants made by
    any party hereto, herein or in any certificate or other
    instrument delivered by any such party or on the behalf of any

    

    34

 

    such party under this Lease, shall be considered to have been
    relied upon by each other party hereto and shall survive the
    consummation of the transactions contemplated hereby on the
    Closing Date and on the Settlement Date regardless of any
    investigation made by any such party or on behalf of any such
    party.

 

    Section 26.8.  Business
    Days.  If any payment is to be made hereunder or
    any action is to be taken hereunder on any date that is not a
    Business Day, such payment or action otherwise required to be
    made or taken on such date shall be made or taken on the
    immediately succeeding Business Day with the same force and
    effect as if made or taken on such scheduled date and as to any
    payment (provided any such payment is made on such succeeding
    Business Day) no interest shall accrue on the amount of such
    payment from and after such scheduled date to the time of such
    payment on such next succeeding Business Day.

 

    Section 26.9.  Directly
    or Indirectly.  Where any provision in this Lease
    refers to action to be taken by any Person, or which such Person
    is prohibited from taking, such provision shall be applicable
    whether such action is taken directly or indirectly by such
    Person.

 

    Section 26.10.  Entitlement
    to §1168 Benefits.  It is the intent of the
    parties that Lessor would be entitled to the benefits of
    Section 1168 of the Bankruptcy Code in the event of any
    bankruptcy proceedings of Lessee filed under the
    U.S. Bankruptcy Code with respect to the right to repossess
    any Unit and to enforce any of its other rights or remedies as
    provided herein, and in any circumstances where more than one
    construction of the terms and conditions of this Lease is
    possible, a construction which would preserve such benefits
    shall control over any construction which would not preserve
    such benefits or would render them doubtful. To the extent
    consistent with the provisions of Section 1168 of the
    Bankruptcy Code or any analogous section of the Bankruptcy Code
    or other applicable law, it is hereby expressly agreed and
    provided that, notwithstanding any other provision of the
    Bankruptcy Code, any right of Lessor to take possession of any
    Unit and to enforce any of its other rights or remedies in
    compliance with the provisions of this Lease shall not be
    affected by the provisions of Sections 362 or 363 of the
    Bankruptcy Code or any analogous provision of any superseding
    statute or any power of a bankruptcy court to enjoin such
    undertaking or possession.

 

    Section 26.11.  Waiver
    of Jury
    Trial.  The
    parties hereto voluntarily and intentionally waive any rights
    they may have to a trial by jury in respect of any litigation
    based hereon, or arising out of, under, or in connection with
    this Lease or any other Operative Agreement, or any course of
    conduct, course of dealing, statements (whether verbal or
    written) or actions of any of the parties hereto and thereto.
    The parties hereto hereby agree that they will not seek to
    consolidate any such litigation with any other litigation in
    which a jury trial has not or cannot be waived.
    

 

    Section 26.12.  Reproduction
    of Documents.  This Lease 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 Closing Date, 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 26.12 shall not
    prohibit the parties hereto 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 26.13.  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 Lease, 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. 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.

    

    35

 

 

    Section 26.14.  Jurisdiction,
    Court Proceedings.  Any suit, action or proceeding
    against any party to this Lease or any other Operative Agreement
    arising out of or relating to this Lease, any other Operative
    Agreement or any transaction contemplated hereby or thereby may
    be brought in any Federal or state court located in New York,
    New York, and each such party hereby submits to the exclusive
    jurisdiction of such courts for the purpose of any such suit,
    action or proceeding. Each of the parties to this Lease (that is
    a resident of the United States of America), in the event that
    service of process by mail is permitted by applicable law, each
    such party irrevocably consents to the service of process in any
    such suit, action or proceeding in such courts by the mailing of
    such process by registered or certified mail, postage prepaid,
    at its address for notices provided for in Section 20. Each
    such party irrevocably agrees not to assert any objection which
    it may ever have to the laying of venue of any such suit, action
    or proceeding in any Federal or state court located in New York,
    New York, including without limitation, objections regarding
    jurisdiction to which they may be entitled by reason of their
    current or future domiciles; and any claim that any such suit,
    action or proceeding brought in any such court has been brought
    in an inconvenient forum.

 

    Each of the parties to this Lease (that are not residents of the
    United States of America), hereby irrevocably designate, appoint
    and empower CT Corporation as its lawful agent to receive for
    and on its behalf service of process in the State of New York in
    any action or proceeding described in this Section 26.14
    and irrevocably consents to the service of process outside the
    territorial jurisdiction of said courts in any such action or
    proceeding. Any service made on such agent or its successor
    shall be effective when delivered regardless of whether notice
    thereof is given to affected party. If any person or firm
    designated as agent hereunder shall no longer serve as agent of
    such party to receive service of process in the State of New
    York, the party so affected shall be obligated promptly to
    appoint a successor to so serve; and, unless and until such
    successor is appointed and the parties hereto notified of the
    same in writing, service upon the last designated agent shall be
    good and effective. The parties to this Lease agree that a final
    judgment in any such action or proceeding shall be conclusive
    and may be enforced in other jurisdictions by suit on the
    judgment or in any other manner provided by law.

 

    Section 26.15.  Judgment
    Currency.  This is an international transaction in
    accordance with which the specification of Dollars is of the
    essence, and Dollars shall be the currency of account in the
    case of all obligations under the Operative Agreements. The
    payment obligations of the parties under the Operative
    Agreements shall not be discharged by an amount paid in a
    currency or in a place other than that specified with respect to
    such obligations, whether pursuant to a judgment or otherwise,
    to the extent that the amount so paid on prompt conversion to
    Dollars and transfer to the specified place of payment under
    normal banking procedures does not yield the amount of Dollars,
    in such place, due under the governing Operative Agreements. In
    the event that any payment, whether pursuant to a judgment or
    otherwise, upon conversion and transfer does not result in
    payment of such amount of Dollars in the specified place of
    payment, the obligee of such payment shall have a separate cause
    of action against the party making the same for the additional
    amount necessary to yield the amount due and owing under such
    Operative Agreements. If, for the purpose of obtaining a
    judgment in any court with respect to any obligation of a party
    under any of the Operative Agreements or any of the agreements
    contemplated thereby, it shall be necessary to convert to any
    other currency any amount in Dollars due thereunder and a change
    shall occur between the rate of exchange applied in making such
    conversion and the rate of exchange prevailing on the date of
    payment of such judgment, the respective judgment debtor agrees
    to pay such additional amounts (if any) as may be necessary to
    insure that the amount paid on the date of payment is the amount
    in such other currency which, when converted into Dollars and
    transferred to New York, New York, in accordance with normal
    banking procedures, will result in the amount then due under the
    respective Operative Agreement in Dollars. Any amount due from
    the respective judgment debtor shall be due as a separate debt
    and shall not be affected by or merged into any judgment being
    obtained for any other sum due under or in respect of any
    Operative Agreement. In no event, however, shall the respective
    judgment debtor be required to pay a larger amount in such other
    currency at the rate of exchange in effect on the date of
    payment than the amount of Dollars stated to be due under the
    respective Operative Agreement, so that in any event the
    obligations of the respective judgment debtor under the
    Operative Agreement will be effectively maintained as Dollar
    obligations.

    

    36

 

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

 

    Lessor:

 

    High Ridge Leasing LLC
    

 

			
	 	    By: 
	
    General Electric Capital Corporation,

    its Member

 

			
	 	    By: 
	
    /s/  Andrea
    J. Brantner

    Name: Andrea J. Brantner

			
	 	    Title: 
	
    Attorney-in-Fact

 

    Lessee:

 

    Kansas City Southern de
    Mexico, S. de R.L. de C.V.
    

 

			
	 	    By: 
	
    /s/  Paul
    J. Weyandt

    Name: Paul J. Weyandt

			
	 	    Title: 
	
    Attorney-in-Fact
    and Treasurer

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