Document:

exv10w49

 

Exhibit
10.49

 

EQUIPMENT LEASE AGREEMENT

(KCSR 2005-1)

dated as of December 20, 2005

between

KCSR TRUST 2005-1, acting through

WILMINGTON TRUST COMPANY,

not in its individual capacity, except as otherwise

expressly provided herein, but solely as Owner Trustee,

Lessor

and

THE KANSAS CITY SOUTHERN RAILWAY COMPANY,

Lessee

SD70MAC Locomotives

 

CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS LEASE, THE EQUIPMENT COVERED
HEREBY AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO,
AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, WELLS FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT (KCSR 2005-1),
DATED AS OF DECEMBER 20, 2005 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED PARTY, AND LESSOR, AS
DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM INDENTURE TRUSTEE AT ITS
ADDRESS SET FORTH IN SECTION 20 OF THIS LEASE. THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS, ONLY THAT COUNTERPART TO BE DEEMED THE ORIGINAL COUNTERPART FOR CHATTEL PAPER
PURPOSES CONTAINS THE RECEIPT THEREFOR EXECUTED BY WELLS FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF. SEE SECTION 26.2 FOR INFORMATION
CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.

 

     Memorandum of Equipment Lease Agreement (KCSR 2005-1) filed with the Surface Transportation
Board pursuant to 49 U.S.C. § 11301 on December 21, 2005 at 3:24PM., Recordation Number 26046, and
deposited in the Office of the Registrar General of Canada pursuant to Section 105 of the Canada
Transportation Act on December 21, 2005.

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	SECTION	 	HEADING	 	PAGE
	Parties

	 	 	 	 	1	 
	 
	 	 	 	 	 	 
	SECTION 1.

	 	DEFINITIONS.
	 	 	1	 
	 
	 	 	 	 	 	 
	SECTION 2.

	 	ACCEPTANCE AND LEASING OF EQUIPMENT
	 	 	1	 
	 
	 	 	 	 	 	 
	SECTION 3.

	 	TERM AND RENT
	 	 	1	 
	 
	 	 	 	 	 	 
	Section 3.1.

	 	Lease Term
	 	 	1	 
	Section 3.2.

	 	Basic Rent
	 	 	2	 
	Section 3.3.

	 	Supplemental Rent
	 	 	3	 
	Section 3.4.

	 	Adjustment of Rent
	 	 	4	 
	Section 3.5.

	 	Manner of Payments
	 	 	4	 
	 
	 	 	 	 	 	 
	SECTION 4.

	 	OWNERSHIP AND MARKING OF EQUIPMENT
	 	 	5	 
	 
	 	 	 	 	 	 
	Section 4.1.

	 	Retention of Title
	 	 	5	 
	Section 4.2.

	 	Duty to Number and Mark Equipment
	 	 	5	 
	Section 4.3.

	 	Prohibition against Certain Designations
	 	 	5	 
	 
	 	 	 	 	 	 
	SECTION 5.

	 	DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT
	 	 	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 7.

	 	LIENS
	 	 	8	 
	 
	 	 	 	 	 	 
	SECTION 8.

	 	MAINTENANCE; OPERATION; SUBLEASE
	 	 	8	 
	 
	 	 	 	 	 	 
	Section 8.1.

	 	Maintenance
	 	 	8	 
	Section 8.2.

	 	Operation
	 	 	9	 
	Section 8.3.

	 	Sublease
	 	 	9	 
	 
	 	 	 	 	 	 
	SECTION 9.

	 	MODIFICATIONS
	 	 	10	 
	 
	 	 	 	 	 	 
	Section 9.1.

	 	Required Modifications
	 	 	10	 
	Section 9.2.

	 	Optional Modifications
	 	 	10	 
	Section 9.3.

	 	Removal of Proprietary and Communications Equipment
	 	 	11	 
	Section 9.4.

	 	Retention of Equipment by Lessor
	 	 	11	 

			
	 	 	 
	Equipment Lease Agreement (KCSR
2005-1)
	 	 

 

 

	 	 	 	 	 	 	 
	SECTION	 	HEADING	 	PAGE
	SECTION 10.

	 	VOLUNTARY TERMINATION
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 10.1.

	 	Right of Termination
	 	 	11	 
	Section 10.2.

	 	Sale of Equipment
	 	 	12	 
	Section 10.3.

	 	Retention of Equipment by Lessor
	 	 	12	 
	Section 10.4.

	 	Termination of Lease
	 	 	13	 
	 
	 	 	 	 	 	 
	SECTION 11.

	 	LOSS, DESTRUCTION, REQUISITION, ETC.
	 	 	13	 
	 
	 	 	 	 	 	 
	Section 11.1.

	 	Event of Loss
	 	 	13	 
	Section 11.2.

	 	Replacement or Payment upon Event of Loss
	 	 	13	 
	Section 11.3.

	 	Rent Termination
	 	 	15	 
	Section 11.4.

	 	Disposition of Equipment; Replacement of Unit
	 	 	15	 
	Section 11.5.

	 	Eminent Domain
	 	 	16	 
	 
	 	 	 	 	 	 
	SECTION 12.

	 	INSURANCE
	 	 	16	 
	 
	 	 	 	 	 	 
	Section 12.1.

	 	Property Damage and Public Liability Insurance
	 	 	16	 
	Section 12.2.

	 	Proceeds of Insurance
	 	 	17	 
	Section 12.3.

	 	Additional Insurance
	 	 	18	 
	 
	 	 	 	 	 	 
	SECTION 13.

	 	REPORTS; INSPECTION
	 	 	18	 
	 
	 	 	 	 	 	 
	Section 13.1.

	 	Duty of Lessee to Furnish
	 	 	18	 
	Section 13.2.

	 	Lessor’s Inspection Rights
	 	 	18	 
	 
	 	 	 	 	 	 
	SECTION 14.

	 	EVENTS OF DEFAULT
	 	 	19	 
	 
	 	 	 	 	 	 
	SECTION 15.

	 	REMEDIES
	 	 	20	 
	 
	 	 	 	 	 	 
	Section 15.1.

	 	Remedies
	 	 	20	 
	Section 15.2.

	 	Cumulative Remedies
	 	 	23	 
	Section 15.3.

	 	No Waiver
	 	 	23	 
	Section 15.4.

	 	Lessee’s Duty to Return Equipment Upon Default
	 	 	23	 
	Section 15.5.

	 	Specific Performance; Lessor Appointed Lessee’s Agent
	 	 	23	 
	 
	 	 	 	 	 	 
	SECTION 16.

	 	FILINGS; FURTHER ASSURANCES
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 16.1.

	 	Filings
	 	 	24	 
	Section 16.2.

	 	Further Assurances
	 	 	24	 
	Section 16.3.

	 	Expenses
	 	 	24	 
	 
	 	 	 	 	 	 
	SECTION 17.

	 	LESSOR’S RIGHT TO PERFORM
	 	 	24	 
	 
	 	 	 	 	 	 
	SECTION 18.

	 	ASSIGNMENT
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 18.1.

	 	Assignment by Lessor
	 	 	25	 
	Section 18.2.

	 	Assignment by Lessee
	 	 	25	 
	Section 18.3.

	 	Sublessee’s Performance and Rights
	 	 	25	 

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR
2005-1)
	 	- ii -
	 	 

 

 

	 	 	 	 	 	 	 
	SECTION	 	HEADING	 	PAGE
	SECTION 19.

	 	NET LEASE, ETC.
	 	 	25	 
	 
	 	 	 	 	 	 
	SECTION 20.

	 	NOTICES
	 	 	26	 
	 
	 	 	 	 	 	 
	SECTION 21.

	 	CONCERNING INDENTURE TRUSTEE
	 	 	27	 
	 
	 	 	 	 	 	 
	Section 21.1.

	 	Limitation of Indenture Trustee’s Liabilities
	 	 	27	 
	Section 21.2.

	 	Right, Title and Interest of Indenture Trustee under Lease
	 	 	28	 
	 
	 	 	 	 	 	 
	SECTION 22.

	 	TERMINATION UPON PURCHASE BY LESSEE; OPTIONS TO RENEW	 	 	28	 
	 
	 	 	 	 	 	 
	Section 22.1.

	 	Termination upon Purchase by Lessee
	 	 	28	 
	Section 22.2.

	 	Renewal Option at Expiration of Basic Term
	 	 	28	 
	Section 22.3.

	 	[Reserved]
	 	 	28	 
	Section 22.4.

	 	Determination of Fair Market Rental Value
	 	 	29	 
	Section 22.5.

	 	Stipulated Loss Value During Renewal Term
	 	 	29	 
	 
	 	 	 	 	 	 
	SECTION 23.

	 	LESSEE’S OPTIONS TO PURCHASE EQUIPMENT; PURCHASE OF BENEFICIAL INTEREST
	 	 	29	 
	 
	 	 	 	 	 	 
	SECTION 24.

	 	LIMITATION OF LESSOR’S LIABILITY
	 	 	30	 
	 
	 	 	 	 	 	 
	SECTION 25.

	 	FILING IN MEXICO
	 	 	31	 
	 
	 	 	 	 	 	 
	SECTION 26.

	 	MISCELLANEOUS
	 	 	31	 
	 
	 	 	 	 	 	 
	Section 26.1.

	 	Governing Law; Severability
	 	 	31	 
	Section 26.2.

	 	Execution in Counterparts
	 	 	31	 
	Section 26.3.

	 	Headings and Table of Contents; Section References
	 	 	31	 
	Section 26.4.

	 	Successors and Assigns
	 	 	32	 
	Section 26.5.

	 	True Lease
	 	 	32	 
	Section 26.6.

	 	Amendments and Waivers
	 	 	32	 
	Section 26.7.

	 	Survival
	 	 	32	 
	Section 26.8.

	 	Business Days
	 	 	32	 
	Section 26.9.

	 	Directly or Indirectly
	 	 	32	 
	Section 26.10.

	 	Incorporation by Reference
	 	 	32	 
	Section 26.11.

	 	Entitlement to §1168 Benefits
	 	 	32	 
	Section 26.12.

	 	Waiver of Jury Trial
	 	 	33	 

ATTACHMENTS TO EQUIPMENT LEASE AGREEMENT:

Exhibit A            –            Form of Lease Supplement

Appendix A       –            Definitions

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR
2005-1)
	 	- iii -
	 	 

 

 

EQUIPMENT LEASE AGREEMENT

(KCSR 2005-1)

     This EQUIPMENT LEASE AGREEMENT (KCSR 2005-1), dated as of December 20, 2005 (this
“Lease”), between KCSR TRUST 2005-1, a Delaware statutory trust (“Lessor”), acting through
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity except as
expressly stated herein, but solely as trustee created under the Trust Agreement (as hereinafter
defined) (in its individual capacity “Trust Company” and as Owner Trustee, together with its
permitted successors and assigns, called the “Owner Trustee”), and THE KANSAS CITY SOUTHERN RAILWAY
COMPANY, a Missouri corporation (“Lessee”),

W I T N E S S E T H:

			
	SECTION 1.	 	DEFINITIONS.

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

			
	SECTION 2.	 	ACCEPTANCE AND LEASING OF EQUIPMENT.

     Lessor hereby agrees (subject to satisfaction or waiver of the conditions applicable to the
Delivery Date set forth in Section 4.1 of the Participation Agreement), simultaneously with the
delivery of each Unit of Equipment from Seller to Lessor, and acceptance thereof by Lessor, to
accept on behalf of Lessor delivery of such Unit of Equipment from Seller, as evidenced by the
execution and delivery by Lessee (as the authorized representative of Lessor) of a Certificate of
Acceptance with respect to such Unit and thereafter to lease such Unit to Lessee hereunder. Lessee
further agrees (subject to satisfaction or waiver of the conditions applicable to the Closing Date
for such Unit set forth in Article IV of the Participation Agreement) to execute and deliver a
Lease Supplement covering such Unit. Lessor hereby authorizes one or more employees or agents of
Lessee, designated by Lessee, to act on behalf of Lessor as its authorized representative or
representatives to accept delivery of the Equipment and to execute and deliver such Certificate of
Acceptance, all in accordance with Section 2.3(b) of the Participation Agreement. Lessee hereby
agrees that such acceptance of delivery by such authorized representative or representatives on
behalf of Lessor shall, without further act, irrevocably constitute acceptance by Lessee of such
Unit for all purposes of this Lease.

			
	SECTION 3.	 	TERM AND RENT.

     Section 3.1. Lease Term. The interim term of this Lease (the “Interim Term”) shall commence for
each Unit on the Delivery Date for such Unit and shall terminate at 11:59 P.M. (New York City time)
on the 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 Closing Date for such Unit and, subject to
earlier termination pursuant to Sections 10, 11, 15, and 22.1, shall expire at 11:59 P.M. (New York
City time) on the Basic Term Expiration Date for such Unit. Subject and pursuant to Section 22.2,
Lessee may elect one or more Renewal Terms with respect to any Unit.

			
	 	 	 
	Equipment Lease Agreement (KCSR
2005-1)

	 	 

 

 

     Section 3.2. Basic Rent. (a) Lessee and Lessor hereby agree that no Rent (other than Supplemental
Rent, if any) shall be payable to Lessor during the Interim Term. Lessee hereby agrees to pay
Lessor Basic Rent for each Unit throughout the Basic Term applicable thereto on the first Rent
Payment Date and in consecutive semi-annual installments thereafter payable on each Rent Payment
Date. Each such payment of Basic Rent shall be in an amount equal to the product of the Equipment
Cost for such Unit multiplied by the Basic Rent percentage for such Unit set forth opposite such
Rent Payment Date on Schedule 2 to the Lease Supplement for such Unit (as such Schedule 2 shall be
adjusted pursuant to Section 2.6 of the Participation Agreement). Basic Rent shall be payable on
the Rent Payment Dates as set forth in Schedule 2 to the Lease Supplement for such Unit. Basic
Rent shall be allocated and accrued for use of the Units as specified in Schedule 5 to the Lease
Supplement for such Unit (“Allocated Rent”). For the avoidance of doubt, and notwithstanding
anything to the contrary herein, the parties agree that irrespective of Lessee’s payment obligation
on each Rent Payment Date, Lessee’s liability on account of the use of each Unit shall be allocated
to each Lease Period in the amount of Allocated Rent set forth in Schedule 5 to the Lease
Supplement for such Unit. Basic Rent allocated to any Lease Period shall be further allocated
ratably to each day within such Lease period. Basic Rent shall be allocated to each calendar year
in the Lease Term based upon the assumption that each calendar year in the Lease Term is 360 days,
consisting of four 90-day quarters and twelve 30-day months.

     (b) It is the intention of Lessor and Lessee that: (i) for purposes of Section 467 of the Code
the Allocated Rent derived by multiplying Equipment Cost by the percentage set forth for each Lease
Period on Schedule 5 to the applicable Lease Supplement under the caption “Allocated Rent”
constitutes a specific allocation of “fixed rent” within the meaning of Treasury Regulation section
1.467-1(c)(2)(ii) with the effect that each of Lessor and Lessee shall accrue rental income and
rental expense, respectively, in the amount equal to Equipment Cost multiplied by the percentage as
set forth for each Lease Period under the column with the heading “Allocated Rent” on Schedule 5 to
the applicable Lease Supplement.

     (c) Lessor and Lessee agree that a prepaid or deferred rent balance may exist at certain times
during the Basic Term. It is the intention of Lessor and Lessee that any such prepaid or deferred
rent balance shall (A) in the case of a prepaid rent balance, give rise to a loan from Lessee to
Lessor in the amount of any positive loan balance (the “Lessor Loan Balance”) computed by
multiplying the percentage set forth in Schedule 6 to the applicable Lease Supplement under the
caption “Loan Balance” by the Equipment Cost, and in the case of a deferred rent balance, shall
give rise to a loan from Lessor to Lessee in the amount of any negative loan balance (the “Lessee
Loan Balance”) computed by multiplying the percentage set forth in Schedule 6 to the applicable
Lease Supplement under the caption “Loan Balance” by the Equipment Cost and (B) such loan shall
provide for “adequate stated interest” within the meaning of Treasury Regulation section
1.467-2(b)(ii). If there shall be an outstanding Lessor Loan Balance, Lessor shall deduct interest
expense and Lessee shall include interest income, in each case, in an amount equal to the product
of Equipment Cost multiplied by the percentage set forth under the caption “Interest Amount” for
the applicable period identified on Schedule 6 to the applicable Lease Supplement. If there shall
be an outstanding Lessee Loan Balance, Lessee shall deduct interest expense and Lessor shall
include interest income, in each case, in an amount equal to the product of Equipment Cost
multiplied by the percentage set forth under the caption

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR
2005-1)

	 	- 2 -
	 	 

 

 

“Interest Amount” for the applicable period identified on Schedule 6 to the applicable Lease
Supplement.

     (d) The obligations of Lessor to Lessee under this Section 3.2 (including Lessor’s obligation
with respect to any loan from Lessee as represented by any Lessor Loan Balance) (i) are subject and
subordinate to the obligations of Lessor under the Indenture and of Lessee to Lessor under any
other Operative Agreement, (ii) are payable exclusively from amounts distributable under clause
“second” of Section 3.01 of the Indenture or clause “fourth” of Section 3.03 of the Indenture,
(iii) shall be suspended at any time a Specified Default or an Event of Default is continuing
(unless all amounts payable to the Loan Participants under Section 3.03 of the Indenture shall have
been satisfied in full and Lessee has paid Lessor all amounts due to Lessor and Owner Participant
under the Operative Agreements), and (iv) shall not be enforceable by Lessee other than by written
demand unless all amounts payable to the Loan Participants under Section 3.03 of the Indenture
shall have been satisfied in full and Lessee has paid Lessor all amounts due to Lessor and Owner
Participant under the Operative Agreements. Lessee acknowledges, consents and agrees to the
subordination and other terms set forth in the previous sentence.

     The EBO Fixed Purchase Price, each Stipulated Loss Value and each Termination Value, as of any
Determination Date, reflects the subtraction of any Lessor Loan Balance and accrued interest
thereon and the addition of any Lessee Loan Balance, accrued interest thereon and accrued Basic
Rent; and the payment thereof, or any amount calculated by reference thereto, by Lessee as and when
due hereunder in connection with a termination of this Lease with respect to any Unit pursuant to
Section 10, 11, 15 or 22.1 shall effect a repayment, by offset, of the Lessor Loan Balance or a
repayment of the Lessee Loan Balance, as the case may be.

     (e) In the event that the amount of fixed rent payable under the Lease is deemed to be less
than or more than the aggregate amount of Basic Rent identified on Schedule 2 to the applicable
Lease Supplement (and such increase is deemed to be fixed rent within the meaning of Treasury
Regulation section 1.467-1(h)(3) or such decrease is deemed to be a decrease of fixed rent within
the meaning of Treasury Regulation section 1.467-1(h)(3)), the amount of Allocated Rent for each
Lease Period shall be increased or decreased, as the case may be, by an amount equal to the deemed
increase or decrease in Basic Rent payments multiplied by a fraction, the numerator of which is
equal to the amount of Allocated Rent for such Lease Periods and the denominator of which is the
aggregate amount of Allocated Rent for all Lease Periods. The adjusted Allocated Rent shall
constitute Allocated Rent for all purposes of this Lease.

     (f) Anything contained herein or in the Participation Agreement to the contrary
notwithstanding, each installment of Basic Rent (both before and after any adjustment pursuant to
Section 2.6 of the Participation Agreement) shall be, under any circumstances and in any event, in
an amount at least sufficient for Lessor to pay in full as of the due date of such installment, any
payment of principal of and interest on the Equipment Notes required to be paid by Lessor pursuant
to the Indenture on such due date.

     Section 3.3. Supplemental Rent. Lessee also agrees to pay to Lessor, or to whomsoever shall be
entitled thereto, any and all Supplemental Rent, promptly as the same shall become due and owing,
or where no due date is specified, promptly after demand by the Person entitled

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 3 -
	 	 

 

 

thereto, and in the event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or equity or otherwise as
in the case of nonpayment of Basic Rent. Without limiting the generality of the foregoing, Lessee
will pay, as Supplemental Rent, (i) on demand, to the extent permitted by applicable law, an amount
equal to interest at the applicable Late Rate on any part of any installment of Basic Rent not paid
when due for any period for which the same shall be overdue and on any payment of Supplemental Rent
not paid when due or demanded, as the case may be, for the period from such due date or demand
until the same shall be paid, (ii) an amount equal to any Make-Whole Amount due under Section
2.10(c) of the Indenture to the extent not paid by Lessee, (iii) in the case of the termination of
this Lease with respect to any Unit pursuant to Section 10, on the applicable Termination Date, an
amount equal to the Make-Whole Amount, if any, with respect to the principal amount of each
Equipment Note to be prepaid as a result of such termination, (iv) in the case of a termination of
this Lease with respect to any Unit pursuant to Section 22.1, on the date such Unit is purchased,
an amount equal to the Make-Whole Amount, if any, with respect to any Equipment Note to be prepaid
on such date, (v) in the case of any refunding or refinancing pursuant to Section 11.2 of the
Participation Agreement or any prepayment pursuant to Section 2.10(d) of the Indenture, on the date
specified in the agreement referred to in Section 11.2(a) of the Participation Agreement or Section
2.10(d) of the Indenture, as applicable, an amount equal to the Make-Whole Amount, if any, with
respect to the principal amount of each Equipment Note outstanding on the Refunding Date, and (vi)
on demand, any payments required under the Tax Indemnity Agreement or Section 7 of the
Participation Agreement and (vi) all amounts payable by Lessor under Section 7.02 of the Indenture.
All Supplemental Rent to be paid pursuant to this Section 3.3 shall be payable in the type of
funds and in the manner set forth in Section 3.5.

     Section 3.4. Adjustment of Rent. Lessee and Lessor agree that the Basic Rent, Stipulated Loss
Value and Termination Value percentages shall be adjusted to the extent provided in Section 2.6 of
the Participation Agreement.

     Section 3.5. Manner of Payments. All Rent (other than Supplemental Rent payable to Persons other
than Lessor, which shall be payable to such other Persons in accordance with written instructions
furnished to Lessee by such Persons, as otherwise provided in any of the Operative Agreements or as
required by law) shall be paid by Lessee to Lessor at its office at Rodney Square North, 1100 North
Market Street, Wilmington, DE 19890-0001, Attention: Corporate Trust Administration. All Rent
shall be paid by Lessee in funds consisting of lawful currency of the United States of America,
which shall be immediately available to the recipient not later than 12:00 noon (New York City
time) on the date of such payment, provided that so long as the Indenture shall not have
been discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee agrees, that all
Rent (excluding Excepted Property) payable to Lessor and assigned to Indenture Trustee shall be
paid directly to Indenture Trustee at the times and in funds of the type specified in this Section
3.5 at the office of Indenture Trustee at 299 South Main Street, 12th Floor, MAC:
U1228-120, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, or at such other
location in the United States of America as Indenture Trustee may otherwise direct.

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 4 -
	 	 

 

 

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

“SUBJECT TO A SECURITY AGREEMENT RECORDED

WITH THE SURFACE TRANSPORTATION BOARD”

or

“OWNERSHIP SUBJECT TO A SECURITY AGREEMENT FILED

WITH THE SURFACE TRANSPORTATION BOARD”

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

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

			
	SECTION 5.	 	DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT.

     Section 5.1. Disclaimer of Warranties. Without waiving any claim Lessee may have against any
seller, supplier or manufacturer, LESSEE ACKNOWLEDGES AND AGREES THAT, (i) EACH UNIT IS OF A SIZE,
DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED
THAT EACH UNIT IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER LESSOR NOR OWNER

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 5 -
	 	 

 

 

PARTICIPANT IS 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 NEITHER LESSOR, AS LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR
OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL
RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO
THE TITLE OF THE EQUIPMENT, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY
THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF
ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS
BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WHATSOEVER WITH RESPECT THERETO, except that Lessor, in its individual capacity, represents and
warrants that on the Delivery Date, Lessor shall have received whatever title to the Equipment
delivered on or prior to the Delivery Date as was conveyed to Lessor by Seller and each Unit will
be free of Lessor’s Liens attributable to Lessor in its individual capacity. 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 Agreement acknowledges notice of, and consents in
all respects to, the terms of this Lease, and expressly, severally and as to its own actions only,
agrees that, notwithstanding any other provision of any of the Operative Agreements, so long as no
Lease Event of Default has occurred and is continuing, it shall not take or cause to be taken any
action inconsistent with Lessee’s rights under this Lease or otherwise through its own actions in
any way 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) On the expiration of the Lease Term with respect to any Unit which has
not been purchased by Lessee, Lessee will, at its own cost and expense, deliver possession of such
Unit to Lessor at not more than three interchange points on the tracks of Lessee in the U.S.,
f.o.b. such interchange point, as Lessor may reasonably designate to Lessee in writing at least 90
days before the end of the Lease Term or, in the absence of such designation, as Lessee may select
or, if Lessor has requested storage pursuant to Section 6.3, to the location determined in
accordance with Section 6.3. 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

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 6 -
	 	 

 

 

obligations with respect to such Unit surviving pursuant to the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not been paid as of the date of the
expiration of the Lease Term) shall terminate.

     (b) In the event any Unit is not returned as hereinabove provided at the expiration of the
Lease Term with respect to such Unit, Lessee may retain custody and control of such Unit so long as
Lessee is attempting to remedy any condition delaying such return, and in any case the covenants of
Lessee (other than with respect to Basic Rent) under this Lease (including those pertaining to
indemnities, Liens, maintenance and insurance) shall continue with respect to such Unit until such
return of such Unit and, regardless of whether such delay shall be attributable to Lessee or any
permitted sublessee, Lessee shall pay holdover rent to Lessor for the first 30 days in an amount
equal to the daily equivalent of rent during the preceding term, and thereafter in an amount equal
to 120% of the daily equivalent of the greater of (i) the arithmetic average of the Basic Rent
during the Basic Term for such Unit (or, if the failure to return occurs after a Renewal Term, the
arithmetic average of the Basic Rent paid during the Renewal Term for such Unit) and (ii) the Fair
Market Rental Value for such Unit. The provision for payment pursuant to the immediately preceding
sentence shall not be in abrogation of Lessor’s right under Section 6.1 (a) to have such Unit
returned to it hereunder.

     Section 6.2. Condition of Equipment. Each Unit when returned to Lessor pursuant to Section 6.1(a)
shall (i) be capable of performing the functions for which it was designed, at its originally rated
horsepower without material degradation, with all mechanical and electrical components in good
working order, (ii) have no broken glass or material corrosion, (iii) have installed all required
operational software (with paid-in-full site licenses) necessary for the operation of the Unit in
compliance with the return provisions of this Lease, (iv) otherwise be in the condition required by
Sections 8.1 and 9.3 and (v) be free and clear of all Liens except Lessor’s Liens and Permitted
Liens, provided that Lessee agrees to promptly discharge any such Permitted Lien upon
return of the Unit and Lessor’s sole remedy for any breach of this clause (v) being damages at law
or specific performance at equity. In addition, Lessee shall return with each Unit all maintenance
and overhaul records for 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 or the date on which 50% of all Units to
be returned at the expiration of the Lease Term have been returned; provided that, with
respect to any Unit returned after the expiration of the Lease Term for such Unit, the Storage
Period for such Unit shall begin on the date of return of such Unit and end not more than 60 days
thereafter. Any storage facilities provided by Lessee pursuant to this Section 6.3 shall, in all
cases, be at the

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 7 -
	 	 

 

 

cost to Lessor of insurance and Lessee’s out-of-pocket costs in connection with providing any
services not contemplated hereby to be provided during the Storage Period and at the risk of
Lessor, including but not limited to any deterioration of any Unit caused by moisture or any
weather-related cost to the extent such cost arises during such period of storage and not as a
result of Lessee’s violation of its obligations under this Lease (except, with respect to any
injury to, or death of, any person exercising, either on behalf of Lessor or any prospective
purchaser or user, the inspection rights granted pursuant to this Section 6.3, Lessee’s gross
negligence or willful misconduct). With respect to the Units stored pursuant hereto, Lessee will
carry and maintain with respect to stored Units, during the Storage Period, under Lessee’s
insurance policies, property damage insurance and public liability insurance with respect to third
party personal and property damage as Lessee then maintains in respect of equipment owned or leased
by it similar in type to the Equipment; provided that (i) Lessor pays all incremental costs
associated with such insurance coverage, (ii) such insurance coverage does not negatively impact
upon Lessee’s loss insurance rating and (iii) any coverage provided is above Lessee’s deductibles
or self-insurance retention amounts. On not more than one occasion with respect to each stored
Unit and upon not less than 15 days’ prior written notice from Lessor to Lessee (which notice shall
specify the transportation of no less than all of the Units), Lessee will, during the Storage
Period, transport such Units, at Lessee’s cost and expense, to a destination or interchange point,
f.o.b., such destination or interchange point, on Lessee’s lines 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 7.	 	LIENS.

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

			
	SECTION 8.	 	MAINTENANCE; OPERATION; SUBLEASE.

     Section 8.1. Maintenance. Lessee, at its own cost and expense, shall service, maintain, repair and
keep each Unit (i) in good repair and operating condition, ordinary wear and tear excepted, (ii) in
accordance with (a) prudent Class I railroad industry maintenance practices in existence from time
to time and (b) manufacturer’s recommendations to the extent required to maintain such
manufacturer’s warranties in effect with respect to such Unit, (iii) in a manner consistent with
service, maintenance, overhaul and repair practices used by Lessee in respect of

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 8 -
	 	 

 

 

equipment owned or leased by Lessee similar in type to such Unit and without discrimination between
owned and leased Units, (iv) in compliance, in all material respects, with all applicable laws and
regulations, including any applicable United States EPA Regulations and any applicable AAR
Mechanical Standards and Federal Railroad Administration regulations as applicable to continued use
by Lessee; provided, however, that Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any such law, regulation,
requirement or rule in any reasonable manner which does not materially adversely affect the rights
or interests of Lessor and Indenture Trustee in the Equipment or hereunder or otherwise expose
Lessor, Indenture Trustee or any Participant to criminal sanctions or release Lessee from the
obligation to return the Equipment in compliance with the provisions of Section 6.2.

     Section 8.2. Operation. Lessee shall be entitled to the possession of the Equipment and to the use
of the Equipment by it or any Affiliate in the general operation of Lessee’s or any such
Affiliate’s freight rail business upon lines of railroad owned or operated by it or any such
Affiliate, upon lines of railroad over which Lessee or any such Affiliate has trackage or other
operating rights or over which railroad equipment of Lessee or any such Affiliate is regularly
operated pursuant to contract and on railroad lines of other railroads (including in connection
with barge-related rail transportation) in the United States, Canada and Mexico, in the usual
interchange of traffic or in through or run-through service and shall be entitled to permit the use
of the Equipment upon lines of railroad of connecting and other carriers in the usual interchange
of traffic or pursuant to through or run-through agreements; provided Lessee shall use the
Equipment only for the purpose and in the manner for which it was designed and intended and in
compliance, in all material respects, with all laws, regulations and guidelines of any governmental
body, the Association of American Railroads, the Federal Railroad Administration and the Surface
Transportation Board and their successors and assigns. Nothing in this Section 8.2 shall be deemed
to constitute permission by Lessor to any Person that acquires possession of any Unit to take any
action inconsistent with the terms and provisions of this Lease and any of the other Operative
Agreements. The rights of any person that acquires possession of any Unit pursuant to this Section
8.2 shall be subject and subordinate to the rights of Lessor hereunder.

     Section 8.3. Sublease. So long as no Specified Default or Event of Default shall have occurred and
be continuing, Lessee shall have the right, without the prior written consent of Lessor, to
sublease any Unit to or permit its use by a user incorporated under the federal laws or the laws of
any state of the United States, organized under the federal laws or the laws of any province of
Canada or organized under the federal laws or the laws of any state of Mexico, for use by such
sublessee upon lines of railroad owned or operated by Lessee, any Affiliate of Lessee, such
sublessee or by a railroad company or companies incorporated under the federal laws or laws of any
state of the United States, organized under the federal laws or the laws of any province in Canada
or organized under the federal laws or the laws of any state of Mexico, over which Lessee, such
Affiliate of Lessee, such sublessee or such railroad company or companies has trackage or other
operating rights, and upon lines of railroad of connecting and other carriers in the usual
interchange of traffic or pursuant to through or run-through service agreements; provided
such sublessee shall not, at the time of such sublease, be insolvent or subject to insolvency or
bankruptcy proceedings. Each sublease shall be subject and subordinate to this Lease (including the
duration of the sublease term, which term may not expire after the expiration of the Basic Term or
any Renewal Term then in effect) and no such sublease shall

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 9 -
	 	 

 

 

contain a purchase option. Lessee shall give Lessor and Indenture Trustee reasonably
contemporaneous notice upon entering into a sublease for a period in excess of one year. Each such
sublease shall be entered into on the expectation that no Unit shall operate outside of the U.S.
for more than 90 days in any calendar year. No sublease shall in any way discharge or diminish any
of Lessee’s obligations hereunder, and Lessee shall remain primarily liable hereunder for the
performance of all the terms, conditions and provisions of this Lease and the other Lessee
Agreements to the same extent as if such sublease had not been entered into. Nothing in this
Section 8.3 shall be deemed to constitute permission to any Person in possession of any Unit
pursuant to any such sublease to take any action inconsistent with the terms and provisions of this
Lease or any of the other Operative Agreements.

			
	SECTION 9.	 	MODIFICATIONS.

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

     Section 9.2. Optional Modifications. Lessee at any time may modify, alter or improve any Unit (a
“Modification”); provided that no Modification shall diminish in more than a de minimis
respect the current fair market value, estimated residual value, utility, or remaining useful life
of such Unit below the current fair market value, estimated residual value, utility, or remaining
useful life thereof immediately prior to such Modification, assuming such Unit was then in the
condition required to be maintained by the terms of this Lease. Title to any Non-Severable
Modifications shall be immediately vested in Lessor. Title to any Severable Modifications shall
remain with Lessee. If Lessee shall at its cost cause such Severable Modifications to be made to
any Unit and such Severable Modifications are reasonably necessary for the economic operation of
any such Unit, Lessor shall have the right, prior to the return of such Unit to Lessor hereunder,
to purchase such Severable Modifications (other than Severable Modifications consisting of
proprietary or communications equipment) at their then Fair Market Sales Value (taking into account
their actual condition). If Lessor does not elect to purchase such Severable Modifications, Lessee
may remove, and shall remove if requested by Lessor, such Severable Modifications at Lessee’s cost
and expense.

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 10 -
	 	 

 

 

     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, but without any Make-Whole Amount in respect of the
principal amount of the Equipment Notes to be prepaid in accordance with Section 2.10(b) of the
Indenture. If Lessor elects to retain the affected Units as provided in this Section 9.4, then
Lessor shall pay, or cause to be paid, to Indenture Trustee in funds of the type and in an amount
equal to the outstanding principal amount of the Equipment Notes issued in respect of such affected
Units and all accrued interest to the date of prepayment of such Equipment Note on such termination
date but without any Make-Whole Amount. If Lessor shall fail to perform any of its obligations
pursuant to this Section 9.4 on the scheduled termination date for any affected Unit, the parties
hereto shall treat such Unit as if an Event of Loss had occurred as of the date of Lessee’s written
notice with respect to such Unit pursuant to Section 9.1 and the provisions of Sections 11.2, 11.3
and 11.4 with respect to rent, termination and disposition shall apply with respect to such Unit
and Lessor shall thereafter no longer be entitled to exercise its election to retain such affected
Units.

			
	SECTION 10.	 	VOLUNTARY TERMINATION.

     Section 10.1. Right of Termination. So long as no Specified Default or Event of Default shall have
occurred and be continuing, Lessee shall have the right, at its option at any time or from time to
time on or after the fifth anniversary of the applicable Closing Date, to terminate this Lease with
respect to, at the sole discretion of Lessee, either all or a Minimum Number of Units of Equipment
(the “Terminated Units”), if Lessee determines in good faith (as evidenced by a certificate
executed by the Chief Financial Officer of Lessee), that such Units have become obsolete or surplus
to Lessee’s requirements, by delivering at least 90 days’ prior notice to Lessor and Indenture
Trustee specifying a proposed date of termination for such Units (the “Termination Date”), which
date shall be a Determination Date, any such termination to be effective on the Termination Date.
Except as expressly provided herein, there will be no conditions to Lessee’s right to terminate
this Lease with respect to the Terminated Units pursuant to this Section 10.1. So long as Lessor
shall not have given Lessee a notice of election to retain the Terminated Units in accordance with
Section 10.3, Lessee may withdraw the termination

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 11 -
	 	 

 

 

notice referred to above not later than 30 days prior to the Termination Date, whereupon this Lease
shall continue in full force and effect; provided that Lessee shall pay all reasonable
costs of Lessor, Indenture Trustee, Loan Participants and Owner Participant incurred in connection
with any proposed or withdrawn termination; and provided further that Lessee may
not withdraw a termination notice hereunder more than twice.

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

     Section 10.3. Retention of Equipment by Lessor. Notwithstanding the provisions of Sections 10.1
and 10.2, Lessor may irrevocably elect by written notice to Lessee, no later than 30 days after
receipt of Lessee’s notice of termination, not to sell the Terminated Units on the Termination
Date, whereupon Lessee shall (i) deliver the Terminated Units to Lessor in the same

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 12 -
	 	 

 

 

manner and condition as if delivery were made to Lessor pursuant to Section 6, treating the
Termination Date as the termination date of the Lease Term with respect to the Terminated Units,
and (ii) pay to Lessor, or to the Persons entitled thereto, all Basic Rent and Supplemental Rent
due and owing on the Termination Date and unpaid including an amount equal to any Make-Whole Amount
in respect of the principal amount of the Equipment Notes to be prepaid in accordance with Section
2.10(a) of the Indenture. If Lessor elects not to sell the Terminated Units as provided in this
Section 10.3, then Lessor shall pay, or cause to be paid, to Indenture Trustee in immediately
available funds an amount equal to the outstanding principal amount of the Equipment Notes issued
in respect of such Terminated Units and all accrued interest to the date of prepayment of such
Equipment Note on such Termination Date. If Lessor shall fail to perform any of its obligations
pursuant to this Section 10.3 and as a result thereof this Lease shall not be terminated with
respect to the Terminated Units on a proposed Termination Date, Lessor shall thereafter no longer
be entitled to exercise its election to retain such Terminated Units and Lessee may at its option
at any time thereafter submit a new termination notice pursuant to Section 10.1 with respect to
such Terminated Units specifying a proposed Termination Date occurring not earlier than five days
from the date of such notice.

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

			
	SECTION 11.	 	LOSS, DESTRUCTION, REQUISITION, ETC.

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

     Section 11.2. Replacement or Payment upon Event of Loss. Upon the occurrence of an Event of Loss
or the deemed occurrence of an Event of Loss pursuant to Section 9.1 with respect to any Unit,
Lessee shall within 60 days after a Responsible Officer of Lessee shall have actual knowledge of
such occurrence or deemed occurrence give Lessor and Indenture Trustee notice of

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 13 -
	 	 

 

 

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 notice 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 of such notice, Lessee shall comply with
Section 11.4(b) and shall convey or cause to be conveyed to Lessor a Replacement Unit to be
leased to Lessee hereunder, such Replacement Unit to be free and clear of all Liens (other
than Permitted Liens) and to have a current fair market value, estimated residual value,
utility, and remaining useful life at least equal to the Unit so replaced (assuming such
Unit was in the condition required to be maintained by the terms of this Lease);
provided that, if Lessee shall not perform its obligation to effect such replacement
under this paragraph (i) during the period of time provided herein, then Lessee shall pay on
the next succeeding Determination Date that is at least 30 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 Determination 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 prior to such Determination Date, and
(C) without duplication, all Supplemental Rent due and payable as of such Determination
Date, it being understood that until such Stipulated Loss Value is paid, there shall be no
abatement or reduction of Basic Rent; provided, at such time that the aggregate
number of Units that have suffered an Event of Loss exceeds 15, Lessee shall pay with
respect to each additional Unit that suffers an Event of Loss, in addition to the amounts
required to be paid under this paragraph (ii), a Make-Whole Amount with respect to the
prepayment of the Equipment Notes on account of such Event of Loss.

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 14 -
	 	 

 

 

     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 the Participation Agreement or the Tax Indemnity Agreement or which
have otherwise accrued but not been paid as of the date of the expiration of the Lease Term) shall
terminate; provided that Lessee shall be obligated to pay all Rent in respect of such Unit
or Units which has accrued up to and including the date of payment of Stipulated Loss Value
pursuant to Section 11.2.

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

     (b) At the time of or prior to any replacement of any Unit, Lessee, at its own expense, will
(A) furnish Lessor with a full warranty bill of sale and an assignment of warranties with respect
to the Replacement Unit, (B) cause a Lease Supplement substantially in the form of Exhibit
A hereto, subjecting such Replacement Unit to this Lease, duly executed by Lessee, to be
delivered to Lessor for execution and, upon such execution, to be filed for recordation in the same
manner as provided for the original Lease Supplement in Section 16.1, (C) so long as the Indenture
shall not have been satisfied and discharged, cause an Indenture Supplement substantially in the
form of Exhibit A to the Indenture for such Replacement Unit, to be delivered to Lessor and
to Indenture Trustee for execution and, upon such execution, to be filed for recordation in the
same manner as provided for the original Indenture Supplement in Section 16.1, (D) furnish Lessor
with an opinion of Lessee’s counsel (which may be Lessee’s General Counsel), to the effect that (w)
Lessor (and Indenture Trustee, as assignee of Lessor) shall be entitled to the benefits of Section
1168 of the Bankruptcy Code in respect of such Replacement Unit to the same extent that Lessor (and
Indenture Trustee, as assignee of Lessor) was entitled to such benefits in respect of the Unit
being replaced, (x) the bill of sale referred to in clause (A) above constitutes an effective
instrument for the conveyance of title to the Replacement Unit to Lessor, (y) good and marketable
title to the Replacement Unit has been delivered to Lessor, free and clear of all Liens (other than
Permitted Liens), and (z) all filings, recordings and other action necessary or appropriate to
perfect and protect Lessor’s and Indenture Trustee’s respective interests in the Replacement Unit
have been accomplished, and (E) furnish Lessor with a certificate of a qualified engineer (who may
be the system chief mechanical officer of Lessee) certifying that the Replacement Unit has a fair
market value, utility and remaining useful life at least equal to the Unit so replaced (assuming
such Unit was in the

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 15 -
	 	 

 

 

condition required to be maintained by the terms of this Lease). For all purposes hereof, upon
passage of title thereto to Lessor, the Replacement Unit shall be deemed part of the property
leased hereunder and the Replacement Unit shall be deemed a “Unit” of Equipment as defined herein.
Upon such passage of title, Lessor will transfer to Lessee, without recourse or warranty (except as
to Lessor’s Liens), all Lessor’s right, title and interest in and to the replaced Unit, and upon
such transfer, Lessor will request in writing that Indenture Trustee execute and deliver to Lessee
an appropriate instrument releasing such replaced Unit from the lien of the Indenture.

     Section 11.5. Eminent Domain. In the event that during the Lease Term the use of any Unit is
requisitioned or taken by any governmental authority under the power of eminent domain or otherwise
for a period which does not constitute an Event of Loss, Lessee’s obligation to pay all
installments of Basic Rent shall continue for the duration of such requisitioning or taking.
Lessee shall be entitled to receive and retain for its own account all sums payable for any such
period by such governmental authority as compensation for requisition or taking of possession. Any
amount referred to in this Section 11.5 which is payable to Lessee shall not be paid to Lessee, or
if it has been previously paid directly to Lessee, shall not be retained by Lessee, if at the time
of such payment a Specified Default or an Event of Default shall have occurred and be continuing,
but shall be paid to and held by Lessor as security for the obligations of Lessee under this Lease.

			
	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 that the Stipulated Loss Value for such Units 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 $200,000,000, and otherwise against such risks, with such
insurance companies and with such terms (including co-insurance, deductibles, limits of liability
and loss payment provisions) as are customary under Lessee’s risk management program and in keeping
with risks assumed by Class I railroads generally; provided, however, that Lessee
may self insure with respect to any or all of the above risks if customary under such risk
management program and in keeping with risks assumed by Class I railroads generally; provided that
in no event shall such self-insurance or policy deductibles exceed $10,000,000 per occurrence in
the case of property insurance and $15,000,000 per deductible in the case of public liability
insurance. Such coverage may provide for deductible amounts as are customary under Lessee’s risk
management program and in keeping with risks assumed by 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.

If any insurance required by this Lease shall not be available to Lessee at renewal on a
commercially reasonable basis on substantially the same terms and conditions as then carried by

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 16 -
	 	 

 

 

Lessee and the obtaining of such insurance is, in Lessee’s reasonable judgment, commercially
impracticable (taking into account both terms and premiums), Lessee shall obtain a written report
of an independent insurance advisor of recognized national standing, chosen by Lessee and
reasonably acceptable to Lessor confirming in reasonable detail that such insurance, in respect of
amount or scope of coverage, is not so available on a commercially reasonable basis from insurers
of recognized standing who provide insurance to the railroad industry. During any period with
respect to which any insurance is not so available, Lessee shall nevertheless maintain such
insurance to the extent, with respect to amount and scope of coverage, that is available on a
commercially reasonable basis from insurers of recognized standing who provide insurance to the
railroad industry. If any insurance which was previously discontinued because of its commercial
unavailability later becomes available on a commercially reasonable basis, Lessee shall reinstate
such insurance.

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

     Section 12.2. Proceeds of Insurance. The entire proceeds of any property insurance or third-party
payments for damages or an Event of Loss with respect to any Unit (including any Association of
American Railroads interline settlements) received by Lessor or Indenture Trustee shall be promptly
paid over to, and retained by, Lessee; provided, however, any such amount

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 17 -
	 	 

 

 

which is payable to Lessee shall not be paid to Lessee, or if it has been previously paid directly
to Lessee, shall not be retained by Lessee, if at the time of such payment a Specified Default or
an Event of Default shall have occurred and be continuing, but shall be paid to and held by Lessor
as security for the obligations of Lessee under this Lease.

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

			
	SECTION 13.	 	REPORTS; INSPECTION.

     Section 13.1. Duty of Lessee to Furnish. On or before June 30, 2006, and on or before each June 30
thereafter, Lessee will furnish to Lessor, Owner Participant, each Loan Participant and Indenture
Trustee (i) an accurate statement, as of the preceding December 31, showing the reporting marks of
the Units then leased hereunder, identifying each Unit that may have suffered an Event of Loss
during the 12 months ending on such December 31 (or since the Delivery Date, in the case of the
first such statement), (ii) a statement confirming whether or not the only expected use of any
Units outside the United States is use by a person in Canada or Mexico on a temporary basis which
is not expected to exceed 90 days in the following calendar year, and (iii) such other information
regarding the condition or repair of the Equipment as Lessor or Owner Participant may reasonably
request.

     Section 13.2. Lessor’s Inspection Rights. Lessor, Owner Participant and Indenture Trustee each
shall have the right, but not the obligation, at their respective sole cost and expense (unless, in
the case of any such expense, a Specified Default or an Event of Default shall have occurred and be
continuing) and risk (including, without limitation, the risk of personal injury or death), by
their respective authorized representatives, to the extent within Lessee’s control: on not more
than one occasion in any 12-month period (unless a Specified Default or an Event of Default shall
have occurred and be continuing or during the last 12 months of the Lease Term), to inspect the
Equipment and Lessee’s records with respect thereto, during Lessee’s normal business hours and upon
reasonable prior notice to Lessee; provided, however, that Lessee shall not be
liable for any injury to, or the death of, any Person exercising, either on behalf of Lessor, Owner
Participant, Indenture Trustee, Loan Participants 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.

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 18 -
	 	 

 

 

			
	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, the EBO Fixed Purchase Price,
or any payment of Stipulated Loss Value or Termination Value within 5 Business Days after
the same shall have become due and payable; or

     (b) Lessee shall fail to make any other payment of Supplemental Rent, including
indemnity or tax indemnity payments, after the same shall have become due and such failure
shall continue unremedied for a period of 10 days after receipt by Lessee of written notice
of such failure from Lessor, Owner Participant or Indenture Trustee (provided that notice of
non-payment of any Excepted Payment may only be given by Owner Participant); or

     (c) Lessee shall (i) make or permit any unauthorized assignment or transfer of this
Lease in violation of Section 18.2 and such unauthorized assignment or transfer shall
continue unremedied for 30 days, (ii) fail to carry the insurance as required herein, or
(iii) breach its covenant set forth in Section 6.7 of the Participation Agreement; or

     (d) any representation or warranty made by Lessee in this Lease or in the Participation
Agreement is untrue or incorrect in any material respect as of the date of issuance or
making thereof and such untruth or incorrectness shall continue to be material and
unremedied for a period of 30 days after receipt by Lessee of written notice thereof from
Lessor, Owner Participant or Indenture Trustee; provided that, if such failure is
capable of being remedied but only in a manner other than by the payment of money, no such
failure shall constitute an Event of Default hereunder for a period of 180 days after
receipt of such notice so long as Lessee is diligently proceeding to remedy such failure; or

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

     (f) an involuntary case or other proceeding shall be commenced against Lessee seeking
liquidation, reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect, or

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 19 -
	 	 

 

 

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;

     (g) Lessee shall fail to observe or perform any other of the covenants or agreements to
be observed or performed by Lessee hereunder or under the Participation Agreement and such
failure shall continue unremedied for 30 days after notice from Lessor, Owner Participant or
Indenture Trustee to Lessee, specifying the failure and demanding the same to be remedied;
provided that, if such failure is capable of being remedied but only in a manner
other than by the payment of money, no such failure shall constitute an Event of Default
hereunder for a period of 180 days after receipt of such notice so long as Lessee is
diligently proceeding to remedy such failure;

     (h) a Change of Control of Lessee occurs without the prior written consent of the Loan
Participants; or

     (i) there occurs under the Direct Loan Agreement, an Event of Default (as such term is
defined therein) which has not been duly waived or cured thereunder;

provided that, notwithstanding anything to the contrary contained in this Lease, any
failure of Lessee to perform or observe any covenant or agreement herein shall not constitute an
Event of Default if such failure is caused solely by reason of an event referred to in the
definition of “Event of Loss” so long as Lessee is continuing to comply with the applicable terms
of Section 11. Lessor (or, for so long as rent payments are being made directly to it, Indenture
Trustee) shall notify Lessee promptly upon Lessee’s failure to make any payment of Basic Rent,
after the same shall have become due; provided that the giving of such notice by Lessor or
Indenture Trustee, as applicable, shall not be a condition to the start of the 10 Business Days
period referred to in paragraph (a) of this Section 14 and the failure or delay in giving such
notice shall not affect the occurrence of an Event of Default under such Section 14(a) and Lessee
agrees Lessor and Indenture Trustee shall incur no liability nor be in breach hereunder for failure
or delay in giving such notice.

			
	SECTION 15.	 	REMEDIES.

     Section 15.1. Remedies. Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, Lessor may, at its option, declare this Lease to be in
default by a written notice to Lessee (provided that upon the occurrence of an Event of Default
under Section 14(e) or 14(f), this Lease shall automatically be in default without the need for any
declaration by Lessor and any giving of notice); and at any time thereafter, Lessor may do one or
more of the following as Lessor in its sole discretion shall elect, to the extent permitted by, and
subject to compliance with any mandatory requirements of, applicable law then in effect:

     (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,

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 20 -
	 	 

 

 

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

     (c) sell any Unit at public or private sale, as Lessor may determine, free and clear of
any rights of Lessee and without any duty to account to Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (f) below if Lessor
elects to exercise its rights under said paragraph in which case such sale shall be
conducted at arm’s length and on a commercially reasonable basis), in which event Lessee’s
obligation to pay Basic Rent and Supplemental Rent (other than any Supplemental Rent owed
with respect to Lessee’s indemnification obligations under Section 7.1 or 7.2 of the
Participation Agreement, except for claims in respect of such Unit attributable to acts or
events occurring after the delivery of such Unit to the purchaser thereof) with respect to
such Unit hereunder due for any periods subsequent to the date of such sale shall terminate;

     (d) hold, keep idle or lease to others any Unit as Lessor in its sole discretion may
determine, free and clear of any rights of Lessee and without any duty to account to Lessee
with respect to such action or inaction or for any proceeds with respect thereto, except
that Lessee’s obligation to pay Basic Rent and Supplemental Rent (other than any
Supplemental Rent owed with respect to Lessee’s indemnification obligations under Section
7.1 or 7.2 of the Participation Agreement, except for claims in respect of such Unit
attributable to acts or events occurring after the return of such Unit to Lessor in
accordance with the terms hereof) with respect to such Unit due for any periods subsequent
to the date upon which Lessee shall have been deprived of possession and use of such Unit
pursuant to this Section 15 and prior to the Determination Date specified in paragraph (e)
or (g) below shall be reduced by the net proceeds, if any, received by Lessor from leasing
such Unit to any Person other than Lessee;

     (e) whether or not Lessor shall have exercised, or shall thereafter at any time
exercise, any of its rights under paragraph (a), (b) or (c) above with respect to any Unit,
Lessor, by written notice to Lessee specifying a payment date (which date shall be a
Determination Date for the purposes of computing Stipulated Loss Value) which shall be not
earlier than 30 days after the date of such notice, may demand that Lessee pay to Lessor,
and Lessee shall pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent for such Unit
due on or after the Determination Date), (x) any unpaid Basic Rent due prior to the
Determination Date so specified, plus (y) whichever of the amounts referred to in
subparagraphs (i) and (ii) below as Lessor, in its sole discretion, shall specify in such
notice, plus (iii) all other Supplemental Rent due as of the date of payment, including
interest, to the extent permitted by applicable law, at the Late Rate on such amounts from

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 21 -
	 	 

 

 

the date due (and in the case of the amount referred to in subparagraphs (i) and (ii)
below, such Determination Date) to the date of actual payment:

     (i) an amount with respect to each Unit which represents the excess of the
present value, at the time of such payment date, of all rentals for such Unit which
would otherwise have accrued hereunder from such payment date for the remainder of
the Basic Term or any Renewal Term then in effect over the then present value of the
then Fair Market Rental Value of such Unit (taking into account its actual
condition) for such period computed by discounting from the end of such Term to such
payment date rentals which Lessor reasonably estimates to be obtainable for the use
of such Unit during such period, such present value to be computed in each case on a
basis of a rate per annum equal to 6% per annum, compounded semiannually from the
respective dates upon which rentals should have been payable hereunder had this
Lease not been terminated; or

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

     (f) so long as any Unit has not been sold pursuant to paragraph (c) above, by notice to
Lessee, require Lessee to pay to Lessor on demand on any Determination Date, and Lessee
hereby agrees that it will so pay Lessor, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of Basic Rent due on or after such Determination Date) (i) any
unpaid Basic Rent due prior to the Determination Date so specified, plus (ii) an amount
equal to the Stipulated Loss Value for such Unit computed as of such Determination Date,
plus (iii) all other Supplemental Rent due as of the date of payment, including interest, to
the extent permitted by applicable law, at the Late Rate on such amounts from the date due
(and in the case of the amount referred to in clause (ii), such Determination Date) to the
date of actual payment; and upon such payment of liquidated damages, Lessor shall transfer,
or cause to be transferred, to Lessee, at Lessee’s cost and expense, on an “as-is, where-is”
basis and without recourse or warranty (except as to the absence of Lessor’s Liens), the
rights and interests of Lessor in and to the Equipment and the Lease, and Lessor and Owner
Participant, at Lessee’s cost and expense, shall execute and deliver such documents
evidencing such transfer and take such further action as may be required to effect such
transfer.; and

     (g) if Lessor shall have sold any Unit pursuant to paragraph (c) above, Lessor, in lieu
of exercising its rights under paragraph (e) above with respect to such Unit may, if it
shall so elect, demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of Basic Rent due on
or after the date of such sale) (i) any unpaid Basic Rent due prior to the date of such
sale, plus (ii) the amount, if any, by which the Stipulated Loss Value of such Unit computed
as of the Determination Date immediately preceding the date of such sale or, if such sale
occurs on a Determination Date, then computed as of such Determination Date, exceeds the net
proceeds of such sale, plus (iii) all other Supplemental Rent due as of the date of payment,
including interest, to the extent permitted by applicable law, at the Late Rate on

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 22 -
	 	 

 

 

such amounts from the date due (and in the case of the amount referred to in clause
(ii), such Determination Date) to the date of actual payment.

     In addition, Lessee shall be liable, except as otherwise provided above, for any and all
unpaid Rent due hereunder before or during the exercise of any of the foregoing remedies, and for
legal fees and other costs and expenses incurred by reason of the occurrence of any Event of
Default or the exercise of Lessor’s remedies with respect thereto, including without limitation the
repayment in full of any costs and expenses necessary to be expended in repairing any Unit in order
to cause it to be in compliance with all maintenance and regulatory standards imposed by this
Lease.

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

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

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

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

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

     (iii) transport the Equipment to any point of interchange on Lessee’s lines in the 48
contiguous United States with a railroad, when directed by Lessor.

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

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 23 -
	 	 

 

 

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 for each Unit, Lessee will (i) cause this
Lease, the Lease Supplement dated such Closing Date, the Indenture and the Indenture Supplement
dated such Closing Date, or appropriate evidence thereof, to be duly filed and recorded with the
STB in accordance with 49 U.S.C. § 11301, (ii) cause this Lease, the Lease Supplement dated such
Closing Date, the Indenture and the Indenture Supplement dated such Closing Date, 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, including Uniform Commercial Code financing statements, to be filed or made as necessary
or appropriate to perfect the right, title and interest of Indenture Trustee in the Indenture
Estate and to protect the interests of Owner Participant, and will furnish Lessor and Indenture
Trustee proof thereof.

     Section 16.2. Further Assurances. Lessee will duly execute and deliver to Lessor such further
documents and assurances and take such further action as Lessor may from time to time reasonably
request in order to effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created in favor of Lessor hereunder, including, without
limitation, if requested by Lessor, the execution and delivery of supplements or amendments hereto,
in recordable form, subjecting to this Lease any Replacement Unit and the recording or filing of
counterparts hereof or thereof in accordance with the laws of such jurisdiction as Lessor may from
time to time deem advisable; provided that this sentence is not intended to impose upon
Lessee any additional liabilities not otherwise contemplated by this Lease.

     Section 16.3. Expenses. Except as provided in Section 2.5 of the Participation Agreement, Lessee
will pay all costs, charges and expenses (including reasonable attorneys’ fees) incident to any
such filing, refiling, recording and rerecording or depositing and redepositing of any such
instruments or incident to the taking of such action.

			
	SECTION 17.	 	LESSOR’S RIGHT TO PERFORM.

     If Lessee fails to make any payment required to be made by it hereunder or fails to perform or
comply with any of its other agreements contained herein and such failure can be cured with the
payment of money, Lessor or Indenture Trustee may itself make such payment or perform or comply
with such agreement, after giving not less than five Business Days’ prior notice thereof to Lessee
(except in the event that an Indenture Event of Default resulting solely from an Event of Default
shall have occurred and be continuing, in which event Lessor or Indenture Trustee may effect such
payment, performance or compliance to the extent necessary to cure such Indenture Event of Default
with notice given concurrently with such payment, performance or compliance) in a reasonable
manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the
reasonable expenses of Lessor or Indenture

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 24 -
	 	 

 

 

Trustee, as the case may be, incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest thereon at the Late
Rate, to the extent permitted by applicable law, shall be deemed to be Supplemental Rent, payable
by Lessee to Lessor or Indenture Trustee, as the case may be, on demand.

			
	SECTION 18.	 	ASSIGNMENT.

     Section 18.1. Assignment by Lessor. Lessee and Lessor hereby confirm that concurrently with the
execution and delivery of this Lease, Lessor has executed and delivered to Indenture Trustee the
Indenture, which assigns as collateral security and grants a security interest to Indenture Trustee
in, to and under this Lease and certain of the Rent payable hereunder, all as more explicitly set
forth in the Granting Clause of the Indenture. Lessor agrees that it shall not otherwise assign or
convey its right, title and interest in and to this Lease, the Equipment or any Unit, except as
expressly permitted by and subject to the provisions of this Lease, the Participation Agreement,
the Trust Agreement and the Indenture.

     Section 18.2. Assignment by Lessee. Except as otherwise provided in Section 8.3 or in the case of
any requisition for use by an agency or instrumentality of the United States government referred to
in Section 11.1, Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder, except as provided in Section 6.8 of the Participation Agreement.

     Section 18.3. Sublessee’s Performance and Rights. Any obligation imposed on Lessee in this Lease
shall require only that Lessee perform or cause to be performed such obligation, even if stated
herein as a direct obligation, and the performance of any such obligation by any permitted
assignee, sublessee or transferee under an assignment, sublease or transfer agreement then in
effect and permitted by the terms of this Lease shall constitute performance by Lessee and
discharge such obligation by Lessee. Except as otherwise expressly provided herein, any right
granted to Lessee in this Lease shall grant Lessee the right to exercise such right or permit such
right to be exercised by any such assignee, sublessee or transferee, provided that Lessee’s renewal
option set forth in Section 22.2 may be exercised only by Lessee itself or by any assignee or
transferee of, or successor to, Lessee in a transaction permitted by Section 6.8 of the
Participation Agreement. The inclusion of specific references to obligations or rights of any such
assignee, sublessee or transferee in certain provisions of this Lease shall not in any way prevent
or diminish the application of the provisions of the two sentences immediately preceding with
respect to obligations or rights in respect of which specific reference to any such assignee,
sublessee or transferee has not been made in this Lease.

			
	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

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 25 -
	 	 

 

 

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

			
	SECTION 20.	 	NOTICES.

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

	 	 	 	 	 
	 

	 	If to Lessor:
	 	KCSR Trust 2005-1
	 

	 	 	 	c/o Wilmington Trust Company
	 

	 	 	 	Rodney Square North
	 

	 	 	 	1100 North Market Street
	 

	 	 	 	Wilmington, DE 19890-0001
	 

	 	 	 	Attention: Corporate Trust Administration
	 

	 	 	 	Facsimile No.: (302) 636-4140
	 

	 	 	 	Telephone No.: (302) 636-6000

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 26 -
	 	 

 

 

	 	 	 	 	 
	 

	 	With copies to:
	 	GS Leasing (KCSR 2005-1) LLC
	 

	 	 	 	c/o The Goldman Sachs Group Inc.
	 

	 	 	 	85 Broad Street
	 

	 	 	 	New York, NY 10004
	 

	 	 	 	Attention: Robert Emer,
	 

	 	 	 	Fixed Income, Currency and Commodities
	 

	 	 	 	Facsimile: 212-256-4853
	 

	 	 	 	Telephone No.: 212-902-0047
	 
	 	 	 	 
	 

	 	If to Indenture Trustee:
	 	Wells Fargo Bank Northwest, National Association
	 

	 	 	 	299 South Main Street, 12th Floor
	 

	 	 	 	MAC: U1228-120
	 

	 	 	 	Salt Lake City, Utah 84111
	 

	 	 	 	Attention: Corporate Trust Department
	 

	 	 	 	Facsimile No.: (801) 246-5053
	 

	 	 	 	Telephone No.: (801) 246-5630
	 
	 	 	 	 
	 

	 	If to Lessee:
	 	Address of Lessee for Mail Delivery:
	 

	 	 	 	The Kansas City Southern Railway Company
	 

	 	 	 	P.O. Box 219335
	 

	 	 	 	Kansas City, MO 64121-9335
	 

	 	 	 	Attention: Senior Vice President – Finance Treasurer
	 

	 	 	 	Facsimile No.: (816) 983-1198
	 

	 	 	 	Telephone No.: (816) 983-1802
	 
	 	 	 	 
	 

	 	 	 	Address of Lessee for Courier and Similar Delivery:
	 

	 	 	 	The Kansas City Southern Railway Company
	 

	 	 	 	427 West 12th Street
	 

	 	 	 	Kansas City, MO 64105
	 

	 	 	 	Attention: Senior Vice President – Finance Treasurer
	 

	 	 	 	Facsimile No.: (816) 983-1198
	 

	 	 	 	Telephone No.: (816) 983-1802
	 
	 	 	 	 
	 

	 	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	The Kansas City Southern Railway Company
	 

	 	 	 	427 West 12th Street
	 

	 	 	 	Kansas City, MO 64105
	 

	 	 	 	Attention: Senior Vice President & General Counsel
	 

	 	 	 	Facsimile No.: (816) 983-1227
	 

	 	 	 	Telephone No.: (816) 983-1303

			
	SECTION 21.	 	CONCERNING INDENTURE TRUSTEE.

     Section 21.1. Limitation of Indenture Trustee’s Liabilities. Notwithstanding any provision herein
or in any of the other Operative Agreements to the contrary, Indenture Trustee’s obligation to take
or refrain from taking any actions, or to use its discretion (including, but not

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 27 -
	 	 

 

 

limited to, the giving or withholding of consent or approval and the exercise of any rights or
remedies under such Operative Agreements), and any liability therefor, shall, in addition to any
other limitations provided herein or in the other Operative Agreements, be limited by the
provisions of the Indenture, including, but not limited to, Article VI thereof.

     Section 21.2. Right, Title and Interest of Indenture Trustee under Lease. It is understood and
agreed that the right, title and interest of Indenture Trustee in, to and under this Lease and the
Rent due and to become due hereunder shall by the express terms granting and conveying the same be
subject to the interest of Lessee in and to the Equipment.

			
	SECTION 22.	 	TERMINATION UPON PURCHASE BY LESSEE; OPTIONS TO RENEW.

     Section 22.1. Termination upon Purchase by Lessee. If Lessee shall have exercised its option to
purchase any Unit pursuant to Section 23 and shall not have elected to purchase Owner Participant’s
Beneficial Interest pursuant to Section 23(c), upon payment by Lessee of the purchase price with
respect to such Unit as provided in Section 23, and upon payment by Lessee of all Rent then due and
payable under this Lease with respect to such Unit, the Lease Term shall end with respect to such
Unit and the obligations of Lessee to pay Rent hereunder with respect to such Unit (except for
Supplemental Rent obligations surviving pursuant to the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not been paid as of the date of such
payment) shall cease.

     Section 22.2. Renewal Option at Expiration of Basic Term. (a) [Reserved].

     (b) So long as no Specified Default or Event of Default shall have occurred and be continuing,
Lessee shall have the right, upon not less than 180 days’ prior irrevocable notice to Lessor at the
end of the Basic Term or any Fair Market Renewal Term, pursuant to this Section, to renew this
Lease with respect to, at the sole discretion of Lessee, either all or a Minimum Number for one or
more successive Renewal Terms of not less than one year each (each a “Fair Market Renewal Term”),
commencing at the end of the Basic Term or the end of any Fair Market Renewal Term, as the case may
be; provided that the aggregate duration of the Fair Market Renewal Terms for such Units,
when added to the duration of the Basic Term and all prior Fair Market Renewal Terms for such
Units, shall not in any event exceed either (i) 80% of the estimated useful life of such Units, or
(ii) the point at which such Units are estimated to have a Fair Market Sales Value of 20% of the
original Equipment Cost of such Units (without giving effect to inflation or deflation since the
Delivery Date for such Units), in each case as determined by appraisal (in accordance with the
procedures set forth in the definition of “Fair Market Sales Value”), completed at a point prior to
the end of the Basic Term or the current Fair Market Renewal Term, as the case may be, selected by
Lessee. Basic Rent for any such Renewal Term shall be equal to the then Fair Market Rental Value
for such Units and shall be payable in semiannual installments in arrears. All other provisions of
this Lease, other than Section 10, shall be applicable during any such Renewal Term for such Units,
except that the Stipulated Loss Values for such Units shall be determined in accordance with
Section 22.5.

     Section 22.3. [Reserved].

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 28 -
	 	 

 

 

     Section 22.4. Determination of Fair Market Rental Value. Lessee may notify Lessor that Lessee
desires a determination of the Fair Market Rental Value of such Units for a. Renewal Term
commencing upon the Renewal Term Commencement Date. Lessee’s request for a determination of Fair
Market Rental Value shall not obligate Lessee to exercise any of the options provided in Section
22.2.

     Section 22.5. Stipulated Loss Value During Renewal Term. During any Fair Market Renewal Term, the
Stipulated Loss Value of any Unit shall be determined by amortizing the Fair Market Sales Value of
such Unit as of the first day of such Renewal Term down to the Fair Market Sales Value of such Unit
as of the last day of such Renewal Term at the implicit interest rate imputed when discounting on a
monthly basis the renewal rents and the Fair Market Sales Value as of the last day of such Renewal
Term back to the Fair Market Sales Value as of the first day of such Renewal Term.

			
	SECTION 23.	 	LESSEE’S OPTIONS TO PURCHASE EQUIPMENT; 
PURCHASE OF BENEFICIAL INTEREST.

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

     (i) upon not less than 180 days’ nor more than 360 days’ prior irrevocable notice to
Lessor to purchase on the Basic Term Expiration Date or the Business Day next following the
expiration of any Renewal Term then in effect, either all or a Minimum Number of Units at a
price equal to the Fair Market Sales Value for such Units;

     (ii) upon not less than 90 days’ nor more than 360 days’ prior irrevocable notice to
Lessor to purchase on the EBO Fixed Purchase Price Date, at the sole discretion of Lessee,
either all of the Units of Equipment or a Minimum Number of Units on the EBO Fixed Purchase
Price Date at a price equal to the EBO Fixed Purchase Price (as such EBO Fixed Purchase
Price may be adjusted from time to time pursuant to and in accordance with Section 2.6 of
the Participation Agreement); and

     (iii) upon not less than 90 days’ nor more than 360 days’ prior irrevocable notice to
Lessor at any time after the EBO Fixed Purchase Price Date, any Unit of Equipment if Lessee
determines and provides to Owner Trustee and Owner Participant a certificate executed by the
Chief Financial Officer of Lessee to the effect that the cost of any improvements thereto
required by Section 8.1(iv) would exceed 20% of the Fair Market Sales Value of such Unit as
of such date, at a price equal to the higher of the Fair Market Sales Value or Termination
Value as of such date for such Unit.

          (b) If Lessee shall have exercised its option to purchase any Unit pursuant to Sections
23(a)(i) or 23(a)(iii) and shall have requested a determination of Fair Market Sales Value at least
180 days prior to the date of such purchase, Owner Trustee and Lessee shall comply in a timely
manner with their respective obligations set forth in the definition of “Fair Market Sales Value.”
If Lessee shall have exercised its option to purchase any Unit hereunder, and so long as Lessee has
not exercised its option to purchase the Beneficial Interest pursuant to Section 23(c) below, on
the date of such purchase (x) Owner Trustee shall, subject to the

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 29 -
	 	 

 

 

payment in full of all amounts referred to in clauses (y) and (z) below, assign, transfer and
convey to Lessee all right, title and interest of Owner Trustee in and to each Unit being purchased
on such date on an “as is, where is” basis, without recourse or warranty except as to Lessor’s
Liens attributable to Owner Trustee or Owner Participant other than Permitted Liens, (y) Lessee
shall pay, by 12:00 noon (New York City time) on such date by wire transfer in immediately
available funds, to Owner Trustee the Fair Market Sales Value or the EBO Fixed Purchase Price, as
the case may be, with respect to the Units purchased on such date plus any sales, use or other
similar taxes imposed on such purchase or transfer, and (z) Lessee shall pay pursuant to Section
22.1 (i) all Basic Rent due and payable prior to such date of purchase plus all other Supplemental
Rent due and payable as of such date of purchase, including, in respect of any Make-Whole Amount
with respect to any Equipment Note due and payable on such date of purchase.

          (c) If Lessee shall have exercised its option pursuant to Section 23(a)(ii) above and shall
have elected to purchase all but not less than all of the Units, Lessee shall have the option to
purchase the Beneficial Interest from Owner Participant and shall assume all of the rights and
obligations of Owner Participant under each of the Operative Agreements to which Owner Participant
is a party (other than any obligations or liabilities of Owner Participant incurred on or prior to
the applicable purchase date, which obligations and liabilities shall remain the sole
responsibility of Owner Participant); provided, however, Lessee shall not entitled
to exercise such option unless Indenture Trustee and the Loan Participants shall have received an
opinion of counsel stating that Indenture Trustee and Loan Participants shall be entitled to the
benefits of Section 1168 of the Bankruptcy Code (or any successor provision) to the same extent as
immediately prior to Lessee’s exercise of this option, such opinion to be reasonably satisfactory
to Indenture Trustee and the Loan Participants. On the applicable purchase date (x) Lessee shall
pay any unpaid Basic Rent due and payable prior to such date of purchase and any other Rent then
due and payable and such amounts shall be distributed as provided in the Indenture and the Trust
Agreement and (y) Lessee shall pay to Owner Participant, in immediately available funds, an amount
equal to the excess of the applicable purchase price over an amount equal to the sum of the
principal of, and any accrued and unpaid interest on, the outstanding Equipment Notes on such date
after taking into account any payments of principal or interest made in respect of the outstanding
Equipment Notes on such date plus any sales, use or other similar taxes imposed on such purchase or
transfer, and upon payment and (in the case of clause (x) above) distribution of the amounts set
forth in clauses (x) and (y) above, Owner Participant will assign, transfer and convey to Lessee,
without recourse or warranty except as to Lessor’s Liens attributable to Owner Trustee or Owner
Participant other than Permitted Liens, all of Owner Participant’s right, title and interest in and
to the Beneficial Interest. If Lessee shall have exercised the option to purchase the Beneficial
Interest from Owner Participant as described above, Owner Participant shall receive on the
applicable purchase date a release in form and substance satisfactory to it, from all liabilities
under the Operative Agreements (other than those liabilities set forth in the first sentence of
this Section 23(c)).

			
	SECTION 24.	 	LIMITATION OF LESSOR’S LIABILITY.

     It is expressly agreed and understood that all representations, warranties and undertakings of
Lessor hereunder (except as expressly provided herein) shall be binding upon Lessor only in its
capacity as Owner Trustee under the Trust Agreement and in no case shall Wilmington Trust

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 30 -
	 	 

 

 

Company be personally liable for or on account of any statements, representations, warranties,
covenants or obligations stated to be those of Lessor hereunder, except that Lessor (or any
successor Owner Trustee) shall be personally liable for its gross negligence or willful misconduct
or for its breach of its covenants, representations and warranties contained herein to the extent
covenanted or made in its individual capacity.

			
	SECTION 25.	 	FILING IN MEXICO.

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

			
	SECTION 26.	 	MISCELLANEOUS.

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

     Section 26.2. Execution in Counterparts. This Lease may be executed in any number of counterparts,
each executed counterpart constituting an original and in each case such counterparts shall
constitute but one and the same instrument; provided, however, that to the extent
that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code)
no security interest in this Lease may be created through the transfer or possession of any
counterpart hereof other than the counterpart bearing the receipt therefor executed by Indenture
Trustee on the signature page hereof, which counterpart shall constitute the only “original” hereof
for purposes of the Uniform Commercial Code.

     Section 26.3. Headings and Table of Contents; Section References. The headings of the sections of
this Lease and the Table of Contents are inserted for purposes of convenience only

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 31 -
	 	 

 

 

and shall not be construed to affect the meaning or construction of any of the provisions hereof.
All references herein to numbered sections, unless otherwise indicated, are to sections of this
Lease.

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

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

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

     Section 26.7. Survival. All warranties, representations, indemnities and covenants made by any
party hereto, herein or in any certificate or other instrument delivered by any such party or on
the behalf of any such party under this Lease, shall be considered to have been relied upon by each
other party hereto and shall survive the consummation of the transactions contemplated hereby on
any Closing 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. Incorporation by Reference. The payment obligations set forth in the Tax Indemnity
Agreement and Sections 7.1 and 7.2 of the Participation Agreement are hereby incorporated by
reference.

     Section 26.11. Entitlement to §1168 Benefits. It is the intent of the parties that Lessor (and
Indenture Trustee as assignee of Lessor under the Indenture) shall be entitled to the benefits

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 32 -
	 	 

 

 

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

     Section 26.12. Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS LEASE OR ANY OTHER OPERATIVE AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE PARTIES
HERETO AND THERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY
SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED.

					
	 	 	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	- 33 -
	 	 

 

 

     IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly executed and delivered
on the day and year first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	LESSOR:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	KCSR TRUST 2005-1,acting through	 	 
	 	 	WILMINGTON TRUST COMPANY, not in its	 	 
	 	 	individual capacity, but solely as Owner Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michele C. Harra	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michele C. Harra	 	 
	 

	 	 	 	Title: Financial Services Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	LESSEE	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	THE KANSAS CITY SOUTHERN RAILWAY COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ronald G. Russ	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Ronald G. Russ	 	 
	 

	 	 	 	Title: Executive Vice President & CFO	 	 

Receipt of the original counterpart

of the foregoing Lease is hereby

acknowledged this 20th day of

December, 2005.

	 	 	 	 	 
	 

	 	 	 	 
	WELLS FARGO BANK NORTHWEST, NATIONAL	 	 
	    ASSOCIATION, as Indenture Trustee	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jon Creasmun	 	 
	 

	 	 	 	 
	 

	 	Name: Jon Creasmun	 	 
	 

	 	Title: Assistant Vice President	 	 

			
	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)
	 	 

 

 

STATE OF DELAWARE                  )

                                                             ) ss:

COUNTY OF NEW CASTLE           )

     On this 19th day of December, 2005, before me personally appeared Michele C. Harra to me
personally known, who being by me duly sworn, says that he/she is a Financial Services Officer of
Wilmington Trust Company, that said instrument was signed and sealed on December 19, 2005, on
behalf of said association by authority of its Board of Directors; and he/she acknowledged that the
execution of the foregoing instrument was the free act and deed of said association

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	By
	 	/s/ Amanda E. Burger
	 	 
	 

	 	 	 	 

	 	 

(SEAL)

My Commission Expires: March 7, 2007.

STATE OF MISSOURI                        )

                    
                                          ) ss:

COUNTY OF JACKSON                     )

     On this 19th day of December, 2005, before me personally appeared Paul J. Weyandt to me
personally known, who being by me duly sworn, says that he is the Senior Vice President-Finance &
Treasurer of THE KANSAS CITY SOUTHERN RAILWAY COMPANY, that said instrument was signed and sealed
on December 19, 2005, on behalf of said corporation by authority of its Board of Directors; and he
acknowledged that the execution of the foregoing instrument was the free act and deed of said
corporation.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	By
	 	/s/ Linda Reeve
	 	 
	 

	 	 	 	 

Notary Public
	 	  

(SEAL)

My Commission Expires: August 4, 2006.

			
	 	 	 
	Equipment Lease Agreement (KCSR 2005-1)exv10w50

 

Exhibit 10.50

EXECUTION COPY

THE BANK OF NOVA SCOTIA

600 Peachtree Street, N.E.

Suite 2700

Atlanta, Georgia 30308

March 17, 2006

The Kansas City Southern Railway Company

427 West 12th Street

Kansas City, Missouri 64105

Attention: Paul J. Weyandt

Ladies and Gentlemen:

          You have advised The Bank of Nova Scotia (“Scotia”) regarding the desire of The Kansas City
Southern Railway Company, a Missouri corporation (the “Borrower”), to amend and restate its
existing $250 million Credit Agreement dated as of March 30, 2004 (as amended by (i) Amendment and
Waiver No. 1 to the Credit Agreement and Amendment No. 1 to the Security Agreement, dated as of
December 22, 2004, (ii) Amendment and Waiver No. 2 to the Credit Agreement, dated as of September
30, 2005, (iii) Amendment No. 3 to the Credit Agreement, dated as of November 4, 2005, (iv) Waiver
No. 3 to the Credit Agreement, dated as of December 8, 2005, and (v) Waiver No. 4 to the Credit
Agreement, dated as of March 1, 2006, and as may be further amended or otherwise modified from time
to time, the “Existing Credit Facility”). In order to amend and restate the Existing Credit
Facility (the “Restatement”) in its entirety, you have requested that Scotia (a) provide you with
its financing commitment for the entire $371.2 million of Senior Bank Financing (as hereinafter
defined) described in this letter and in the summary of certain terms and conditions attached
hereto as Exhibit A (the “Summary of Terms” and, together with this letter, this “Commitment
Letter”) and (b) provide you with its best efforts undertaking to arrange a syndicate (in such
capacity, the “Lead Arranger”) of Lenders (as defined under the section “Lenders” in the Summary of
Terms) for the Senior Bank Financing.

          We understand that the funding required to effect the Restatement, to pay the fees and
expenses incurred in connection therewith and to provide for the ongoing working capital and
general corporate needs of the Borrower (as defined in the Summary of Terms) and its subsidiaries
shall be provided from the incurrence by the Borrower of the Senior Bank Financing.

          We further understand that the senior secured bank financing (the “Senior Bank Financing”)
will be in the form of (i) a term loan facility in the amount of $246.2 million (the “Term Loan B
Facility”), and (ii) a revolving credit facility in the amount of $125 million (the “Revolving
Credit Facility”, together with the Term Loan B Facility, the “Credit Facilities”).

          Scotia is pleased to commit to provide, subject to and upon the terms and conditions set forth
herein and in the Summary of Terms, the entire amount of (i) the Revolving Credit Facility and (ii)
the Term Loan B Facility, in each case, on the terms and conditions set forth herein and in the
Summary of Terms. It is understood that (i) Scotia shall act as sole lead arranger and sole
bookrunner for the Senior Bank Financing (the “Lead Arranger”) and (ii) Scotia will act as
administrative agent for the Senior Bank
Financing. It is further understood that the Lead Arranger shall be permitted to designate
(after

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Commitment Letter

 

 

 2 

consultation with and agreement of the Borrower, such agreement not to be unreasonably
withheld) one or more Lenders as agents or co-agents, as the case may be, with respect to the
Senior Bank Financing, and that no titles may be given, or compensation paid, to Lenders without
the Lead Arranger’s consent.

          The Lead Arranger reserves the right, prior to or after execution of the definitive credit
documentation for the Senior Banking Financing, to syndicate all or part of its commitments for the
Senior Bank Financing to one or more lending institutions of which you shall approve, such approval
not to be unreasonably withheld, that will become parties to such definitive credit documentation
pursuant to a syndication to be managed by the Lead Arranger, and the commitments of the Lead
Arranger hereunder shall be reduced as and when commitments are received from the Lenders as
described in the immediately preceding paragraph. The Lead Arranger shall commence syndication
efforts promptly after the execution of this Commitment Letter by you and you agree actively to
assist the Lead Arranger in achieving a syndication that is satisfactory to the Lead Arranger. To
assist the Lead Arranger in its syndication efforts, you hereby agree (a) to provide and cause your
advisors to provide the Lead Arranger and the other syndicate members upon request with all
information reasonably deemed necessary by the Lead Arranger to complete syndication, including but
not limited to information and evaluations prepared by you and your advisors or on your behalf
relating to the transactions contemplated hereby, (b) to assist the Lead Arranger upon request in
the preparation of an Information Memorandum to be used in connection with the syndication of the
Senior Bank Financing, (c) to use your commercially reasonable efforts to ensure that the
syndication efforts of the Lead Arranger benefit materially from your existing lending
relationships, (d) to make available your senior officers, representatives and advisors, in each
case from time to time, and to attend and make presentations regarding the business and prospects
of the Borrower at a meeting or meetings of lenders or prospective lenders and (e) to make
available your senior officers and representatives in connection with discussions with the rating
agencies; subject, in each case, to the agreement of the Lead Arranger and the other syndicate
members and their advisors to keep all non-public information confidential as more fully set forth
below. In addition, you agree that no financing for the Borrower or any of its respective
subsidiaries or affiliates shall be syndicated, privately placed or publicly offered to the extent
that such financing could have an adverse effect on the syndication of the Senior Bank Financing.

          Those matters that are not covered or made clear herein or in the attached Summary of Terms
are subject to mutual agreement of the parties. The terms and conditions of this commitment may be
modified only in writing. In addition, this commitment is subject to (a) the preparation,
execution and delivery of mutually acceptable loan documentation, including a credit agreement
incorporating substantially the terms and conditions outlined herein and in the Summary of Terms,
and (b) the accuracy and completeness in all material respects of all representations that you make
to us and all information that you furnish to us in connection with this commitment and your
compliance with the terms of this Commitment Letter. The Lead Arranger’s commitment set forth in
this Commitment Letter will terminate on April 30, 2006, unless the Restatement closes on or before
such date. The Lead Arranger shall not be responsible or liable for any consequential damages
which may be alleged as a result of its failure to provide the Senior Bank Financing.

          To induce the Lead Arranger to issue this Commitment Letter and to continue with its due
diligence efforts, you hereby agree that all reasonable out-of-pocket fees and expenses (including
the reasonable fees and expenses of counsel and consultants) of the Lead Arranger and its
affiliates arising in connection with this Commitment Letter (and its due diligence and syndication
efforts in connection herewith) and in connection with the Senior Bank Financing and the other
transactions described herein shall be for your account, whether or not the Restatement is
consummated, the Senior Bank Financing is made available or definitive credit documents are
executed. In addition, you hereby agree to pay when
and as due the fees described in the fee letter (the “Fee Letter”) executed simultaneously
herewith. You further agree to indemnify and hold harmless each of the Lenders (including, in any
event, the Lead

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Commitment Letter

 

 

 3 

Arranger) and each director, officer, employee and affiliate thereof (each an
“Indemnified Person”) from and against any and all actions, suits, proceedings (including any
investigations or inquiries), claims, losses, damages, liabilities or expenses of any kind or
nature whatsoever which may be incurred by or asserted against or involve any such Indemnified
Person as a result of or arising out of or in any way related to or resulting from this Commitment
Letter, the Restatement or the extension or syndication of the Senior Bank Financing contemplated
by this Commitment Letter, or in any way arise from any use or intended use of this Commitment
Letter or the proceeds of the Senior Bank Financing contemplated by this Commitment Letter, and you
agree to reimburse each Indemnified Person upon demand for any reasonable legal or other reasonable
out-of-pocket expenses incurred in connection with investigating, defending or preparing to defend
any such action, suit, proceeding (including any inquiry or investigation) or claim (whether or not
Scotia or any such other Indemnified Person is a party to any action or proceeding out of which any
such expenses arise) (collectively, an “Action”); provided, however, that you shall not have to
indemnify any Indemnified Person against any loss, claim, damage, expense or liability to the
extent finally determined by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This Commitment Letter is issued for
your benefit only and no other person or entity may rely hereon. Neither Scotia nor any Lender
shall be responsible or liable to the Borrower or any other person for consequential damages that
may be alleged as a result of this Commitment Letter.

          The Lead Arranger reserves the right to employ the services of its affiliates in providing
services contemplated by this Commitment Letter and to allocate, in whole or in part, to such
affiliates certain fees payable to the Lead Arranger in such manner as the Lead Arranger and such
affiliates may agree in their sole discretion. Each of you acknowledges that the Lead Arranger may
share with any of its affiliates, and such affiliates may share with the Lead Arranger, any
information related to the Restatement, the Borrower, any of its subsidiaries or affiliates or any
of the matters contemplated hereby in connection with the Restatement.

          The provisions of the immediately preceding two paragraphs shall survive any termination of
this Commitment Letter.

          You represent and warrant that (a) all information that has been or will hereafter be made
available by or on behalf of you or by any of your representatives in connection with the
Restatement and the other transactions contemplated hereby to the Lead Arranger or any of its
affiliates or representatives or to any Lender or any potential Lender is and will be complete and
correct in all material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances under which such statements were or are made
and (b) all financial projections, if any, that have been or will be prepared by you or on your
behalf or by any of your representatives and made available to the Lead Arranger or any of its
affiliates or representatives or to any Lender or any potential Lender in connection with the
Restatement and the other transactions contemplated hereby have been or will be prepared in good
faith based upon reasonable assumptions (it being understood that such projections are subject to
significant uncertainties and contingencies, many of which are beyond your control, and that no
assurance can be given that any particular projections will be realized). You agree to supplement
the information and projections from time to time so that the representations and warranties
contained in this paragraph remain complete and correct in all material respects.

          In issuing these commitments, the Lead Arranger is relying on the accuracy of the information
furnished to it by you or on your behalf or by or on behalf of the Borrower (collectively, the
“Pre-Commitment Information”). The obligations of the Lead Arranger under this Commitment
Letter and of any Lender that issues a commitment for the Senior Bank Financing are made solely for
your benefit and may not be relied upon or enforced by any other person or entity.

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Commitment Letter

 

 

 4 

          Scotia hereby notifies you that pursuant to the requirements of the USA Patriot Act, Title III
of Pub. L. 107-56 (signed into law October 26, 2001) (the “Patriot Act”), Scotia may be, and each
Lender is, required to obtain, verify and record information that identifies you, which information
includes the name, address, tax identification number and other information regarding you that will
allow Scotia or such Lender to identify you in accordance with the Patriot Act. This notice is
given in accordance with the requirements of the Patriot Act and is effective as to Scotia and each
Lender.

          You, on behalf of yourself and your affiliates, acknowledge and agree that in connection with
all aspects of the transactions contemplated by this Commitment Letter, you, Scotia, the Lenders,
and any affiliate through which any of them may be acting (each, a “Transaction Affiliate”), have
an arm’s-length business relationship that creates no fiduciary duty on the part of Scotia, any
Lender or any other Transaction Affiliate and each expressly disclaims any fiduciary relationship.

          You acknowledge that Scotia and its affiliates may be providing debt financing, equity capital
or other services (including financial advisory services) to other companies in respect of which
you may have conflicting interests regarding the transactions described herein and otherwise.
Neither we nor any of our affiliates will use confidential information obtained from you by virtue
of the transactions contemplated by this Commitment Letter or our other relationships with you in
connection with the performance by us of services for other companies, and we will not furnish any
such information to other companies. You also acknowledge that neither we nor any of our
affiliates has any obligation to use in connection with the transactions contemplated by this
Commitment Letter, or to furnish to you, confidential information obtained by us from other
companies.

          You are not authorized to show or circulate this Commitment Letter to any other person or
entity (other than your legal and financial advisors in connection with your evaluation hereof and
except as required by law or stock exchange requirements) until such time as you have accepted this
Commitment Letter as provided in the immediately succeeding paragraph. The Lead Arranger, on
behalf of itself and its affiliates, hereby agrees that it will not disclose to any person or
entity any confidential, proprietary or non-public information of Kansas City Southern, a Delaware
corporation (“Holdings”) and its subsidiaries furnished to the Lead Arranger by the Borrower (such
information collectively, “Company Information”), except that the Lead Arranger may disclose
Company Information (i) to its and its affiliates’ officers, directors, employees, agents,
accountants, attorneys, and other advisors (collectively “Lead Arranger Representatives”) who have
a need to know such Company Information for the purpose of assisting in the negotiation and
completion of the Senior Bank Financing, (ii) to actual or potential Lenders who have agreed to
hold the Company Information in confidence on substantially the same terms as provided herein, and
(iii) to the extent any portion of such Company Information (A) is or becomes generally available
to the public on a non-confidential basis other than as a result of a breach of this paragraph by
any Lead Arranger or the Lead Arranger Representatives, (B) is or becomes available to the Lead
Arranger or any Lead Arranger Representatives on a non-confidential basis from a source other than
the Borrower or (C) is required to be disclosed by law, regulation or judicial order or is
requested by any regulatory body with jurisdiction over any Lead Arranger or a Lead Arranger
Representative. Notwithstanding anything to the contrary in this Commitment Letter, the Lead
Arranger’s obligations under this paragraph shall terminate on the earlier of (i) the first
anniversary of the date of this Commitment Letter and (ii) if definitive agreements are entered
into for the Senior Bank Financing, the date such definitive agreements are executed (in which case
the confidentiality obligations of the Lead
Arranger under this paragraph shall be superseded by the confidentiality obligations in such
definitive agreements).

          If this Commitment Letter is not accepted by you as provided in the immediately succeeding
paragraph, you are to immediately return this Commitment Letter (and any copies hereof) to the
undersigned. This Commitment Letter may be executed in any number of counterparts, and by the

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Commitment Letter

 

 

 5 

different parties hereto on separate counterparts, each of which counterpart shall be an original,
but all of which shall together constitute one and the same instrument.

          If you are in agreement with the foregoing, please sign and return to the Lead Arranger
(including by way of facsimile transmission) the enclosed copy of this Commitment Letter, together
with the Fee Letter, no later than noon, New York time, on March 17, 2006. Our commitments set
forth in this Commitment Letter shall terminate at the time and on the date referenced in the
immediately preceding sentence unless this Commitment Letter and the Fee Letter are executed and
returned by you as provided in such sentence.

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Commitment Letter

 

 

 6 

     This Commitment Letter and the Fee Letter shall be governed by, and construed in accordance
with the laws of the state of New York, and any right to trial by jury with respect to any claim,
action, suit or proceeding arising out of or contemplated by this Commitment Letter and/or the
related Fee Letter is hereby waived. The parties hereto hereby submit to the non-exclusive
jurisdiction of the federal and New York State courts located in the City of New York in connection
with any dispute related to this Commitment Letter or the Fee Letter or any matters contemplated
hereby or thereby. Delivery of an executed counterpart of this Commitment Letter by facsimile or
other electronic transmission shall be effective as delivery of a manually executed counterpart of
this Commitment Letter.

	 	 	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 	 	 
	 	 	THE BANK OF NOVA SCOTIA
	 
	 	 	 	 	 	 
	 

	 	By
	 	          /s/ V.H. Gibson	 	 
	 

	 	 	 	 

Title: V.H. Gibson, Assistant Agent
	 	 

Agreed to and Accepted this

17th day of March, 2006

	 	 	 	 	 
	THE KANSAS CITY SOUTHERN RAILWAY COMPANY
	 
	 	 	 	 
	By

	 	/s/ Paul J. Weyandt	 	 
	 

	 	 

Title: Senior Vice President-Finance & Treasurer
	 	 

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Commitment Letter

 

 

EXHIBIT A

SUMMARY OF CERTAIN TERMS AND CONDITIONS1

I. The Parties

	 	 	 
	Borrower:

	 	The Kansas City Southern Railway Company, a Missouri corporation
	 

	 	(“Kansas City Southern”).
	 
	 	 
	Holdings:

	 	Kansas City Southern, a Delaware corporation.
	 
	 	 
	Lead Arranger
	 	 
	And Bookrunner:

	 	Scotia Capital.
	 
	 	 
	Syndication Agent:

	 	To be determined.
	 
	 	 
	Administrative Agent:

	 	The Bank of Nova Scotia.
	 
	 	 
	Documentation Agent:

	 	To be determined.
	 
	 	 
	Lenders:

	 	The Bank of Nova Scotia and a syndicate of financial institutions and institutional lenders arranged by the Lead
Arranger in consultation with the Borrower.
	 
	 	 
	Guarantors:

	 	Similar to the $250 million Credit Agreement dated as of March 30, 2004 (as amended by (i) Amendment and
Waiver No. 1 to the Credit Agreement and Amendment No. 1 to the Security Agreement, dated as of December 22, 2004, (ii)
Amendment and Waiver No. 2 to the Credit Agreement, dated as of September 30, 2005, (iii) Amendment No. 3 to the Credit
Agreement, dated as of November 4, 2005, (iv) Waiver No. 3 to the Credit Agreement, dated as of December 8, 2005, and
(v) Waiver No. 4 to the Credit Agreement, dated as of March 1, 2006, and as may be further amended or otherwise modified
from time to time, the “Existing Credit Facility”), all obligations under the Senior Bank Financing shall be
unconditionally guaranteed by Holdings and each of Holdings’ and the Borrower’s direct and indirect wholly-owned
domestic subsidiaries (Holdings and all of such subsidiaries being, collectively, the “Guarantors”), subject to
customary exceptions and exclusions (consistent with the Existing
Credit Facility) and release mechanics for transactions of this type
and subject to the exclusion of certain subsidiaries to be agreed.

 

			
	1	 	Terms used herein and not otherwise defined
being used as defined in the Commitment Letter to which this Exhibit A is
attached.

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

2

II. Description of Credit Facilities Comprising the Senior Bank Financing

A. Term Loan Facility

	 	 	 
	Term Loan B Facility:

	 	$246.2 million Term Loan B Facility.
	 
	 	 
	Maturity and Amortization:

	 	The final maturity of the Term Loan B Facility
shall be the date which occurs seven years
after the Closing Date. The loans under the
Term Loan B Facility (the “Term B Loans”),
shall be repaid during the final year of the
Term B Loans in equal quarterly amounts,
subject to amortization of approximately 1% per
year prior to such final year.
	 
	Use of Proceeds:

	 	The Term B Loans shall only be utilized (i) to
effect the amendment and restatement of the
Existing Credit Facility (the “Restatement”)
and to pay fees and expenses incurred in
connection with the Restatement, and (ii) for
general corporate purposes.
	 
	 	 
	Availability:

	 	Term B Loans may only be borrowed on the
Closing Date. No amount of Term B Loans once
repaid may be reborrowed.

B. Revolving Credit Facility

	 	 	 
	Revolving Credit

Facility:

	 	$125 million Revolving Credit Facility, with
a letter of credit sublimit of $25 million
and a swingline of $15 million.
	 
	 	 
	Maturity:

	 	The final maturity of the Revolving Credit
Facility shall be the date which occurs five
years after the Closing Date. Loans made
pursuant to the Revolving Credit Facility
(the “Revolving Loans”) shall be repaid in
full on the fifth anniversary of the Closing
Date, and all letters of credit issued
thereunder shall terminate prior to such
time.
	 
	 	 
	Use of Proceeds:

	 	The Revolving Loans shall be utilized solely
for the Borrower’s and its subsidiaries’
working capital requirements and other
general corporate purposes.
	 
	 	 
	Availability:

	 	Revolving Loans may be borrowed, repaid and
reborrowed on and after the Closing Date.

III.Terms
Applicable to the Entire Senior Bank Financing

	 	 	 	 	 
	Closing Date	 	On or before April 30, 2006.
	 
	 	 	 	 
	Security:	 	Similar to the Existing Credit Facility, the
Borrower and each of the Guarantors shall
grant the Administrative Agent and the
Lenders a valid and perfected first priority
(subject to certain exceptions to be set
forth in the loan documentation) lien and
security interest in all of the following:
	 
	 	 	 	 
	 

	 	(a)
	 	All shares of capital stock of
(or other ownership interests in) and intercompany debt of the
Borrower and each present and future domestic subsidiary of the
Borrower or such Guarantor

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

3

	 	 	 	 	 
	 

	 	 
	 	(excluding, for the avoidance of
doubt, the Meridian Speedway Joint Venture (as defined in the
Existing Credit Facility)).

	 
	 	 	 	 
	 

	 	(b)
	 	All present and future property
and assets, real and personal, of the Borrower or such
Guarantor, including, but not limited to, machinery and
equipment (including, without limitation, rolling stock
equipment and accessories), inventory and other goods, accounts
receivable, owned real estate, leaseholds, fixtures, bank
accounts, general intangibles, license rights, patents,
trademarks, tradenames, copyrights, chattel paper, insurance
proceeds, contract rights, hedge agreements, documents,
instruments, indemnification rights, tax refunds and cash, but
excluding rolling stock acquired after the Closing Date that is
subject to purchase money financing within 180 days of
acquisition.
	 
	 	 	 	 
	 

	 	(c)
	 	All proceeds and products of the
property and assets described in clauses (a) and (b) above.
	 
	 	 	 	 
	 	 	In addition, Holdings shall not pledge, or permit any of its
subsidiaries to pledge, the equity interests in the Meridian Speedway
Joint Venture to any third party without the prior written consent of
the Administrative Agent.
	 
	 	 	 	 
	 	 	Notwithstanding the foregoing, the Lead Arranger may agree to exclude
particular assets from time to time acquired by the Borrower or any
Guarantor from the collateral package if it determines that the cost
of including such assets would be excessive relative to the benefits
to the Lenders of including such assets as collateral.
	 
	 	 	 	 
	Interest Rates:	 	At the option of the Borrower, the Revolving Loans and the Term Loan (collectively,
the “Loans”) may be maintained from time to time as (x) Base Rate Loans which shall bear
interest at the Applicable Margin in excess of the Base Rate in effect from time to time or
(y) Eurodollar Loans which shall bear interest at the Applicable Margin in excess of the
Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent for
the respective interest period, provided that until the earlier to occur of (x) the 30th day
following the Closing Date and (y) that date upon which the Lead Arranger has determined (and
notifies the Borrower) that the primary syndication of the Senior Bank Financing (and the
resultant addition of institutions as Lenders) has been completed no Eurodollar Loans having
an interest period greater than one month may be incurred.
	 
	 	 	 	 
	 	 	“Base Rate” shall mean the higher of (x) 1/2 of 1% in excess of the
federal funds rate or (y) the rate that the Administrative Agent
announces from time to time as its prime or base commercial lending
rate, as in effect from time to time.
	 
	 	 	 	 
	 	 	The “Applicable Margin” means at any time (a) with respect to the
Revolving Credit Facility, (i) until the first date after the Closing
Date when the Borrower delivers the financial statements and related

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

4

	 	 	 
	 

	 	certificates and schedules required by the loan documentation for the
Senior Bank Financing, 1.50% per annum in the case of Eurodollar Rate
Loans and 0.50% per annum in the case of Base Rate Loans, and (ii)
thereafter, the applicable percentage per annum determined in
accordance with the step-ups and step-downs reflected on the pricing
grid set forth in Annex A hereto and (b) with respect to the Term B
Facility, 1.50% per annum in the case of Eurodollar Rate Loans and
0.50% per annum in the case of Base Rate Loans.
	 
	 	 
	 

	 	Interest will accrue, in the case of overdue amounts, at the
otherwise applicable rate plus 2% per annum.
	 
	 	 
	 

	 	Interest periods of 1, 2, 3 and 6 months (or such shorter periods as
may be available and acceptable to the Lenders) shall be available in
the case of Eurodollar Loans.
	 
	 	 
	 

	 	Interest in respect of Base Rate Loans shall be payable quarterly in
arrears on the last business day of each quarter. Interest in
respect of Eurodollar Loans shall be payable in arrears at the end of
the applicable interest period and every three months in the case of
interest periods in excess of three months. Interest will also be
payable at the time of repayment of any Loans, and at maturity. All
interest accruing by reference to the Eurodollar Rate and other fee
calculations shall be based on a 360-day year and all interest
accruing by reference to the Base Rate shall be calculated based on a
365/366 day year.
	 
	 	 
	Unused

Commitment Fees:

	 	The applicable percentage per annum determined in accordance with the step-ups and step-downs reflected
on the pricing grid set forth in Annex A hereto on the unused portion of each Lender’s share of the
Senior Bank Financing from and after the Closing Date, payable (a) quarterly in arrears and (b) on the
date of termination or expiration of the commitments.
	 
	 	 
	Letter of Credit Fees:

	 	Applicable Margin for Eurodollar Loans which are Revolving Loans on the aggregate outstanding stated
amounts of letters of credit plus an additional 1/4 of 1% on the aggregate outstanding stated amounts of
letters of credit to be paid as a fronting fee to the issuing bank.
	 
	 	 
	Voluntary Commit-

ment Reductions:

	 	Substantially similar to the Existing Credit Facility.
	 
	 	 
	Voluntary Prepayment:

	 	Substantially similar to the Existing Credit Facility.
	 
	 	 
	Mandatory

Prepayment:

	 	Substantially similar to the Existing Credit Facility, all net cash proceeds (a) from sales of property
and assets of Holdings and its subsidiaries (except for sales of inventory, non-operating assets and
non-income producing assets in the ordinary course of business and subject to a reinvestment provision
to be negotiated and an additional annual basket of an amount to be agreed), (b) property insurance and
condemnation

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

5

	 	 	 	 	 
	 	 	proceeds (subject to a reinvestment provision to be negotiated), and (c) from the issuance
after the Closing Date of additional debt of Holdings and its subsidiaries otherwise permitted under the
loan documentation (subject to exceptions to be agreed and except that proceeds not exceeding $125
million received in connection with indebtedness incurred by Holdings or its subsidiaries owing to the
Meridian Speedway Joint Venture (as defined in the Existing Credit Facility) and as currently permitted
by the Existing Credit Facility shall not be subject to a mandatory prepayment of the Term Loan B
Facility), and 50% of Excess Cash Flow (to be defined in the loan documentation) of the Borrower and its
subsidiaries for so long as the total leverage ratio is greater than 4.00:1:00, shall be applied to
prepay the Senior Bank Financing, ratably to the principal repayment installments of the Term B Facility
on a pro rata basis and then to the Revolving Credit Facility.
	 
	 	 	 	 
	Documentation:	 	Each of the commitments will be subject to the negotiation, execution and delivery of definitive
financing agreements (and related security documentation, guaranties, etc.) consistent with this Summary
of Certain Terms and Conditions, in each case prepared by counsel to the Lead Arranger.
	 
	 	 	 	 
	Conditions Precedent
to Initial Extension of Credit	 	The final loan documentation will contain the following conditions precedent:
	:
	 	 	 	 
	 
	 	 	 	 
	 

	 	(a)
	 	The final terms and conditions of
the Restatement, including, without limitation, all legal and
tax aspects thereof, shall be as described in the Commitment
Letter and otherwise consistent with the description thereof
received in writing as part of the information furnished by or
on behalf of the Borrower (the “Pre-Commitment Information”).
	 
	 	 	 	 
	 

	 	(b)
	 	All of the capital stock of the
Borrower shall be owned by Holdings and all capital stock of the
Borrower’s subsidiaries shall be owned by the Borrower,
Holdings, or one or more of the Borrower’s subsidiaries, in each
case free and clear of any lien, charge or encumbrance, other
than the liens and security interests created under the loan
documentation; the Lenders shall have a valid and perfected
first priority (subject to certain exceptions to be set forth in
the loan documentation) lien and security interest in such
capital stock (other than the stock of the Meridian Speedway
Joint Venture) and in the other collateral referred to under the
section “Security” above; all filings, recordations and
searches necessary or desirable in connection with such liens
and security interests shall have been duly made; and all
filing and recording fees and taxes shall have been duly
paid. Notwithstanding the foregoing, the Lead Arranger may
grant reasonable extensions of time for the perfection of
liens on real property and other particular assets where
perfection cannot be accomplished by the Closing Date.

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

6

	 	 	 	 	 
	 

	 	(c)
	 	All governmental and third party
consents and approvals necessary in connection with the
Restatement and the Senior Bank Financing shall have been
obtained (without the imposition of any conditions that are not
acceptable to the Lenders) and shall remain in effect; all
applicable waiting periods shall have expired without any
adverse action being taken by any competent authority; and no
law or regulation shall be applicable in the judgment of the
Lenders that restrains, prevents or imposes materially adverse
conditions upon the Restatement or the Senior Bank Financing.
	 
	 	 	 	 
	 

	 	(d)
	 	The Borrower and each Guarantor
shall have delivered certificates, in form and substance
satisfactory to the Lenders, attesting to the Solvency (as
hereinafter defined) of the Borrower and such Guarantor, as the
case may be, in each case individually and together with its
subsidiaries, taken as a whole, immediately before and
immediately after giving effect to the Restatement, from their
respective chief financial officers. As used herein, the term
“Solvency” of any person means (i) the fair value of the
property of such person exceeds its total liabilities
(including, without limitation, contingent liabilities), (ii)
the present fair saleable value of the assets of such person is
not less than the amount that will be required to pay its
probable liability on its debts as they become absolute and
matured, (iii) such person does not intend to, and does not
believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature and (iv)
such person is not engaged, and is not about to engage, in
business or a transaction for which its property would
constitute an unreasonably small capital.
	 
	 	 	 	 
	 

	 	(e)
	 	The Lenders shall have been given
such access to the management, records, books of account,
contracts and properties of Holdings and its subsidiaries and
shall have received such financial, business and other
information regarding each of the foregoing persons as they
shall have requested, including, without limitation, information
as to possible contingent liabilities, tax matters, collective
bargaining agreements and other arrangements with employees,
annual financial statements dated December 31, 2005, accompanied
by an unqualified opinion of independent auditors of Holdings
and its subsidiaries, pro forma consolidated financial
statements as to the Borrower and its subsidiaries, and
forecasts prepared by management of the Borrower, in a form
satisfactory to the Lenders, of balance
sheets, income statements and cash flow statements on a
quarterly basis for the first year following the Closing Date
and on an annual basis for the three succeeding years
thereafter.
	 
	 	 	 	 
	 

	 	(f)
	 	The Lenders shall have received
(i) satisfactory opinions of counsel for the Borrower and the
Guarantors as to the transactions contemplated hereby and (ii)
such corporate

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

7

	 	 	 	 	 
	 

	 	 	 	resolutions, certificates and other documents as
the Lenders shall reasonably request.
	 
	 	 	 	 
	 

	 	(g)
	 	The Borrower shall have, and
shall have caused each other obligor under the security
documents to, execute and deliver any and all further documents,
financing statements, agreements and instruments, and take all
such further actions that may be required to cause the
collateral to have a perfected, first priority security interest
in favor of the Secured Parties (to be defined in the Senior
Bank Financing).
	 
	 	 	 	 
	 

	 	(h)
	 	There shall exist no default
under any of the loan documentation, and the representations and
warranties of the Borrower and each of the Guarantors therein
shall be true and correct immediately prior to, and after giving
effect to, the initial extension of credit under the loan
documentation.
	 
	 	 	 	 
	 

	 	(i)
	 	All accrued fees and expenses of
the Administrative Agent, the Lead Arranger and the Lenders
(including the fees and expenses of counsel for the Lead
Arranger and local counsel for the Lenders) shall have been
paid.
	 
	 	 	 	 
	 

	 	(j)
	 	The Senior Bank Financing shall
have received debt ratings from Moody’s and S&P.
	 
	 	 	 	 
	Conditions Precedent
to Subsequent
Extensions of Credit:	 	There shall exist no default under any of the loan documentation, and the representations and warranties
of the Borrower and each of the Guarantors therein shall be true and correct immediately prior to, and
after giving effect to, such extension of credit.
	 
	 	 	 	 
	Representations and
Warranties, Covenants
and Events of Default:	 	Substantially similar to the Existing Credit Facility except that:
	 
	 	 	 	 
	 

	 	(k)
	 	Covenant thresholds/levels shall
be determined upon a review of revised projections.
	 
	 	 	 	 
	 

	 	(l)
	 	The definition of “Debt” in the
documentation in respect of the Senior Bank Financing shall
exclude certain indebtedness in respect of purchase agreement
indemnity and other claims that may be satisfied by Kansas City
Southern or its subsidiaries with the issuance of stock or other
equity interests of Kansas City
Southern or its subsidiaries; provided that such indebtedness
must be repaid with such stock or equity interests unless (i)
after giving effect to any payment in cash, the Parent would
have been in compliance with the financial covenants
(including the leverage ratio) as determined on a pro forma
basis as of the most recently ended fiscal quarter as if such
indebtedness had constituted “Debt” or (ii) if the Revolving
Credit Facility would

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

8

	 	 	 	 	 
	 

	 	 	 	remain undrawn after such repayment and
have availability thereunder of not less than $25 million.
	 
	 	 	 	 
	 

	 	(m)
	 	If the ratings of the Senior Bank
Financing are less than Ba3 from Moody’s and BB+ from S&P, in
each case with stable outlook, at such time, the Senior Bank
Financing shall mature on the date that is 90 days prior to the
maturity date of any public debt securities of the Borrower
unless (i) such debt securities are successfully refinanced on
or prior to such date or (ii) an amount sufficient to
indefeasibly repay such debt securities has been deposited with
the applicable bond trustee on or prior to such date and, after
giving pro forma effect to such deposit, the Borrower is in pro
forma compliance with all financial covenants.
	 
	 	 	 	 
	Expenses:	 	The Borrower shall pay all of the Administrative Agent’s
and the Lead Arranger’s reasonable fees and all other
out-of-pocket expenses incurred by the Administrative
Agent or the Lead Arranger (including the fees and
expenses of counsel for the Lead Arranger) in connection
with syndicating and documenting the Senior Bank
Financing, whether or not any of the transactions
contemplated hereby are consummated, as well as all
reasonable expenses of the Administrative Agent in
connection with the administration of the loan
documentation. The Borrower shall also pay the
reasonable expenses of the Administrative Agent, the
Lead Arranger and the Lenders in connection with the
enforcement of any of the loan documentation.
	 
	 	 	 	 
	Indemnity:	 	The Borrower will indemnify and hold harmless the
Administrative Agent, the Lead Arranger, each Lender and
each of their affiliates and their officers, directors,
employees, agents and advisors from claims and losses
relating to the Restatement or the Senior Bank Financing
other than to the extent such claims or losses have been
finally determined by a court of competent jurisdiction
to have resulted directly and primarily from the gross
negligence or willful misconduct of such person.
	 
	 	 	 	 
	Required Lenders:	 	Lenders holding more than 50% of the aggregate amount of
loans and commitments under the Senior Bank Financing.
	 
	 	 	 	 
	Waivers &
Amendments:	 	Substantially similar to the Existing Credit Facility.
	 
	 	 	 	 
	Assignments and
Participations:	 	Assignments must be to Eligible Assignees (as defined in
the Existing Credit Facility) approved by the Borrower
for so long as no event of
default has occurred and been continuing (such approval not to be unreasonably
withheld) and, in each case other than an assignment to a Lender or an
assignment of the entirety of a Lender’s interest in the Senior Bank Financing,
in a minimum amount equal to $1 million. Each Lender will also have the right,
without consent of the Borrower or the Administrative Agent, to assign (i) as
security all or part of its rights under the loan documentation to any Federal
Reserve Bank and (ii) all or

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

 

9

	 	 	 
	 

	 	part of its rights or obligations under the loan
documentation to any of its affiliates. No participation shall include voting
rights, other than for reductions or postponements of amounts payable or
releases of all or substantially all of the collateral.
	 
	 	 
	Taxes:

	 	All payments to be free and clear of any present or
future taxes, withholdings or other deductions
whatsoever (other than income taxes in the
jurisdiction of the Lender’s applicable lending
office). The Lenders will use reasonable efforts
(consistent with their respective internal policies
and legal and regulatory restrictions and so long as
such efforts would not otherwise be disadvantageous
to such Lenders) to minimize to the extent possible
any applicable taxes and the Borrower will indemnify
the Lenders and the Administrative Agent for such
taxes paid by the Lenders or the Administrative
Agent.
	 
	 	 
	Miscellaneous:

	 	Standard yield protection (including compliance with
risk-based capital guidelines, increased costs,
payments free and clear of withholding taxes and
interest period breakage indemnities), eurodollar
illegality and similar provisions, defaulting lender
provisions, waiver of jury trial, submission to
jurisdiction and judgment currency provisions.
	 
	 	 
	Governing Law:

	 	New York.
	 
	 	 
	Counsel for the

Lead Arranger:

	 	Shearman & Sterling LLP.

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

 

 

Annex A

Pricing Grid

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Applicable	 	 	Applicable	 	 	 	 
	 	 	Margin for	 	 	Margin for	 	 	Unused	 
	 	 	Base Rate	 	 	Eurodollar	 	 	Commitment	 
	Leverage Ratio	 	Loans	 	 	Rate Loans	 	 	Fee	 
	Level I

greater than 5.25: 1.00
	 	 	0.500	%	 	 	1.500	%	 	 	0.500	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Level II

greater than 4.25: 1.00
but less than or equal
to 5.25: 1.00
	 	 	0.250	%	 	 	1.250	%	 	 	0.500	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Level III

greater than 3.25: 1.00
but less than or
equal to 4.25:1.00
	 	 	0.000	%	 	 	1.000	%	 	 	0.375	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Level IV

less than or equal to
3.25: 1.00
	 	 	0.000	%	 	 	0.875	%	 	 	0.375	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 

THE KANSAS CITY SOUTHERN RAILWAY COMPANY

Summary of Certain Terms and Conditions

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]