Equipment Lease Agreement

EXHIBIT 10.3

Equipment Lease Agreement
(KCSR 2008-1)

dated as of April 1, 2008

between

KCSR 2008-1 Statutory Trust , acting through
U.S. Bank Trust National Association,
not in its individual capacity, but solely as Owner Trustee,
Lessor

and

The Kansas City Southern Railway Company,
Lessee

30 SD70ACe Locomotives

      Certain of the right, title and interest of Lessor in and to this Lease, the Equipment covered hereby and the Rent due and to become due hereunder have been assigned as collateral security to, and are subject to a security interest in favor of, Wilmington Trust Company, as Indenture Trustee under a Trust Indenture and Security Agreement (KCSR 2008-1), dated as of April 1, 2008 between said Indenture Trustee, as secured party, and Lessor, as debtor. Information concerning such security interest may be obtained from Indenture Trustee at its address set forth in Section 20 of this Lease. This Lease Agreement has been executed in several counterparts, but only that counterpart shall be deemed the original counterpart for chattel paper purposes that contains the receipt therefor executed by Wilmington Trust Company, as Indenture Trustee, on the signature page thereof. See Section 26.2 for information concerning the rights of the original holder and the holders of the various counterparts hereof.

     Memorandum of Equipment Lease Agreement (KCSR 2008-1) filed with the Surface Transportation Board pursuant to 49 U.S.C. § 11301 on April 14, 2008 at 10:30 A.M., Recordation Number 27460, and deposited in the Office of the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act on April 14, 2008 at 12:28 P.M.

Table of Contents

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

Section		Heading		Page
Section 10.		Voluntary Termination			11
Section 10.1.		Right of Termination			11
Section 10.2.		Sale of Equipment			11
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			14
Section 11.4.		Disposition of Equipment; Replacement of Unit			14
Section 11.5.		Eminent Domain			15
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			17
Section 13.		Reports; Inspection			17
Section 13.1.		Duty of Lessee to Furnish			17
Section 13.2.		Lessor’s Inspection Rights			18
Section 14.		Events of Default			18
Section 15.		Remedies			20
Section 15.1.		Remedies			20
Section 15.2.		Cumulative Remedies			22
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			23
Section 16.1.		Filings			23
Section 16.2.		Further Assurances			24
Section 16.3.		Expenses			24
Section 17.		Lessor’s Right to Perform			24
Section 18.		Assignment			24
Section 18.1.		Assignment by Lessor			24
Section 18.2.		Assignment by Lessee			25
Section 18.3.		Sublessee’s Performance and Rights			25

Section		Heading		Page
Section 19.		Net Lease, etc.			25
Section 20.		Notices			26
Section 21.		Concerning Indenture Trustee			28
Section 21.1.		Limitation of Indenture Trustee’s Liabilities			28
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 Options			28
Section 22.3.		[Reserved]			29
Section 22.4.		Determination of Fair Market Rental Value			29
Section 22.5.		Stipulated Loss Value and Termination 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			32
Section 25.		Filing in Mexico			32
Section 26.		Miscellaneous			33
Section 26.1.		Governing Law; Severability			33
Section 26.2.		Execution in Counterparts			33
Section 26.3.		Headings and Table of Contents; Section References			33
Section 26.4.		Successors and Assigns			33
Section 26.5.		True Lease			33
Section 26.6.		Amendments and Waivers			33
Section 26.7.		Survival			34
Section 26.8.		Business Days			34
Section 26.9.		Directly or Indirectly			34
Section 26.10.		Incorporation by Reference			34
Section 26.11.		Entitlement to §1168 Benefits			34
Section 26.12.		Waiver of Jury Trial			34
Attachments to Equipment Lease Agreement:
Exhibit A            —		Form of Lease Supplement
Appendix A       —		Definitions

Equipment Lease Agreement
(KCSR 2008-1)

     This Equipment Lease Agreement (KCSR 2008-1), dated as of April 1, 2008 (this “ Lease ”), between the KCSR 2008-1 Statutory Trust , a Delaware statutory trust (“ Lessor ”), acting through U.S. Bank Trust National Association , a national banking association, not in its individual capacity except as expressly stated herein, but solely as trustee created under the Trust Agreement (as hereinafter defined) (in its individual capacity “ Trust Company ” and as Owner Trustee, together with its permitted successors and assigns, called the “ Owner Trustee ”), and The Kansas City Southern Railway Company, a Missouri corporation (“ Lessee ”),

Witnesseth:

Section 1. Definitions.

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

Section 2. Acceptance and Leasing of Equipment.

     Lessor hereby agrees (subject to satisfaction or waiver of the conditions applicable to the Delivery Date set forth in Article IV of the Participation Agreement), simultaneously with the delivery of each Unit of Equipment from Seller to Lessor to accept delivery of such Unit of Equipment from Seller, as evidenced by the execution and delivery by an authorized representative of Lessor of a Certificate of Acceptance with respect to such Unit and thereafter to lease such Unit to Lessee hereunder. Lessee further agrees (subject to satisfaction or waiver of the conditions applicable to the Delivery Date for such Unit set forth in Article IV of the Participation Agreement) to execute and deliver a Lease Supplement covering such Unit. Lessor hereby authorizes one or more employees or agents of Lessee, designated by Lessee, to act on behalf of Lessor as its authorized representative or representatives to accept delivery of the Equipment and to execute and deliver such Certificate of Acceptance, all in accordance with Sections 2.1(a) and 2.3(b) of the Participation Agreement. Lessee hereby agrees that such acceptance of delivery by such authorized representative or representatives on behalf of Lessor shall, without further act, irrevocably constitute acceptance by Lessee of such Unit for all purposes of this Lease.

Section 3. Term and Rent.

      Section 3.1. Lease Term . The interim term of this Lease (the “ Interim Term ”) shall commence for each Unit on the Delivery Date for such Unit and shall terminate at 11:59 P.M. (New York City time) on the date set forth as Item C to Schedule 3 of the Participation Agreement (the “ Interim Term Expiration Date ”) for such Unit. The basic term of this Lease (the “ Basic Term ”) for each Unit shall commence on the day (the “ Basic Term Commencement Date ”) immediately following the Interim Term Expiration Date for such Unit and, subject to

earlier termination pursuant to Sections 10, 11, 15, 22.1 and 23, shall expire at 11:59 P.M. (New York City time) on the date set forth as Item D to Schedule 3 of the Participation Agreement (the “ Basic Term Expiration Date ”) for such Unit. Subject and pursuant to Section 22.2, Lessee may elect one or more Renewal Terms with respect to any Unit.

      Section 3.2. Interim Rent and Basic Rent . (a) Lessee and Lessor hereby agree that no Rent (other than Supplemental Rent, if any) shall be payable to Lessor during the Interim Term. Lessee hereby agrees to pay Lessor Basic Rent for each Unit throughout the Basic Term applicable thereto on the first Rent Payment Date and in consecutive semi-annual installments thereafter payable on each Rent Payment Date. Each such payment of Basic Rent shall be in an amount equal to the product of the Equipment Cost for such Unit multiplied by the Basic Rent percentage for such Unit set forth opposite such Rent Payment Date on Schedule 2 to the Lease Supplement for such Unit (as such Schedule 2 shall be adjusted pursuant to Section 2.6 of the Participation Agreement). Basic Rent for any Unit 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 Units (“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. It is the intention of Lessor and Lessee that the allocations of Basic Rent to each Lease Period in the amount set forth in Schedule 5 to the applicable Lease Supplement constitute specific allocations of fixed rent within the meaning of Treasury Regulation Section 1.467-1(c)(2)(ii).

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

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

any Make-Whole Amount due under Section 2.10(a) or Section 2.10(c) of the Indenture, (iii) in the case of the termination of this Lease with respect to any Unit pursuant to Section 10, on the applicable Termination Date, an amount equal to the Make-Whole Amount, if any, with respect to the principal amount of each Equipment Note to be prepaid as a result of such termination and any Make-Whole Amount due on the Equipment Notes upon their acceleration pursuant to Section 4.02 of the Indenture by reason of a Lease Event of Default, (iv) in the case of a termination of this Lease with respect to any Unit pursuant to Section 22.1, on the date such Unit is purchased, an amount equal to the 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, (vi) on demand, any payments required under the Tax Indemnity Agreement or Article VII of the Participation Agreement, (vii) in the case of any purchase of a Unit in accordance with Section 23(d), on the first installment payment date, an amount equal to the Make-Whole Amount, if any, with respect to any Equipment Note to be prepaid on such date, and (viii) all amounts payable by Lessor under Section 7.02 of the Indenture. All Supplemental Rent to be paid pursuant to this Section 3.3 shall be payable in the type of funds and in the manner set forth in Section 3.5.

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

      Section 3.5. Manner of Payments . All Rent (other than Supplemental Rent payable to Persons other than Lessor, which shall be payable to such other Persons in accordance with written instructions furnished to Lessee by such Persons, as otherwise provided in any of the Operative Agreements or as required by law) shall be paid by Lessee to Lessor at its office at Goodwin Square, 225 Asylum Street, 23rd Floor, Hartford, Connecticut 06103, Attention: Corporate Trust- Administration (KCSR 2008-1). All Rent shall be paid by Lessee in funds consisting of lawful currency of the United States of America, which shall be immediately available to the recipient not later than 12:00 noon (New York City time) on the date of such payment, provided that so long as the Indenture shall not have been discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee agrees, that all Rent (excluding Excepted Property) payable to Lessor and assigned to Indenture Trustee shall be paid directly to Indenture Trustee at the times and in funds of the type specified in this Section 3.5 at the office of Indenture Trustee at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or at such other location in the United States of America as Indenture Trustee may otherwise direct.

Section 4. Ownership and Marking of Equipment.

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

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

“Subject to a Security Agreement recorded
with the Surface Transportation Board“
or
“Ownership subject to a Security Agreement filed
with the Surface Transportation Board“

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

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

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

      Section 5.1. Disclaimer of Warranties . Without waiving any claim Lessee may have against any seller, supplier or manufacturer, LESSEE ACKNOWLEDGES AND AGREES THAT, (I) EACH UNIT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (II) LESSEE IS SATISFIED THAT EACH UNIT IS SUITABLE FOR ITS PURPOSES, (III) NEITHER LESSOR, TRUST COMPANY NOR OWNER PARTICIPANT IS A MANUFACTURER 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, TRUST COMPANY NOR OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE EQUIPMENT, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO , except that Trust Company represents and warrants that on 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 Trust Company. During the Lease Term so long as no Event of Default shall have occurred and be continuing, Lessor hereby appoints and constitutes Lessee its agent and attorney-in-fact during the Lease Term to assert and enforce, from time to time, in the name and for the account of Lessor and Lessee, as their interests may appear, but in all cases at the sole cost and expense of Lessee, whatever claims and rights Lessor may have as owner of the Equipment against the manufacturers or any prior owner thereof.

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

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 30 days before the end of the Lease Term or, in the absence of such designation, as Lessee may select or, if Lessor has requested storage pursuant to Section 6.3, to the location determined in accordance with Section 6.3. To the extent that any maintenance logs are kept by Lessee with respect to any Unit in accordance with Section 8.1 and such Unit is returned pursuant to this Section 6.1, upon the written request of Lessor, such maintenance logs shall be made available to Lessor or its designee upon the return of such Unit. Upon expiration of the Lease Term with respect to such Unit, compliance with the terms hereof (including without limitation the return conditions) and tender of such Unit at the location determined in accordance with this Section 6.1(a), this Lease and the obligation to pay Basic Rent and all other Rent for such Unit accruing subsequent to such expiration (except for Supplemental Rent

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

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

      Section 6.2. Condition of Equipment . Each Unit when returned to Lessor pursuant to Section 6.1(a) shall (i) be in a condition mechanically suitable for use as a locomotive by a Class I railroad in the United States, (ii) be in the condition required by Sections 8.1 and 9.3 and (iii) be free and clear of all Liens except Lessor’s Liens and Permitted Liens, provided that Lessee agrees to promptly discharge any such Permitted Lien within thirty (30) days of the return of the Unit with Lessor’s sole remedy for any breach of this clause (iii) being damages at law or specific performance at equity. 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 any Units of Equipment, upon written request of Lessor received at least 60 days prior to the end of the Lease Term for such Units, 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 of the Units of Equipment to be returned at the expiration of the Lease Term have been returned; provided that, with respect to any Unit returned after the expiration of the Lease Term for such Unit, the Storage Period for such Unit shall begin on the date of return of such Unit and end 60 days thereafter. Any storage facilities provided by Lessee pursuant to this Section 6.3 shall, in all cases, be at the cost to Lessor, including 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 except a result of Lessee’s violation of its obligations under this Lease. With respect to the Units stored pursuant hereto, Lessee will carry and maintain with respect to stored Units, during the Storage Period, under Lessee’s insurance policies, property damage insurance and public liability insurance with respect to third party personal and property damage as Lessee then maintains in respect of equipment owned or leased by it similar in type to the Equipment; provided that (i) Lessor pays all incremental costs associated with such insurance coverage, (ii) such insurance coverage does not negatively impact upon Lessee’s loss insurance rating and (iii) any coverage provided is above Lessee’s deductibles or self-insurance retention amounts. On not more than one occasion with respect to each stored Unit and upon not less than 15 days’ prior written notice from Lessor to Lessee (which notice shall specify the transportation of no less than all of the Units of Equipment), Lessee will, during the Storage Period, transport such Units, at Lessee’s cost and expense, to a destination or interchange point, f.o.b., such destination or interchange point, on Lessee’s lines in the U.S. specified by Lessor, whereupon Lessee shall have no further liability or obligation with respect to such Units. During the Storage Period, Lessee will permit Lessor or any person designated by it, including the authorized representative or representatives of any prospective purchaser or user of such Unit, to inspect the same; provided , however , that such inspection shall not interfere with the normal conduct of Lessee’s business and such person shall be insured to the reasonable satisfaction of Lessee with respect to any risks incurred in connection with any such inspections and Lessee (except in the case of Lessee’s gross negligence or willful misconduct) shall not be liable for any injury to, or the death of, any person exercising, either on behalf of Lessor or any prospective purchaser or user, the rights of inspection granted pursuant hereto. Lessee shall not be required to store the Equipment after the Storage Period. If Lessee stores any Unit after the Storage Period, such storage shall be at the sole expense and risk of Lessor.

      Section 6.4. Termination of Lease . Upon the later of (i) expiration of the Lease Term with respect to such Unit and payment of all sums due from Lessee hereunder, (ii) tender of such Unit at the location determined in accordance with Section 6.1(a) or, as applicable, the tender of such Unit for storage in accordance with Section 6.3, and (iii) compliance by such Unit with Section 6.2, except for (a) Supplemental Rent obligations with respect to such Unit surviving pursuant to the Participation Agreement or the Tax Indemnity Agreement or which have otherwise accrued but not been paid as of the date of the expiration of the Lease Term and (b) the provisions hereof that expressly survive the termination of this Lease, this Lease and the obligation to pay Rent for such Unit accruing subsequent to the expiration of the Lease Term with respect to such Unit shall terminate.

Section 7. Liens.

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

Section 8. Maintenance; Operation; Sublease.

      Section 8.1. Maintenance . Lessee, at its own cost and expense, shall service, maintain, repair and keep each Unit (i) in good repair and operating condition, ordinary wear and tear excepted, (ii) in accordance with (a) prudent Class I railroad industry maintenance practices in existence from time to time and (b) in all material respects, manufacturer’s recommendations to the extent required to maintain such manufacturer’s warranties in effect with respect to such Unit, (iii) in a manner consistent with service, maintenance, overhaul and repair practices used by Lessee in respect of equipment owned or leased by Lessee similar in type to such Unit and without discrimination between owned and leased equipment, and (iv) in compliance, in all material respects, with all applicable laws and regulations, including any applicable United States EPA regulations, 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, create any material risk of the sale, forfeiture or loss of any Unit 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. Lessee shall maintain or cause to be maintained all records, logs and other documents required by applicable law to be maintained with respect to each Unit, and will maintain or cause to be maintained such records and logs without discrimination between owned and leased equipment and in accordance with Lessee’s normal record keeping procedures in its ordinary course of business. Lessee will not discriminate against any Unit (as compared against similar equipment owned or leased by Lessee) with respect to its use, operation or maintenance in contemplation of the expiration or termination of the Lease Term for such Unit.

      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 or user upon lines of railroad owned or operated by Lessee, any Affiliate of Lessee, such sublessee or user or by a railroad company or companies incorporated under the federal laws or laws of any state of the United States, organized under the federal laws or the laws of any province in Canada or organized under the federal laws or the laws of any state of Mexico, over which Lessee, such Affiliate of Lessee, such sublessee or user or such railroad company or companies has trackage or other operating rights, and upon lines of railroad of connecting and other carriers in the usual interchange of traffic or pursuant to through or run-through service agreements; provided such sublessee shall not, at the time of such sublease, be insolvent or subject to insolvency or bankruptcy proceedings. Each sublease shall be subject and subordinate to this Lease (including the duration of the sublease term, which term may not expire after the expiration of the Basic Term or any Renewal Term then in effect) and no such sublease shall contain a purchase option. Lessee shall give Lessor and Indenture Trustee reasonably contemporaneous notice upon entering into a sublease for a period in excess of one year. No sublease shall in any way discharge or diminish any of Lessee’s obligations hereunder, and Lessee shall remain primarily liable hereunder for the performance of all the terms, conditions and provisions of this Lease and the other Lessee Agreements to the same extent as if such sublease had not been entered into. Nothing in this Section 8.3 shall be deemed to constitute permission to any Person in possession of any Unit pursuant to any such sublease to take any action inconsistent with the terms and provisions of this Lease or any of the other Operative Agreements.

Section 9. Modifications.

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

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

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

      Section 9.4. Retention of Equipment by Lessor . Notwithstanding the provisions of the last sentence of Section 9.1, Lessor may irrevocably elect by written notice to Lessee, no later than 15 Business Days after receipt of Lessee’s notice of determination of economic impracticality pursuant to Section 9.1, not to declare an Event of Loss as provided in Section 9.1, whereupon Lessee shall not be liable for the Stipulated Loss Value for the affected 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, (1) 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 and (2) any Underpayment of Basic Rent for the affected Units as of such termination date. 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 in respect of the principal amount of the Equipment Notes to be prepaid in accordance with Section 2.10(b) of the Indenture. On such termination date, if Lessee shall have paid all amounts due hereunder, Lessor shall pay to Lessee any Overpayment of Basic Rent for such Units as of such termination date. If Lessor shall fail to perform any of its obligations pursuant to this

Section 9.4 on the scheduled termination date for any affected Unit, the parties hereto shall treat such Unit as if an Event of Loss had occurred as of the date of Lessee’s written notice with respect to such Unit pursuant to Section 9.1 and the provisions of Sections 11.2, 11.3 and 11.4 with respect to rent, termination and disposition shall apply with respect to such Unit and Lessor shall thereafter no longer be entitled to exercise its election to retain such affected Units.

Section 10. Voluntary Termination.

      Section 10.1. Right of Termination . So long as no Specified Default or Event of Default shall have occurred and be continuing, Lessee shall have the right, at its option at any time or from time to time on or after the fifth anniversary of the Closing Date, to terminate this Lease with respect to, at the sole discretion of Lessee, either all of the Units of Equipment or a Minimum Number of the 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 notice referred to above at any time prior to ten (10) days before the scheduled Termination Date, whereupon this Lease shall continue in full force and effect; provided that Lessee shall pay all reasonable costs of Lessor, Indenture Trustee, Loan Participant and Owner Participant incurred in connection with any proposed or withdrawn termination; provided , further , that Lessee may not withdraw a termination notice hereunder more than twice.

      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 (including Owner Participant, who shall be permitted to bid on the same basis as any other Person, but excluding Lessee, any Affiliate of Lessee, any successor or assign of Lessee or any third party with whom Lessee or any Affiliate of Lessee has an arrangement to use or operate the Terminated Units for the benefit of Lessee or such Affiliate following the termination of this Lease with respect thereto) 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 for so long as the Indenture remains in effect or otherwise to the Owner Trustee for distribution according to the Trust Agreement 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, (D) any other Supplemental Rent due and payable as of such Termination Date and (E) any Underpayment of Basic Rent for the Terminated Units as of such Termination Date. On such Termination Date, if Lessee shall have paid all amounts due hereunder, Lessor shall pay to Lessee any Overpayment of Basic Rent for such Units as of such Termination Date. If no sale shall have occurred, this Lease shall continue in full force and effect with respect to such Units; provided that if such sale shall not have occurred solely because of Lessee’s failure to pay the amounts required to be paid pursuant to the immediately preceding sentence, Lessee shall have no further right to terminate this Lease with respect to such Units, and such failure to pay such amounts shall be deemed a withdrawal of the termination notice referred to in Section 10.1. If Lessor elects not to exercise its right to retain the Terminated Units as provided in Section 10.3, Lessee, in acting as agent for Lessor, shall have no liability to Lessor for failure to obtain the best price, shall act in its sole discretion and shall be under no duty to solicit bids publicly or in any particular market. Lessee’s sole interest in acting as agent shall be to sell the Units at a price that reduces or eliminates Lessee’s obligation to pay the amount provided in this Section 10.2. 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 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, and any Underpayment of Basic Rent for such Terminated Units as of such Termination Date. 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. On such Termination Date, if Lessee shall have paid all amounts due hereunder, Lessor shall pay to Lessee any Overpayment of Basic Rent for such Units as of such Termination Date. If Lessor shall fail to perform any of its obligations pursuant to this Section 10.3 and as a result thereof this Lease shall not be terminated with respect to the Terminated Units on a proposed Termination Date, Lessor shall thereafter no longer be entitled to exercise its election to retain such Terminated Units and Lessee may at its option at any time thereafter submit a new termination notice pursuant to Section 10.1 with respect to such Terminated Units specifying a proposed Termination Date occurring not earlier than five days from the date of such notice.

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

Section 11. Loss, Destruction, Requisition, Etc.

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

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

     (i) So long as no Specified Default or Event of Default shall have occurred and be continuing, as promptly as practicable, and in any event on or before the Business Day next preceding the 175th day next following the date on which a Responsible Officer of Lessee shall have actual knowledge of the occurrence or deemed occurrence of such Event of Loss, Lessee shall comply with Section 11