LOAN AND SECURITY AGREEMENT

EXHIBIT 10.1

 

 

Loan and Security Agreement

by and between

Kansas City Southern de México, S.A. de C.V.

and

Export Development Canada

February 26, 2008

 

 

Table of Contents

Section		Heading		Page
Article I		Definitions			1
Section 1.1.		Definitions			1
Section 1.2.		Directly or Indirectly			1
Article II		Closing Date			1
Section 2.1.		Closing			1
Article III		Funding of Loan			2
Section 3.1.		Funding			2
Section 3.2.		Notice and Closing			2
Section 3.3.		Administration Fee			2
Article IV		The Notes			2
Section 4.1.		Notes			2
Section 4.2.		Method of Payment			3
Section 4.3.		Application of Payments to Principal Amount and Interest			3
Section 4.4.		Termination of Interest			3
Section 4.5.		Transfer of Notes			3
Section 4.6.		Loss, Theft, Etc. of Notes			4
Section 4.7.		Payment of Transfer Taxes			4
Section 4.8.		Prepayments			4
Section 4.9.		Equally and Ratably Secured			6
Article V		Grant of Security			6
Article VI		Closing Conditions			7
Article VII		Covenants of the Borrower			8
Section 7.1.		Payment of the Notes			8
Section 7.2.		Marking of Equipment			8
Section 7.3.		Maintenance of Equipment; Casualty Occurrences; Eminent Domain			8
Section 7.4.		Possession of Equipment; Assignments			10
Section 7.5.		Insurance			12
Section 7.6.		Borrower’s Indemnities			14
Section 7.7.		The Lender’s Inspection Rights			18
Section 7.8.		Merger Covenant			18
Section 7.9.		Financial Statements			18
Section 7.10.		Increased Costs			20
Section 7.11.		Withholding Tax Indemnity			21

Section		Heading		Page
Section 7.12.		Discharge of Liens			23
Section 7.13.		Recording; Payment of Expenses			24
Section 7.14.		Further Assurances			24
Section 7.15.		Compliance with Laws			25
Article VIII		Events of Default; Remedies Upon An Event of Default			25
Section 8.1.		Events of Default			25
Section 8.2.		Rights and Remedies Upon Default			26
Section 8.3.		Waiver of Default			27
Section 8.4.		Obligations of Borrower Not Affected by Remedies			28
Section 8.5.		Borrower to Deliver Equipment to Lender			28
Section 8.6.		Lender Appointed Attorney-in-Fact			28
Section 8.7.		Lender May Perform			29
Section 8.8.		Remedies Cumulative			29
Section 8.9.		Applications of Proceeds Received From Disposition of the Collateral			30
Article IX		Miscellaneous			30
Section 9.1.		Continuing Security Interest; Termination			30
Section 9.2.		Notices			31
Section 9.3.		Entire Agreement; Severability			31
Section 9.4.		Amendments			32
Section 9.5.		Counterparts			32
Section 9.6.		Security Agreement			32
Section 9.7.		Governing Law			32
Section 9.8.		Waiver of Jury Trial			32
Section 9.9.		Powers and Rights Not Waived; Remedies Cumulative			32
Section 9.10.		Exempted Transaction			32
Section 9.11.		Reproduction of Documents			33
Section 9.12.		Tax Disclosure			33
Section 9.13.		Jurisdiction, Court Proceedings			34
Section 9.14.		Judgment Currency			34
Section 9.15.		Business Days			35
Section 9.16.		Effect of Headings			35
Section 9.17.		Participations			35
Appendix A — Definitions
Exhibit A — Form of Note
Exhibit B — Form of Loan Request
Exhibit C — Closing Conditions
Exhibit D — Form of Borrower’s Officer’s Certificate
Exhibit E — Loan and Security Agreement Supplement

Loan and Security Agreement

     This Loan and Security Agreement (the “Agreement” ), dated as of February 26, 2008, is made by and between Kansas City Southern de México, S.A. de C.V ., a corporation incorporated under the laws of Mexico (together with its permitted successors and assigns, “Borrower” ) and Export Development Canada , a corporation established by an Act of Parliament of Canada (together with its permitted successors and assigns, “Lender” ).

Recitals

      Whereas , the Borrower has requested that the Lender make the Loan to the Borrower in an aggregate principal amount not to exceed $72,750,000.00, and the Lender has indicated its willingness to make the Loan provided that the Loan is secured by a lien and security interest in favor of the Lender against certain locomotives of the Borrower as set forth herein.

      Now, Therefore , in consideration of the premises and agreements herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

Article I

Definitions

      Section 1.1. 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 hereof; and the rules of interpretation set forth in Appendix A hereto shall apply to this Agreement.

      Section 1.2. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

Article II

Closing Date

      Section 2.1. Closing. (a) Subject to the terms and conditions hereof, this Agreement shall be effective as of the date the conditions precedent set forth in Exhibit C hereto shall have been satisfied or waived (the “Closing Date” ).

     (b) All documents and instruments required to be delivered on the Closing Date and in connection with the Loan pursuant to this Agreement shall be delivered at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Suite 1700, Chicago, Illinois 60603 (other than the Notes and the Pledge Agreement, which shall be delivered at the offices of Ritch Mueller), or at such other location as the Lender and the Borrower may mutually agree.

Article III

Funding of Loan

      Section 3.1. Funding . (a) Loan . Prior to 11:00 A.M., New York City time, on the Closing Date, the Lender shall make a loan (the “Loan” ) to the Borrower by making available to the Borrower by wire transfer immediately available funds in an amount equal to the Requested Loan Amount as set forth in the Loan Request in accordance with the wiring instructions set forth therein; provided, that the terms and conditions for the Loan set forth herein have been satisfied by 11:00 A.M. New York time on the Closing Date. The aggregate amount of the Loan required to be made as above provided shall not exceed the product of the Financing Percentage and the aggregate Equipment Cost of the Equipment being financed on the Closing Date. The Loan funded hereunder is to reimburse the Borrower for payments made by the Borrower to the Manufacturer for the acquisition of the Equipment by the Borrower.

     (b)  Waiver; Business Day. The funding by the Lender of the Loan shall be deemed a waiver of the Loan Request. The Closing Date shall be a Business Day.

      Section 3.2. Notice and Closing. Not later than 1:00 P.M., New York City time, on the Business Day preceding the Closing Date, the Borrower shall deliver to the Lender a request (a “Loan Request” ) by facsimile or other form of electronic communication or telephone (to be promptly confirmed in writing) substantially in the form of Exhibit B hereto setting forth:

     (i) the Closing Date;

     (ii) the Requested Loan Amount; and

     (iii) the number and type of Units for which settlement of the purchase price will be made on the Closing Date and the Equipment Cost of such Units.

      Section 3.3. Administration Fee . Within 30 days after the date hereof, the Borrower shall pay to the Lender an administration fee in an amount equal to 0.2% of the Aggregate Commitment Amount.

Article IV

The Notes

      Section 4.1. Notes. The Loan shall be evidenced by non-negotiable Notes which qualify as pagarés under Mexican law, executed by the Borrower and issued to the Lender, substantially in the form of Exhibit A attached hereto. The Notes issued with respect to the Loan shall be issued in 30 series and shall be designated Series 1 Notes through and including Series 30 Notes (such Notes to be issued in the principal amounts and with the maturity dates specified in Schedule II to the Loan and Security Agreement Supplement dated the Closing Date). The Lender shall be entitled to receive a single Note, of each Series, on the Closing Date in an

aggregate principal amount equal to the amount of the Loan made by the Lender on the Closing Date.

     The principal amount of and interest on each Note issued pursuant to the provisions of this Agreement shall be payable as set forth in the form thereof contained in Exhibit A. Interest on the Notes shall accrue at the Debt Rate and shall be computed on the basis of a 360-day year of twelve 30-day months on the principal amount thereof remaining unpaid from time to time from and including the date thereof to but excluding the date of payment. Principal shall be paid in equal semi-annual installments.

     Each Note outstanding hereunder shall be identical except in respect of the Series, principal amount and maturity date thereof.

      Section 4.2. Method of Payment . (a) The principal of, and Make-Whole Amount, if any, and interest on each Note will be payable in U.S. dollars in immediately available funds to the Lender at Citibank N.A., New York, New York, USA, ABA No. 021000089, Account No. 36236357, SWIFT CITIUS33, Reference: 880-41109, for the account of Export Development Canada, without any presentment or surrender of any Note, except that the holder of a Note shall promptly surrender such Note to the Borrower upon payment in full of the principal amount of and interest on such Note and such other sums payable to such holder hereunder with respect to such Note.

     (b) Subject to Section 7.11, payments in respect of the Notes shall be reduced by any taxes, fees or other charges required by applicable law to be withheld at the source.

      Section 4.3. Application of Payments to Principal Amount and Interest . In the case of each Note, each payment of principal thereof and Make-Whole Amount, if any, and interest thereon shall be applied, first, to the payment of accrued but unpaid interest on such Note then due thereunder, second, to the payment of the unpaid principal amount of such Note then due thereunder and, third, to the payment of Make-Whole Amount, if any, then due thereon. Any prepayment of less than the entire outstanding principal amount of all Series of Notes pursuant to Section 4.8(b) shall be applied pro rata in accordance with the outstanding principal amounts thereof.

      Section 4.4. Termination of Interest . The Lender shall have no further interest in, or other right with respect to, any Equipment when and if the principal amount of and interest on all the Notes and all other sums payable to the Lender hereunder and under such Notes shall have been paid in full.

      Section 4.5. Transfer of Notes . The Borrower shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the “Note Register” ) and the Borrower will register or transfer or cause to be registered or transferred as hereinafter provided any Notes issued pursuant to this Agreement. A holder of a Note intending to transfer such Note to a new payee, or to exchange any Note or Notes held by it for a Note or Notes of a different denomination or denominations, may surrender such Note or Notes to the Borrower, together with a written request from such holder for the issuance of a new Note or

Notes, specifying the denomination or denominations (each of which shall be not less than $1,000.00 (or, if less, the outstanding principal amount of such Note) or such smaller denomination as may be necessary due to the original issuance of Notes of the applicable maturity in an aggregate principal amount not evenly divisible by $1,000.00), and, in the case of a surrender for registration of transfer, the name and address of the transferee or transferees. Promptly upon receipt of such documents, the Borrower will issue a new Note or Notes in the same aggregate principal amount, of the same Series, in the form set forth in Exhibit A, as the case may be, in the same maturity and bearing the same interest rate as the Note or Notes surrendered, in such denomination or denominations and payable to such payee or payees as shall be specified in the written request from such holder. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Borrower evidencing the same respective obligations, and entitled to the same security and benefits under this Agreement, as the Notes surrendered upon such registration of transfer or exchange.

     Prior to the due presentment for registration of transfer of a Note, the Borrower shall deem and treat the registered holder of such Note as the absolute owner and holder of such Note for the purpose of receiving payment of all amounts payable with respect to such Note and for all other purposes and shall not be affected by any notice to the contrary.

      Section 4.6. Loss, Theft, Etc. of Notes. If any Note shall become mutilated, destroyed, lost or stolen, the Borrower shall, upon the written request of the holder of such Note, issue in replacement thereof, a new Note in the form set forth in Exhibit A, payable to the same holder in the same principal amount, dated the same date, of the same Series, of the same maturity, bearing the same interest rate and dated the same date as the Note so mutilated, destroyed, lost or stolen. If the Note being replaced has become mutilated, such Note shall be surrendered to the Borrower. If the Note being replaced has been destroyed, lost or stolen, the holder of such Note shall furnish to the Borrower such security or indemnity as may be required by it to save the Borrower harmless and evidence satisfactory to the Borrower of the destruction, loss or theft of such Note and of the ownership thereof.

      Section 4.7. Payment of Transfer Taxes . Upon and as a condition to the transfer of any Note or Notes pursuant to Section 4.5, the Borrower may require from the party requesting such new Note or Notes payment of a sum to reimburse the Borrower for, or to provide funds for the payment of, any tax or other governmental charge in connection therewith.

      Section 4.8. Prepayments . (a) If any Unit or Units have suffered or been deemed to have suffered a Casualty Occurrence, the Notes shall be prepaid in whole or in part by the Borrower on the date which is the monthly anniversary of the Closing Date if such Unit or Units are not replaced pursuant to Section 7.3 hereof on the relevant date determined pursuant to Section 7.3 hereof, at a price equal to the sum of (i) as to principal thereof, an amount equal to the product obtained by multiplying the aggregate unpaid principal amount of the Notes as at the date of such prepayment (after deducting therefrom the principal installment, if any, due on the date of such prepayment) by a fraction, the numerator of which shall be the Equipment Cost of such Unit or Units of Equipment and the denominator of which shall be the aggregate Equipment Cost of all Units of Equipment subject to the Lien of this Agreement immediately prior to the date of such prepayment and (ii) as to interest, the aggregate amount of interest accrued and

unpaid in respect of the principal amount to be prepaid pursuant to clause (i) above to but not including the date of prepayment (after deducting therefrom any principal installment due on or prior to the date of such prepayment), but without the payment of any Make-Whole Amount.

     (b) All Notes issued at any time outstanding hereunder may be prepaid in whole or in part upon the request of the Borrower at any time on a date selected by the Borrower at a price equal to the unpaid principal amount thereof together with accrued but unpaid interest thereon, plus, an amount equal to the Make-Whole Amount, if any, applicable in respect of the principal amount of such Notes to be prepaid pursuant to this Section 4.8(b) on the date of such prepayment.

     (c) If at any time as a result of a Change in Tax Law (as defined below) the Borrower is or becomes obligated to make any increased payments pursuant to Section 7.11 hereof in respect of any payment of interest or other amounts on account of any of the Notes or this Agreement in excess of the amounts payable without regard to such Change in Tax Law, the Borrower may give the Lender irrevocable written notice (a “Tax Prepayment Notice” ) of the prepayment of the Notes on a specified prepayment date (which shall be a Business Day not less than 30 days nor more than 60 days after the date of such notice) and the circumstances giving rise to the obligation of the Borrower to make any increased payments and the amount thereof and stating that all of the Notes shall be prepaid on the date of such prepayment at 100% of the principal amount so prepaid together with interest accrued thereon to the date of such prepayment (but without the payment of any Make-Whole Amount), unless the Lender gives Borrower written notice no more than 20 days after receipt of the Tax Prepayment Notice (or, if earlier, the tenth day prior to the date for the payment giving rise to such increased payments), that it seeks to reject such prepayment (a “Tax Prepayment Rejection Notice” ). The form of Tax Prepayment Rejection Notice shall also accompany the Tax Prepayment Notice and shall state that execution and delivery thereof by the Lender shall operate as a permanent waiver of its right to receive the increased payments arising as a result of the circumstances described in the Tax Prepayment Notice in respect of all future payments of interest or other amounts (but not of the Lender’s right to receive any increased payments that arise out of circumstances not described in the Tax Prepayment Notice or which exceed the amount of the increased payment described in the Tax Prepayment Notice), which waiver shall be binding upon all subsequent transferees of any Note. The Tax Prepayment Notice having been given, the principal amount of the Notes together with interest accrued thereon to the date of such prepayment (but without the payment of any Make-Whole Amount) shall become due and payable on such prepayment date, unless the Lender shall timely give a Tax Prepayment Rejection Notice.

     No prepayment pursuant to this Section 4.8(c) shall affect the obligation of the Borrower to pay increased payments in respect of any payment made on or prior to the date of such prepayment.

     The Borrower may not offer to prepay, or prepay, Notes pursuant to this Section 4.8(c) (i) if an Event of Default then exists, (ii) until the Borrower shall have taken commercially reasonable steps to mitigate the requirement to make the related increased payments or (iii) if the obligation to make such increased payments directly results or resulted from actions taken by the Borrower (other than actions required to be taken under applicable law), and any Tax

Prepayment Notice given pursuant to this Section 4.8(c) shall certify to the foregoing and describe such mitigation steps, if any.

     For purposes of this Section 4.8(c): “Change in Tax Law” means (individually or collectively with one or more prior changes) (i) an amendment to, or change in, any law, treaty, rule or regulation of Mexico after the date of the Closing Date, or an amendment to, or change in, an official interpretation or application of such law, treaty, rule or regulation after the date of the Closing Date, which amendment or change is in force and continuing and meets the opinion and certification requirements described below or (ii) in the case of any other jurisdiction that becomes a Taxing Jurisdiction after the date of the Closing Date, an amendment to, or change in, any law, treaty, rule or regulation of such jurisdiction, or an amendment to, or change in, an official interpretation or application of such law, treaty, rule or regulation, in any case after such jurisdiction shall have become a Taxing Jurisdiction, which amendment or change is in force and continuing and meets such opinion and certification requirements. No such amendment or change shall constitute a Change in Tax Law unless the same would in the opinion of the Borrower (which shall be evidenced by an Officer’s Certificate of the Borrower and supported by a written opinion of counsel having recognized expertise in the field of taxation in the Taxing Jurisdiction, both of which shall be delivered to the Lender prior to or concurrently with the Tax Prepayment Notice in respect of such Change in Tax Law) affect the deduction or require the withholding of any Tax imposed by such Taxing Jurisdiction on any payment payable on the Notes.

     (d) If the Borrower shall desire to prepay Notes pursuant to Section 4.8(b) above, it shall deliver a Request to the Lender giving notice of the exercise of such right of prepayment and specifying the aggregate principal amount of Notes to be prepaid, the date fixed for prepayment (which date shall be at least 45 days after the delivery of such Request or such shorter period of time as shall be satisfactory to the Lender) and shall state that payment of such amount, together with accrued interest thereon and Make-Whole Amount, if any, will be made on the date of such prepayment and that on and after such date interest on the principal amount of the Notes to be prepaid will cease to accrue.

      Section 4.9. Equally and Ratably Secured . All Notes at any time outstanding under this Agreement shall be equally and ratably secured hereby without preference, priority or distinction on account of the date or dates or the actual time or times of the issue or maturity of such Notes so that all Notes at any time issued and outstanding hereunder shall have the same rights, Liens and preferences under and by virtue of this Agreement.

Article V

Grant of Security

     In consideration of the premises described herein, the indebtedness described in the Notes, and as security for the prompt and complete payment of the principal of, interest on and Make-Whole Amount, if any, with respect to the Notes, and all other amounts due with respect to the Notes from time to time outstanding hereunder and all other amounts due hereunder and the performance and observance by the Borrower of all the agreements, covenants and

provisions herein and in the Notes all for the benefit of the holders of the Notes, and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Notes by the Lender, the Borrower does hereby grant to Lender, its successors and assigns, for the security and benefit of the holders of the Notes from time to time, a continuing security interest, in and to all of the Borrower’s right, title and interest to the following described property, rights, interests and privileges, whether now owned or hereafter acquired, wherever located and whether now existing or hereafter arising from time to time (collectively, the “Collateral” ):

     (a) the Equipment and all replacements of any Units thereof and substitutions therefor in which Borrower shall from time to time acquire an interest, all as more particularly described in the Loan and Security Agreement Supplement executed and delivered on the Closing Date or any such replacements thereof or substitutions therefor, as provided in this Agreement;

     (b) subject to Sections 7.3(b) and 7.5(c), all requisition proceeds with respect to the Equipment or any Unit thereof (to the extent of Borrower’s interest therein);

     (c) all warranties or representations made or given to the Borrower, expressly or impliedly, by the Manufacturer under the purchase agreements to which it is a party relating to the Equipment and all claims for damages in respect of such Equipment arising as a result of any default by the Manufacturer under any purchase agreement; and

     (d) all proceeds, rents, issues, profits, products, revenues and other income from or on account of the property, rights and privileges subjected or required to be subjected to the lien of this Agreement.

     For so long as this Agreement is in effect, the Borrower agrees that at any time and from time to time, upon the written request of the Lender, the Borrower will promptly and duly execute and deliver or cause to be executed and delivered any and all such further instruments and documents as the Lender may deem desirable in obtaining the full benefits of this assignment and of the rights and powers herein granted.

Article VI

Closing Conditions

     The obligation of the Lender to make the Loan hereunder shall be subject to the satisfaction or waiver of the conditions precedent set forth in Exhibit C attached hereto on or before the Closing Date (except as otherwise indicated).

Article VII

Covenants of the Borrower

      Section 7.1. Payment of the Notes . The Borrower shall promptly pay the principal and interest on the Notes when due and punctually perform and observe all of the covenants, agreements and provisions contained herein, in the Notes and in any other instrument given as security for the Notes.

      Section 7.2. Marking of Equipment . The Borrower agrees that at or before the Closing Date, the Borrower shall affix and maintain on each Unit the reporting mark, if any, and identification number listed in the Loan and Security Agreement Supplement for such Unit and such other markings as from time to time may be required by law or to protect the interest of the Lender in such Units. In case any of such marks shall at any time be removed, defaced or destroyed before the termination of the Lien provided for herein, the Borrower shall promptly cause the same to be restored or replaced. The Borrower shall not change, or permit to be changed, the reporting mark of any of the Equipment at any time covered hereby (or any reporting mark which may have been substituted as herein provided) except in accordance with a statement of new reporting marks to be substituted therefor which shall be filed and recorded as provided in Section 7.13 hereof.

     The Equipment may be lettered with the name, initials or insignia of the Borrower, or of any Affiliate or any lessee of the Borrower which is permitted to use the Equipment as herein provided, or may be lettered in some other appropriate manner, for convenience of identification of the interest of the Borrower, or such Affiliate or lessee therein. Except as aforesaid, during the term of this Agreement, the Borrower shall not allow the name of any Person to be placed on any of the Equipment as a designation if the right, title and interest of the Lender therein would thereby be impaired or invalidated. The Lender shall, upon the Request of the Borrower, consent to the placing of the name of any specified Person upon any Unit as a designation if there shall have been delivered to the Lender an Opinion of Counsel to the effect that such designation will not impair or invalidate the right, title and interest of the Lender in or to such Unit.

      Section 7.3. Maintenance of Equipment; Casualty Occurrences; Eminent Domain .

     (a)  Maintenance of Equipment. The Borrower, 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 U.S. 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 the Borrower in respect of equipment owned or leased by the Borrower 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 and any applicable AAR Mechanical Standards and Federal Railroad Administration regulations as applicable to continued use by the Borrower; provided, however, that the Borrower 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 the Lender in the Equipment or hereunder or otherwise expose the Lender to criminal sanctions or any material civil liability.

     (b)  Casualty Occurrences. Whenever any Unit shall suffer a Casualty Occurrence, the Borrower shall within 60 days after a responsible officer of the Borrower shall have actual knowledge of such occurrence give the Lender notice of such occurrence (such notice to include the amount, description, reporting marks and road numbers of all the Units of Equipment that have suffered a Casualty Occurrence) and of its election to perform one of the following options (it being agreed that if the Borrower shall not have given notice of such election within such 60 days after such actual knowledge of such occurrence, the Borrower shall be deemed to have elected to perform the option set forth in the following clause (1)) (1) on or before a Payment Date selected by the Borrower that is within 90 days after a responsible officer of the Borrower shall have actual knowledge of the Casualty Occurrence, the Borrower shall transfer to the Lender immediately available funds in an amount equal to the amount required to prepay that portion of the Notes that are to be prepaid on account of such Casualty Occurrence on such Payment Date pursuant to Section 4.8(a) hereof or (2) so long as no 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 the Borrower shall have actual knowledge of the Casualty Occurrence, the Borrower shall grant to the Lender a Lien on a replacement Unit of similar type and capable of performing comparable function as the replaced Unit (a “Replacement Unit” ) with a current fair market value, utility and remaining useful life at least equal to such replaced Unit, assuming such replaced Unit was in the condition and repair required by the terms hereof immediately prior to such Casualty Occurrence; provided that, if the Borrower shall not perform its obligation to effect such replacement under this clause (2) during the period of time provided herein, then the Borrower shall pay on a Payment Date selected by the Borrower that is within 180 days after a responsible officer of the Borrower shall have actual knowledge of the occurrence of a Casualty Occurrence to the Lender the amounts specified in clause (1) above. Prior to or at the time of any such conveyance and as a condition to such replacement, the Borrower will, at its own expense:

     (i) duly execute a Loan and Security Agreement Supplement which shall subject such Replacement Unit to this Agreement and cause such Loan and Security Agreement Supplement to be delivered to the Lender for execution and, upon such execution, cause such supplement or appropriate evidence thereof to be filed, recorded or deposited in every public office where the supplement (or appropriate evidence thereof) covering the replaced Unit shall have been filed, recorded or deposited;

     (ii) duly execute a Pledge Agreement Supplement which shall subject such Replacement Unit to the Pledge Agreement and cause such Pledge Agreement Supplement to be delivered to the Lender for execution and, upon such execution, cause such supplement or appropriate evidence thereof to be filed, recorded or deposited in every public office where the supplement (or appropriate evidence thereof) covering the replaced Unit shall have been filed, recorded or deposited and the Borrower shall deliver

to the Lender evidence of the presentment for registration of the filing and evidence of the recordation of such Pledge Agreement Supplement in such public office(s) promptly following the Borrower’s receipt of the same;

     (iii) furnish to the Lender an Officer’s Certificate certifying that the Replacement Unit is free and clear of all Liens other than Permitted Liens;

     (iv) furnish to the Lender an Opinion or Opinions of Counsel to the effect that all filings, recordings and other action necessary to perfect the Lender’s interests in the United States of America and Canada in the Replacement Unit have been accomplished;

     (v) furnish to the Lender a certificate of a qualified engineer (who may be the chief mechanical officer employed by the Borrower) certifying that the Replacement Unit has a fair market value, utility and remaining useful life at least equal to the Unit replaced thereby (assuming that such replaced Unit was maintained in the condition required by the terms of this Agreement); and

     (vi) pay all of the Lender’s reasonable costs and expenses (including reasonable attorney’s fees (including, without limitation, reasonable attorney’s fees of U.S. and Mexican counsel)) incurred in connection with such replacement or substitution.

     Upon the compliance by the Borrower with the terms of this Section 7.3(b), the Lender shall, upon the written request of the Borrower, execute and deliver to, or as directed in writing by, the Borrower an appropriate instrument (in due form for recording) furnished by the Borrower releasing the replaced Unit or Units of Equipment from the Lien of this Agreement. Notwithstanding anything to the contrary contained herein, the Borrower or its designee shall be entitled to any amounts arising from the disposition of any Unit suffering a Casualty Occurrence, plus any awards, insurance (other than insurance maintained by the Lender for its own account in accordance with Section 7.5(d)) or other proceeds and damages (including any Association of American Railroads interline settlement paid upon a Casualty Occurrence) received by the Borrower or the Lender by reason of such Casualty Occurrence. For all purposes hereof, each Replacement Unit shall, after such conveyance, be deemed Collateral hereunder with the same Cost as the Unit it replaced.

     In the event of the substitution of a Replacement Unit, all provisions of this Agreement relating to the Unit or Units being replaced shall be applicable to such Replacement Unit with the same force and effect as if such Replacement Unit was the same Unit being replaced.

      Section 7.4. Possession of Equipment; Assignments . (a) The Borrower 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 the Borrower’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 the Borrower or any such Affiliate has trackage or other operating rights or over which railroad equipment of the Borrower or any such Affiliate is regularly operated pursuant to contract and on railroad lines of other railroads in Mexico, the United States and Canada, in the usual interchange of traffic or in through or run-through service and shall be entitled to permit the use

of the Equipment upon lines of railroad of connecting and other carriers in the usual interchange of traffic or pursuant to through or run-through agreements; provided the Borrower 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 and the Federal Railroad Administration and their successors and assigns. Nothing in this Section 7.4(a) shall be deemed to constitute permission by the Lender to any Person that acquires possession of any Unit to take any action inconsistent with the terms and provisions of this Agreement. The rights of any person that acquires possession of any Unit pursuant to this Section 7.4(a) shall be subject and subordinate to the rights of the Lender hereunder.

     (b) Except as otherwise provided in this Section 7.4(b) or in the case of any requisition for use by an agency or instrumentality of the Mexican government, the Borrower will not, without the prior written consent of the Lender, assign any of its rights hereunder; provided, however, that the Borrower, so long as no Event of Default shall have occurred and be continuing under this Agreement, shall have the right, without the prior written consent of the Lender, to lease any Unit to or permit its use by a user organized under the federal laws or the laws of any state of Mexico, organized under the federal laws or the laws of any state of the United States or organized under the federal laws or the laws of any province of Canada, for use by such lessee or user upon lines of railroad owned or operated by the Borrower, any Affiliate of the Borrower, such lessee or user or by a railroad company or companies organized under the federal laws or the laws of any state of Mexico, organized under the federal laws or the laws of any state of the United States or organized under the federal laws or the laws of any province of Canada, over which the Borrower, such Affiliate of the Borrower, such lessee 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 lessee shall not, at the time of such lease, be insolvent or subject to insolvency or bankruptcy proceedings. Each lease shall be expressly subject and subordinate to this Agreement. Prior to entering into a lease for a period in excess of one year, Borrower shall have received written consent from the Lender. No lease shall in any way discharge or diminish any of the Borrower’s obligations hereunder, and the Borrower shall remain primarily liable hereunder for the performance of all the terms, conditions and provisions of this Agreement to the same extent as if such lease had not been entered into. Nothing in this Section 7.4(b) shall be deemed to constitute permission to any Person in possession of any Unit pursuant to any such lease to take any action inconsistent with the terms and provisions of this Agreement.

     Notwithstanding anything to the contrary contained herein, any conveyance, transfer or lease, directly or indirectly, of all or substantially all of the assets of the Borrower in accordance with Section 7.8 shall not be deemed a breach of this covenant.

     (c) Notwithstanding anything to the contrary contained herein (but subject to Section 9.17 hereof), the Lender shall not assign, transfer or convey any Notes or any of its interest under this Agreement or the Pledge Agreement or any other document executed in connection therewith unless such assignment, transfer or conveyance shall be of all, but not less than all, of the Notes outstanding under this Agreement and all of its rights and interest under

this Agreement, the Pledge Agreement and any other documents executed in connection therewith, it being understood that no assignment, transfer or conveyance of the Notes by the Lender may occur separately from any assignment, transfer or conveyance by the Lender of all of its rights and interest under this Agreement, the Pledge Agreement and any other documents executed in connection therewith. The Borrower agrees to reasonably cooperate with any such transfer, assignment or conveyance, including, without limitation, execution and delivery of replacement Notes and a replacement Pledge Agreement. The Lender agrees to pay Borrower’s reasonable costs in connection with an assignment under this Section 7.4(c).

      Section 7.5. Insurance .

     (a)  Coverages . The Borrower will, at its own expense, cause to be carried and maintained (i) all risk property insurance in respect of the Units of Equipment and (ii) public liability insurance against loss or damage for personal injury, death or property damage suffered upon, in or about any premises occupied by the Borrower or occurring as a result of the use, maintenance or operation of the Units of Equipment in such amounts and against such risks, with such insurance companies and with such terms (including co-insurance, deductibles, limits of liability and loss payment provisions) as are customary under the Borrower’s risk management program and in keeping with risks assumed by U.S. Class I railroads generally, provided, however, that the Borrower may self-insure with respect to any or all of the above if customary under such risk management program and in keeping with risks assumed by U.S. 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 the Borrower’s risk management program and in keeping with risks assumed by U.S. Class I Railroads generally. Notwithstanding the foregoing, all insurance coverages (including, without limitation, self-insurance) with respect to the Equipment required under this Agreement shall be comparable to, and no less favorable than, insurance coverages applicable to equipment owned or leased by the Borrower which is comparable to the Equipment. The Borrower 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 Agreement shall not be available to the Borrower at renewal on a commercially reasonable basis on substantially the same terms and conditions as then carried by the Borrower and the obtaining of such insurance is, in the Borrower’s reasonable judgment, commercially impracticable (taking into account both terms and premiums), the Borrower shall obtain a written report of an independent insurance advisor of recognized national standing, chosen by the Borrower and reasonably acceptable to the Lender 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, the Borrower shall nevertheless maintain such insurance to the extent, with respect to amount and scope of coverage, that it 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, in the Borrower’s reasonable judgment, on a commercially reasonable basis, the Borrower shall reinstate such insurance.

     (b)  Certificate of Insurance . The Borrower shall, on or prior to the Closing Date, furnish the Lender with a certificate signed by the insurer or an independent insurance broker showing the insurance then maintained, if any, with respect to the Units of Equipment financed on the Closing Date. The Lender may, but not more than once in any twelve-month period, request from the Borrower and the Borrower shall promptly thereafter furnish to the Lender, an Officer’s Certificate or, at the Borrower’s option, such a certificate signed by an independent insurance broker, setting forth all insurance maintained by the Borrower pursuant to Section 7.5(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 shall name the Lender as an additional insured with respect to such public liability insurance then maintained as its interest may appear and such all risk property insurance shall name the Lender as loss payee. The Borrower agrees that such insurer or such broker will provide written notice to the Lender at least 30 days prior to the cancellation or lapse of any insurance required to be maintained by the Borrower in accordance with Section 7.5(a) above. Any insurance maintained pursuant to this Section 7.5 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 the Lender shall not be invalidated by any action or inaction of the Borrower 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 the Borrower 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 the Lender and shall expressly provide a severability of interest clause. Any insurance maintained by the Lender shall not be considered co-insurance with any insurance maintained by the Borrower.

     (c)  Proceeds of Insurance. The entire proceeds of any property or casualty insurance or third-party payments for damages or a Casualty Occurrence with respect to any Unit (including any Association of American Railroads interline settlements) received by the Lender shall be promptly paid over to, and retained by, the Borrower; provided, however, any such amount which is payable to the Borrower shall not be paid to the Borrower, or if it has been previously paid directly to the Borrower shall not be retained by the Borrower, if at the time of such payment an Event of Default shall have occurred and be continuing, but shall be paid to and held by the Lender as security for the obligations of the Borrower under this Agreement.

     (d)  Additional Insurance. At any time the Lender may but shall not be required to at its own expense carry insurance with respect to its interest in the Equipment, provided that such insurance does not interfere with the Borrower’s ability to insure the Equipment as required by this Section 7.5 or adversely affect the Borrower’s insurance or the cost thereof, it being understood that all salvage rights to each Unit and all primary subrogation rights shall remain with the Borrower’s insurers at all times. Any insurance payments received from policies

maintained by the Lender pursuant to the previous sentence shall be retained by the Lender without reducing or otherwise affecting the Borrower’s obligations hereunder.

      Section 7.6. Borrower’s Indemnities .

     (a)  Claims Defined . For the purposes of this Section 7.6, “Claims” shall mean any and all costs, expenses, liabilities, obligations, losses, damages, penalties, actions or suits or claims of whatsoever kind or nature (whether or not on the basis of negligence, strict or absolute liability or liability in tort) which may be imposed on, or asserted against, an Indemnified Person, as defined herein, or any Unit and, except as otherwise expressly provided in this Section 7.6, shall include, but not be limited to, all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith or related thereto.

     (b)  Indemnified Person Defined . For the purposes of this Section 7.6, “Indemnified Person” means the Lender and its directors, officers, employees, successors and permitted assigns, agents and servants (the directors, officers, employees, successors and permitted assigns, agents and servants of the Lender together with the Lender being referred to herein collectively as the “Related Indemnitee Group” of the Lender), provided that as a condition of any obligations of the Borrower to pay any indemnity or perform any action under this Section 7.6 with respect to any persons who are not signatories hereto, such persons at the written request of the Borrower shall expressly agree in writing to be bound by all the terms of this Section 7.6. In the event that any Indemnified Person fails, after notice to such Indemnified Person referring to this sentence, to comply with any duty or obligation under Section 7.6(e) and (f), such Indemnified Person shall not be entitled to indemnity under this Section 7.6 to the extent such failure to comply has a material adverse effect on the Borrower’s ability to defend any such Claim.

     (c)  Claims Indemnified . Whether or not the Funding occurs with respect to any Equipment, and subject to the exclusions stated in subsection (d) below, the Borrower agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims resulting from or arising out of or related to (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person):

     (i) this Agreement or any other document or any of the transactions contemplated hereby and thereby or resulting herefrom or therefrom and the enforcement thereof and hereof;

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

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

     (iv) any breach of or failure to perform or observe, or any other non-compliance with, any covenant, condition or agreement to be performed by, or other obligation of, the Borrower under this Agreement, or the falsity when made of any representation or warranty of the Borrower in this Agreement or in any document or certificate delivered in connection therewith; and

     (v) the offer, sale and delivery by the Borrower of the Notes.

     (d)  Claims Excluded . The following are excluded from the agreement to indemnify under this Section 7.6:

     (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (A) in the case of the occurrence of a Casualty Occurrence with respect to such Unit under Section 7.3 hereof, the last to occur of (x) if an Event of Default exists, the elimination of such Event of Default and the payment of all amounts due under this Agreement, (y) the payment of all amounts due from the Borrower in connection with any such event and (z) the release of the Lien on such Unit in accordance with the terms herein or (B) in all other cases, with respect to such Unit, the earlier to occur of (y) if an Event of Default exists, the elimination of such Event of Default and the payment of all amounts due under this Agreement and (z) the release of the Lien on such Unit in accordance with the terms herein;

     (ii) with respect to any particular Indemnified Person, Claims which are Taxes except Taxes described in Section 7.11. Except as expressly provided in this Agreement (including the foregoing sentence), the Borrower’s entire obligation with respect to Taxes and losses of tax benefits being fully set out in Section 7.11;

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

     (iv) with respect to any particular Indemnified Person, Claims to the extent attributable to any transfer (other than pursuant to Section 7.3 or Article VIII hereof) by such Indemnified Person of any interest in the Units of Equipment or this Agreement;

     (v) with respect to any particular Indemnified Person, any Claim to the extent attributable to the offer, sale or disposition (voluntary or involuntary) by or on behalf of such Indemnified Person of the Notes, any interest in this Agreement, or any similar

security, other than a transfer by such Indemnified Person of its interests in any Unit pursuant to Section 7.3 hereof or otherwise attributable to or following an Event of Default that has occurred and is continuing;

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

     (vii) any Claim which relates to a cost, fee or expense payable by a Person other than the Borrower or the Borrower pursuant to this Agreement;

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

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

     (x) with respect to any particular Indemnified Person, any Claim, to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 7.7 hereof.

     (e)  Insured Claims . In the case of any Claim indemnified by the Borrower hereunder which is covered by a policy of insurance maintained by the Borrower pursuant to Section 7.5 of this Agreement or otherwise, each Indemnified Person agrees to provide reasonable cooperation at the expense of the Borrower to the insurers in the exercise of their rights to investigate, defend or compromise such Claim as may be required to retain the benefits of such insurance with respect to such Claim.

     (f)  Claims Procedure . An Indemnified Person shall, upon becoming aware of any Claim for which indemnification is sought, promptly notify the Borrower of such Claim; provided, however, that, notwithstanding the last sentence of Section 7.6(b), the failure to give such notice shall not release the Borrower from any of its obligations under this Section 7.6, except to the extent that such failure to give notice shall have a material adverse effect on the Borrower’s ability to defend such claim or recover proceeds under any insurance policies maintained by the Borrower. Subject to the rights of insurers under policies of insurance maintained by the Borrower, the Borrower shall have the right in each case at the Borrower’s sole expense to investigate, and the right in its sole discretion to defend or compromise, any Claim for which indemnification is sought under this Section 7.6 and the Indemnified Person shall cooperate with all reasonable requests of the Borrower in connection therewith; provided that no right to defend or compromise such Claim shall exist on the part of the Borrower with respect to any Indemnified Person if (1) an Event of Default shall have occurred and be

continuing or (2) such Claim would entail a significant risk to the Lender of any criminal liability; provided, further, that no right to compromise or settle such Claim shall exist unless the Borrower agrees in writing to pay the amount of such settlement or compromise. In any case in which any action, suit or proceeding is brought against any Indemnified Person in connection with any Claim, the Borrower may, and upon such Indemnified Person’s request will, at the Borrower’s expense resist and defend such action, suit or proceeding, or cause the same to be resisted or defended by counsel selected by the Borrower and reasonably acceptable to such Indemnified Person and, in the event of any failure by the Borrower to do so, the Borrower shall pay all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by such Indemnified Person in connection with such action, suit or proceeding. Where the Borrower or the insurers under a policy of insurance maintained by the Borrower undertake the defense of an Indemnified Person with respect to a Claim, no additional legal fees or expenses of such Indemnified Person in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the request of the Borrower or such insurers; provided, however, that if in the written opinion of counsel to such Indemnified Person an actual or potential material conflict exists where it is advisable for such Indemnified Person to be represented by separate counsel, the reasonable fees and expenses of any such separate counsel shall be paid by the Borrower. Subject to the requirements of any policy of insurance, an Indemnified Person may participate at its own expense in any judicial proceeding controlled by the Borrower pursuant to the preceding provisions; provided that such party’s participation does not, in the opinion of the independent counsel appointed by the Borrower or its insurers to conduct such proceedings, interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 7.6(f). Nothing contained in this Section 7.6(f) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto.

     (g)  Subrogation . If a Claim indemnified by the Borrower under this Section 7.6 is paid by the Borrower and/or an insurer under a policy of insurance maintained by the Borrower, the Borrower and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. So long as no Event of Default shall have occurred and be continuing, should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by the Borrower hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount the Borrower or any of its insurers has paid in respect of such Claim paid or payable by such Indemnified Person on account of such refund) to the Borrower.

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

     (i)  Conflicting Provisions . The general indemnification provisions of this Section 7.6 are not intended to waive or supersede any specific provisions of, or any rights or remedies of the Borrower under, this Agreement to the extent such provisions apply to any Claim.

      Section 7.7. The Lender’s Inspection Rights . The Lender shall have the right, but not the obligation, at its sole cost and expense (unless, in the case of any such expense, an Event of Default shall have occurred and be continuing) and risk (including, without limitation, the risk of personal injury or death), by its authorized representatives, to the extent within the Borrower’s control: on not more than one occasion in any 12-month period (unless an Event of Default shall have occurred and be continuing) or during the last 12 months prior to the final maturity of the Notes, to inspect the Equipment and the Borrower’s records with respect thereto, during the Borrower’s normal business hours and upon reasonable prior notice to the Borrower; provided, however, that the Borrower shall not be liable for any injury to, or the death of, any Person exercising, either on behalf of the Lender or any prospective user, the rights of inspection granted under this Section 7.7 except as may result or arise from the Borrower’s gross negligence or willful misconduct. No inspection pursuant to this Section 7.7 shall interfere with the use, operation or maintenance of the Equipment or the normal conduct of the Borrower’s business, and the Borrower shall not be required to undertake or incur any additional liabilities in connection therewith.

      Section 7.8. Merger Covenant . The Borrower shall not consolidate with or merge into any other Person or convey, transfer or lease substantially all of its assets as an entirety to any Person unless (i) the Person formed by such consolidation or into which the Borrower is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Borrower as an entirety shall execute and deliver to the Lender an agreement containing the assumption by such successor corporation of the due and punctual performance and observance of each covenant and condition of this Agreement to be performed or observed by the Borrower, (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred solely as a result of such consolidation or merger or such conveyance, transfer or lease and (iii) such transaction does not result in a Material Adverse Effect. Upon such consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Borrower as an entirety in accordance with this Section 7.8, the successor corporation formed by such consolidation or into which the Borrower is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Borrower under this Agreement with the same effect as if such successor corporation had been named as the Borrower herein. If the Borrower shall have consolidated with or merged into any other Person or conveyed, transferred or leased substantially all of its assets, such assets to include the Equipment and the Borrower’s interest in this Agreement, the Person owning such interest after such event shall deliver to the Lender an opinion of counsel (which counsel may be such Person’s in-house counsel) confirming that the assumption agreement pursuant to which such Person assumed the obligations of the Borrower shall have been duly authorized, executed and delivered by such Person and that such agreement is the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms.

      Section 7.9. Financial Statements . The Borrower shall furnish the following to the Lender:

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

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

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

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

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

      Section 7.10. Increased Costs . (a) In the event of (x) a Regulatory Change or (y) a judgment being rendered after the Closing Date which subjects or imposes any increase in the actual cost to the Lender of agreeing to make or making, funding or maintaining the Loan evidenced by the Notes, then, within twenty (20) days after delivery to the Borrower of an Officer’s Certificate of the Lender setting forth in reasonable detail the event giving rise to such increase in cost and the basis for the determination of the amount of such increase in cost, the Borrower shall pay to the Lender such amount as shall be necessary to reimburse the Lender for such increase in respect of any period which is no more than ninety (90) days prior to such demand; provided, however, that the Lender shall not be entitled to assert any claim under this Section 7.10(a) in respect of Taxes. Such Officer’s Certificate shall, in the absence of manifest error, be binding and conclusive on the Borrower. The Lender shall notify the Borrower as soon as possible of the occurrence of the event by reason of which it is entitled to make a claim as described in this Section 7.10(a), but the failure to give such notice shall not affect the obligations of the Borrower hereunder. In determining the amount of compensation payable by the Borrower under this Section 7.10(a), the Lender shall use reasonable efforts to minimize the compensation payable by the Borrower including using reasonable efforts to obtain refunds or credit and any compensation paid by the Borrower, which is later determined not to have been properly payable, shall forthwith be reimbursed by such holder to the Borrower.

     (b) For purposes of Section 7.10(a), “Regulatory Change” means with respect to the Lender (i) any change after the Closing Date in the laws or regulations of Mexico or any State thereof, the United States or any State thereof, France, Germany, The Netherlands, Switzerland, United Kingdom or Canada or the adoption or making after such date of any interpretation, directive or request applying to a class of banks including the Lender, as the case may be, of or under any law or regulation (whether or not having the force of law) of Mexico or any State thereof or Canada by any court or governmental or monetary authority charged with the interpretation or administration thereof and in addition, (ii) any change after the Closing Date in any regulation, guideline or requirement or in the interpretation or administration thereof (whether or not having the force of law) issued by any governmental or monetary authority applying to a class of banks including the Lender, as the case may be, or the bank holding company of Lender, as the case may be (including any change after the Closing Date in the regulations, guidelines or requirements or interpretations or administration of any of the foregoing implementing the proposals for a risk-based capital framework described by the Basle Committee on Banking Regulations and Supervisory Practices in its paper entitled “International Convergence of Capital Measurement and Capital Standards” (commonly known as Basel II) dated June 2004, as modified and supplemented from time to time).

     (c) The Lender shall, if seeking com