PACER INTERNATIONAL INC/TN
RAIL CAR LEASE AGREEMENT DATED JANUARY 2001
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>6
<FILENAME>dex1040.txt
<DESCRIPTION>RAIL CAR LEASE AGREEMENT DATED JANUARY 2001
<TEXT>
<PAGE>

                                                                   Exhibit 10.40

LASALLE NATIONAL LEASING CORPORATION

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                                                         RAILCAR LEASE AGREEMENT

     THIS RAILCAR LEASE AGREEMENT (the "Lease") is made as of the      day of
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January, 2001, by and between LASALLE NATIONAL LEASING CORPORATION, its
successors and assigns ("Lessor"), and PACER INTERNATIONAL, INC., its successors
and permitted assigns ("Lessee").

     The parties agree that Lessee shall lease from Lessor the railcars
(collectively the "Cars") described in the Schedules to be executed pursuant
hereto (collectively, the "Schedule"), subject to the terms set forth herein, in
the Riders attached hereto and in the Schedule. Each Schedule incorporates by
reference the terms and conditions of this Lease and constitutes a separate
instrument of lease. Certain definitions and construction of certain of the
terms used herein are provided in Section 23 hereof.

     1. TERM. The term of lease with respect to each Car shall consist of the
term set forth in the Schedule relating thereto; provided, however, that this
Lease shall be effective from and after the date of execution hereof.

     2. RENT. Lessee shall pay Lessor rent for the use of the Cars in the
aggregate amounts specified in the Schedule, and all other amounts payable
pursuant to this Lease, without prior notice or demand. Each Schedule
constitutes a non-cancellable net lease, and Lessee's obligation to pay rent,
and otherwise to perform its obligations under this Lease, each Schedule and all
of the other documents and agreements entered into in connection herewith (the
"Lease Documents"), are and shall be absolute and unconditional and shall not be
affected by any right of setoff, counterclaim, recoupment, deduction, defense or
other right which Lessee now has or hereafter may have against Lessor, the
manufacturer or vendor of the Cars, or anyone else, for any reason whatsoever.
Rent is payable as and when specified in the Schedule by mailing the same to
Lessor at its address specified pursuant to this Lease; and shall be effective
upon receipt. Time is of the essence. If any rent is not paid on the due date,
Lessor may collect, and Lessee agrees to pay, a charge (the "Late Charge")
calculated as the product of the late charge rate specified in the Schedule (the
"Late Charge Rate") and the amount in arrears for the period such amount remains
unpaid. Lessor expressly acknowledges and agrees that nothing contained in this
Section 2 shall constitute a waiver by the Lessee of any of its rights under
this Lease, the Schedule or any of the other Lease Documents or of its right to
assert and sue upon any claims it may have against Lessor or any other person in
one or more separate actions so long as such claims or actions in no way
diminish or discharge Lessee's obligation to pay rent, and otherwise to perform
its obligations under the Lease Documents without any right of setoff,
counterclaim, recoupment, deduction, or defense.

     3. REPRESENTATIONS AND WARRANTIES. (a) Representations and Warranties of
Lessee. Lessee represents and warrants that: (i) Lessee is a corporation duly
organized and validly existing in good standing under the laws of the State of
Tennessee. (ii) The execution, delivery and performance of this Lease, the
Schedule and all related instruments and documents: (A) have been duly
authorized by all necessary corporate action on the part of Lessee; (B) do not
require the approval of any stockholder, trustee or holder of any obligations of
Lessee except such as have been duly obtained; and (C) do not and will not
contravene any law, governmental rule, regulation or order now binding on
Lessee, or the charter or by-laws of Lessee, or contravene the provisions of, or
constitute a default under, or result in the creation of any lien or encumbrance
upon the property of Lessee under, any indenture, mortgage, contract or other
agreement to which Lessee is a party or by which it or its property is bound.
(iii) This Lease, the Schedule and all related instruments and documents, when
entered into, will constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws affecting the rights of creditors generally, and except as such
enforceability may be subject to the application of equitable principles, legal
or equitable. (iv) There are no actions, suits or proceedings pending to which
Lessee is a party, and there are no other actions, suits or proceedings
threatened of which Lessee has knowledge, before any court, arbitrator or
administrative agency, which, either individually or in the aggregate have a
Material Adverse Effect. As used herein, "Material Adverse Effect" shall mean
(1) a materially adverse effect on the business, condition (financial or
otherwise), operations, performance or properties of Lessee, or (2) a material
impairment of the ability of Lessee to perform its obligations under or to
remain in compliance with the Lease Documents. Further, to the best of its
knowledge, Lessee is not in default under any obligation for the payment of
borrowed money, for the deferred purchase price of property or for the payment
of any rent under any

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lease agreement which, either individually or in the aggregate, would have the
same such effect. (v) The financial statements of Lessee (copies of which have
been furnished to Lessor) have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP"), and fairly present
Lessee's financial condition and the results of its operations as of the date of
and for the period covered by such statements, and since the date of such
statements there has been no material adverse change in such conditions or
operations. (vi) The address stated below the signature of Lessee is the chief
place of business and chief executive office of Lessee; and Lessee does not
conduct business under a trade, assumed or fictitious name. (vii) Lessee: (A)
has conducted, and will continue to conduct, its business operations, and
throughout the term of this Lease will use the Cars, so as to comply with all
Environmental Laws (as hereinafter defined), (B) when not in possession of the
Cars, Lessee will use its best efforts to ensure that the Cars are operated in a
manner that is in compliance with all Environmental Laws, provided, however, the
foregoing clause (B) shall no way diminish Lessee's obligations under any of the
Lease Documents.

     (b) Representations and Warranties of Lessor: Lessor represents and
warrants: (i) Lessor is a corporation duly organized and validly existing in
good standing under the law of the State of Delaware. (ii) The execution,
delivery and performance of the Lease Document: (A) having duly authorized by
all necessary corporate action on the part Lessor: (B) do not require the
approval of every stockholder, trustee or holder of any obligations of Lessor
except such as had been duly obtained. (iii) This Lease, the Schedule and all
related instruments and documents, when entered into, will constitute legal,
valid and binding obligations of Lessor enforceable against Lessor in accordance
with the terms thereof, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally, and except that such enforceability may be
subject to the application of equitable principles in any proceeding, legal or
equitable.

     4.   CONDITIONS PRECEDENT. Lessor's obligations hereunder are conditioned
          upon satisfaction of the following conditions:

          (a) Lessor having received the following, in form and substance
satisfactory to Lessor: (1) evidence as to due compliance with the insurance
provisions hereof; (2) certificate of Lessee's Secretary certifying: (i)
resolutions of Lessee's Board of Directors duly authorizing the leasing of the
Cars hereunder and the execution, delivery and performance of this Lease, the
Schedule and all other related instruments and documents, and (ii) the
incumbency and signature of the officers of Lessee authorized to execute such
documents; and (3) the Schedule with respect to the Cars.

          (b) Upon execution hereof, Lessor will (1) cause this Lease (or a
memorandum thereof) to be duly filed and recorded with the Surface
Transportation Board ("STB"), in accordance with 49 U.S.C. Section 11301, (2)
cause this Lease to be deposited with the Registrar General of Canada pursuant
to Section 105 of The Canada Transportation Act and cause notice of such deposit
to be forthwith given in The Canada Gazette in accordance with said Section 105,
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and (3) cause such filings and notices to be filed or made as necessary or
appropriate to protect the interests of the Lessor in such other places within
the United States as Lessor reasonably shall determine.

          (c) All representations and warranties provided in favor of Lessor
herein shall be true and correct on the effective date of the Schedule with the
same effect as though made as of such date (and Lessee's execution and delivery
of the Schedule shall constitute an acknowledgment of the same).

          (d) There shall be no Default.

     5. FINANCIAL STATEMENTS; FURTHER ASSURANCES. (a) Lessee will furnish Lessor
(1) within one hundred twenty (120) days after the end of each fiscal year of
Lessee, a balance sheet of Lessee as at the end of such year, and the related
statement of income and statement of changes in financial position of Lessee for
such fiscal year, prepared in accordance with GAAP, all in reasonable detail and
certified by independent certified public accountants of recognized standing
selected by Lessee (it being agreed that if Lessee files a Form 10-K with the
Securities and Exchange Commission, that delivery of such Form 10-K shall be
deemed to satisfy the requirements of this Section 5(a)(1)); and (2) within
sixty (60) days after the end of each quarter of Lessee's fiscal year, a balance
sheet of Lessee as at the end of such quarter, and the related statement of
income and statement of changes in financial position of Lessee for such
quarter, prepared in accordance with GAAP (it being agreed that if Lessee files
a Form 10-Q with the Securities and Exchange Commission, that delivery of such
Form 10-Q shall be deemed to satisfy the requirements of this Section 5(a)(2)).
(b) Lessee will duly execute and deliver to Lessor such further documents and
assurances and take such further action as Lessor may from time to time
reasonably request in order to effectively carry out the intent and purpose of
this Lease and to establish and protect the rights and remedies created in favor
of Lessor hereunder, including, without limitation, if requested by Lessor, the
execution and delivery of supplements or amendments hereto, in recordable form,
subjecting to this Lease any Replacement Car (as hereinafter defined), and the
recording or filing of counterparts hereof or thereof in accordance with the
laws of such jurisdiction as Lessor may from time to time deem advisable, and
the filing of Uniform Commercial Code financing statements with respect thereto.

     6. ACCEPTANCE BY LESSEE. Lessee shall execute and deliver to Lessor a
Schedule containing a complete description of the Cars; whereupon, as between
Lessor and Lessee the same shall be deemed to have been finally accepted by
Lessee pursuant to this Lease.

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     7. OWNERSHIP AND MARKING OF THE CARS. Lessor shall and hereby does retain
all incidents of ownership with respect to the Cars notwithstanding the delivery
of the Cars to Lessee hereunder. Each Car is and will be numbered with its
reporting mark shown on the Schedule relating thereto. Lessee will not change
the reporting mark of any Car except in accordance with a statement of new
reporting marks to be substituted therefor, which statement shall be delivered
to Lessor by Lessee and a supplement to this Lease with respect to such new
marks shall be filed or recorded in all public offices where this Lease (or a
memorandum thereof) shall have been filed or recorded. Except for any insignia
and other markings that appear on any Car as originally accepted by Lessee,
Lessee will not allow the name of any person to be placed on any Car 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 preceding sentence, Lessee may cause the Cars to be lettered with the names
or initials or other insignia customarily used by Lessee or any permitted
sublessee of railroad equipment used by it of the same or a similar type. If
Lessor requests, Lessee agrees that it will cause the UMLER register with
respect to each Car to reflect the name of Lessor in the owner field.

     8. DISCLAIMER OF WARRANTIES.

     LESSEE ACKNOWLEDGES AND AGREES THAT, AS BETWEEN LESSOR AND LESSEE (I) EACH
CAR IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO
LESSEE, (II) LESSEE IS SATISFIED THAT EACH CAR IS SUITABLE FOR ITS PURPOSES,
(III) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (IV)
EACH CAR IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL
REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (V) LESSOR LEASES TO LESSEE
AND LESSEE TAKES EACH CAR "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", AND LESSEE
ACKNOWLEDGES THAT LESSOR HAS NOT MADE, AND LESSOR HEREBY EXPRESSLY DISCLAIMS,
ANY AND ALL 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 CARS, 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, it being agreed that
all such risks, as between Lessor and Lessee, are to be borne by Lessee. During
the term of this Lease, so long as Lessee is not then in Default hereunder,
Lessee may 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 Cars against the manufacturers or any prior owner thereof.

     9. MAINTENANCE; OPERATION; POSSESSION; COMPLIANCE WITH LAWS.

     Lessee, at its own cost and expense, shall maintain, repair and keep, or
caused to maintained, repaired or kept, each Car (a) in accordance with prudent
Class I railroad industry maintenance practices in existence from time to time,
(b) in a manner consistent with the maintenance practices used by Lessee in
respect of equipment owned or leased by Lessee similar in type to such Car, (c)
in accordance with maintenance requirements of insurance policies covering such
Car, (d) eligible for interchange service, and (e) in compliance with all
orders, statutes, rules, regulations, directives and other laws and requirements
of the United States of America, and any and all jurisdictions in which its
operations involving any of the Cars may extend, with the Interchange Rules and
with all rules of the United States Department of Transportation, the Surface
Transportation Board, the Federal Energy Regulatory Commission, the Federal
Railroad Administration, the United States Environmental Protection Agency and
any other legislative, executive, administrative, regulatory or judicial body,
agency or commission (whether Federal, state, local or otherwise) exercising any
power or jurisdiction over the Cars or any of the parties to this Lease or the
Lease Documents, to the extent that the foregoing affect the title, operation,
possession or use of, or any other undertaking with respect to, the Cars or are
necessary to comply with applicable health, safety or environmental standards
(all of the foregoing, the "Applicable Standards"), the enforcement of which
would adversely affect Lessor or Lessor's title to, or ownership of, or residual
interest in, the Cars. For the purposes hereof, "Interchange Rules" means all
codes, rules, regulations, interpretations, laws and orders governing the hire,
use, condition, repair and all other matters pertaining to the interchange of
freight traffic reasonably interpreted within the rail industry as being
applicable to the Cars, as adopted and in effect from time to time by the
Association of American Railroads, or any successor, and in the event that such
Applicable Standards require any alteration, replacement or addition of or to
any part of the Cars, Lessee will conform therewith at its own expense. Lessee
will prepare and deliver to Lessor within a reasonable time prior to the
required date of filing (or, to the extent permissible, file on behalf of
Lessor) any and all reports (other than income tax returns) to be filed by
Lessor with any Federal, state or other regulatory authority by reason of
Lessor's right, title and interest in the Cars or the leasing thereof to Lessee.
Notwithstanding the foregoing, Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any
such law, regulation, requirement or rule in any reasonable manner which does
not materially adversely affect the rights or interests of Lessor in the Cars or
hereunder or otherwise expose Lessor to criminal sanctions or release Lessee
from the obligation to return the Cars in compliance with the provisions of
Section 16 hereof.

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     Lessee shall be entitled to the possession of the Cars and to the use of
the Cars upon lines of railroad owned or operated by it, upon lines of railroad
over which Lessee has trackage or other operating rights, or over which railroad
equipment of Lessee is regularly operated pursuant to contract and on railroad
lines of other railroads 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 such Cars upon connecting and other carriers in
the usual interchange of traffic or pursuant to in-through or run-through
agreements. Notwithstanding the foregoing, Lessee shall not permit any Car to be
physically located outside the United States during more than fifty (50) percent
of any taxable year. Nothing shall be deemed to constitute permission by Lessor
to any Person that acquires possession of any Car to take any action
inconsistent with the terms and provisions of this Lease.

     10. MODIFICATIONS.

     In the event the Association of American Railroads, the United States
Department of Transportation, or any other United States governmental agency
having jurisdiction over the operation, safety or use of railroad equipment
requires that any Car be altered, replaced or modified (a "Required
Modification"), Lessee agrees to make such Required Modification at its own cost
and expense; provided, however, that Lessee may, in good faith and by
appropriate proceedings diligently conducted, contest the validity or
application of any such law, regulation, requirement or rule in any reasonable
manner which does not materially adversely affect the rights or interests of
Lessor in the Cars or hereunder or otherwise expose Lessor to criminal sanctions
or relieve Lessee of the obligation to return the Cars in compliance with the
provisions of Section 16 hereof. Title to any Required Modification immediately
shall vest in Lessor. Notwithstanding anything herein to the contrary, if Lessee
determines in good faith that any Required Modification to a Car would be
economically impractical, it shall provide written notice of such determination
to Lessor and the parties hereto shall treat such Car as if an Event of Loss had
occurred as of the date of such written notice with respect to such Car and the
provisions of Section 13 hereof with respect to rent, termination and
disposition shall apply with respect to such Car. The Lessee shall be permitted
at any time to request that Lessor finance any Required Modification provided
that Lessor may, in its sole discretion, refuse such financing request of
Lessee; provided, however, Lessor's refusal to finance any Required Modification
shall in no way excuse Lessee's performance of its obligations under this Lease.

     Lessee at any time may modify, alter or improve any Car (a "Modification");
provided that no Modification shall adversely affect the fair market value,
utility, or remaining useful life of such Car below the fair market value,
utility, or remaining useful life thereof immediately prior to such
Modification, assuming such Car was then in the condition required to be
maintained by the terms of this Lease. Title to each such Modification shall
remain with Lessee so long as it is readily removable from such Car and upon its
removal will not interfere with the normal use and operation of the Car (each, a
"Severable Modification"). In all other instances, title to such Modifications
immediately shall vest in Lessor. If Lessee shall, at its sole cost and expense,
cause such Severable Modification to be made to any Car and such Severable
Modification is reasonably necessary for the economic operation of such Car,
Lessor shall have the right, prior to the return of such Car to Lessor
hereunder, to purchase such Severable Modification at its then fair market
value. If Lessor does not elect to purchase such Severable Modification, Lessee
may remove, and shall remove if requested by Lessor, such Severable Modification
at Lessee's sole cost and expense.

     11. FEES AND TAXES. (a) To the extent permitted by law, Lessee shall file
any necessary report and return for, shall pay promptly when due, shall
otherwise be liable to reimburse Lessor (on an after-tax basis, taking into
account all relevant, current, and future tax costs and benefits) for, and
agrees to indemnify and hold Lessor harmless from: (1) all titling, filing,
publication, recordation, documentary stamp and other fees; and (2) taxes (other
than taxes calculated solely on the basis of net income), assessments and all
other charges or withholdings of any nature (together with any penalties, fines
or interest thereon); relating to the Cars or this Lease or the delivery,
acquisition, ownership, use, operation, substitution, leasing or subleasing of
the Cars, or upon the rentals payable hereunder, whether the same be assessed to
Lessor or Lessee, provided that Lessee shall not be required to pay, or to
reimburse or indemnify Lessor for, any of the following: (i) any tax imposed on
or with respect to or measured by the gross or net income, gross receipts,
capital, net worth or franchise of Lessor or the conduct of business by Lessor
unless (A) such tax is a sales, use, rental, goods and services or similar tax,
or (B) such tax is imposed by a jurisdiction outside the United States of
America, or a jurisdiction within the United States of America in which Lessor
would not have otherwise been subject to tax, as the result of the use,
operation or presence of any Car or any activity of Lessee, any permitted
Sublessee or any other permitted user of any Car in such jurisdiction; (ii) any
tax imposed on or with respect to any sale, assignment, transfer or other
disposition by Lessor of any interest in any Car or this Lease or any Schedule
unless caused by an Event of Loss with respect to such Car or by an exercise of
remedies after the occurrence of a Default, or unless made at the request of
Lessee; (iii) any tax imposed with respect to any Car for any period after the
expiration or earlier termination of this Lease with respect to such Car and the
return of such Car (if and as required by this Lease) to Lessor; (iv) any
interest or penalty resulting from the failure of Lessor to file any tax return
or other tax document, or to pay any tax, in a timely and proper manner unless
such failure results from the failure by Lessee to perform its obligations under
this Lease; (v) any tax to the extent such tax would not have been incurred but
for, or is increased as a result of, (A) the gross negligence or willful
misconduct of Lessor, (B) any sale-leaseback, loan, assignment of receivables or
other transaction between Lessor and a third party with respect to any Cars,
this Lease or any Schedule; and (vi) any United States federal withholding tax.
Upon request, Lessor shall furnish to Lessee all documentation and other
information necessary to file such reports and returns and to pay the amount of
such

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fees, taxes or other sums then due; provided, however, nothing contained herein
shall require that Lessor deliver copies of tax returns or other information
that it considers (in its sole discretion) confidential.

     (b) If any report, return or property listing, or any fee, tax or
assessment for which Lessee is required to indemnify Lessor pursuant to sub-part
(a) hereof ("Imposition") is, by law, required to be filed by, assessed or
billed to, or paid by, Lessor, Lessee at its own expense will do all things
required to be done by Lessor (to the extent permitted by law) in connection
therewith and is hereby authorized by Lessor to act on behalf of Lessor in all
respects, including (but not limited to), the contest or protest, in good faith
and by appropriate proceedings, of the validity of any Imposition or of the
amount thereof, and Lessor agrees to notify Lessee promptly in writing of
Lessor's receipt of any assessment, bill or other claim by any taxing authority
for any such Imposition, provided that (x) Lessor's failure to provide such
notice shall not relieve Lessee of its obligations under this Section 11 unless
such failure precludes a contest of such Imposition, (y) Lessor will have the
right to elect (by giving Lessee written notice of such election together with
Lessor's notice of receipt of such claim) to control any contest of such
Imposition that may result in any material unindemnified loss, cost or expense
to Lessor, and (z) Lessee shall not be permitted to contest any such claim
unless the amount of the Imposition that is the subject of such claim (plus the
amount of all other Impositions that may be asserted with respect to the Cars in
the same or any other tax period) exceeds $10,000. Lessor agrees to cooperate
with Lessee in any such contest unless such cooperation would cause any material
unindemnified loss, cost or expense to Lessor, and Lessee agrees promptly to
indemnify Lessor for all reasonable expenses incurred by Lessor in the course of
such cooperation. An Imposition shall be paid, subject to refund proceedings, if
failure to pay would create a material danger of the sale, forfeiture or loss of
the Cars or any interest therein. If Lessor obtains a refund of any Imposition
which has been paid (by Lessee, or by Lessor and for which Lessor has been
reimbursed by Lessee), Lessor shall promptly pay such refund to Lessee, provided
that Lessor shall not be required to pay such refund to Lessee if a Default is
continuing unless and until such Default ceases to exist, provided further that
the amount payable by Lessor under this sentence shall not exceed the amount
paid by Lessee with respect to such Imposition. To the extent that any tax
liability of Lessor for which Lessee is not required to indemnify Lessor is
reduced as a result of an Imposition which Lessee has paid or for which Lessee
has indemnified Lessor, Lessor shall pay to Lessee the amount of such tax
savings plus the amount of any additional tax savings resulting from such
payment, provided that (i) the amount payable by Lessor under this sentence
shall not exceed the amount paid by Lessee with respect to such Imposition (ii)
Lessor shall not be required to make any such payment if a Default has occurred
and is continuing unless and until such Default ceases to exist. Lessee shall
indemnify Lessor for any refund or tax saving paid by Lessor to Lessee which
subsequently becomes disallowed or recaptured. Lessee will cause all billings of
such charges to Lessor to be made to Lessor in care of Lessee (to the extent
permitted by applicable law) and will, in preparing any report or return
required by law with respect to any Imposition (to the extent permitted on such
report or return), show the ownership of the Cars in Lessor, and shall send a
copy of any such report or return to Lessor. If Lessee fails to pay any such
Impositions when due, except any Imposition being contested in good faith and by
appropriate proceedings as above provided for a reasonable period of time,
Lessor at its option may do so, in which event the amount so paid (including any
penalty or interest incurred as a result of Lessee's failure), plus interest
thereon at the Late Charge Rate shall be paid by Lessee to Lessor with the next
periodic payment of rent. (c) As used herein, the term "Lessor" shall mean and
include Lessor and the consolidated Federal taxpayer group of which Lessor is a
member, Lessor shall cause each of its Affiliates to comply with the obligations
of "Lessor" under this Section 11. At Lessee's written request, Lessor's
calculation of an indemnity payment under this Section 11 which is at least
$50,000 Dollars shall be submitted to a nationally recognized public accounting
firm selected by Lessor reasonably acceptable to Lessee to verify the accuracy
of Lessor's calculations. If Lessee pays an indemnity payment before completion
of such review, appropriate adjustments will be made after completion of the
review to take into account any redetermination of such indemnity made by the
accounting firm. Lessee shall pay the fees and expenses charged by the
accounting firm for such review unless such an accounting firm concludes that
the indemnity payment calculated by Lessor exceeds the indemnity payment
properly due by an amount exceeding 10% of the indemnity payment calculated by
Lessor.

     12. LIENS. Lessee agrees to maintain the Cars free from all claims, liens,
attachments, rights of others and legal processes ("Liens") of creditors of
Lessee or other persons claiming by, through or under Lessee, other than Liens
for: (a) fees, taxes, levies, duties or other governmental charges of any kind,
Liens of mechanics, materialmen, laborers, employees or suppliers and similar
Liens arising by operation of law incurred by Lessee in the ordinary course of
business for sums that are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof (provided, however, that such proceedings do not involve any material
danger (as determined in Lessor's sole reasonable discretion) of the sale,
forfeiture or loss of the Cars or any interest therein); (b) Liens arising out
of any judgments or awards against Lessee with respect to which a stay of
execution has been obtained pending an appeal or proceeding for review; (c)
Liens for taxes of Lessor for which Lessee has no indemnification obligation
pursuant to this Lease (such Liens in clauses (a)and (d) being hereinafter
referred to as "Permitted Liens"); and (d) Liens created by or through Lessor.
Lessee will defend, at its own cost and expense, Lessor's title to the Cars from
such claims, Liens or legal processes (other than Permitted Liens). Lessee shall
also notify Lessor promptly upon receipt of notice of any Lien (other than
Permitted Liens) affecting the Cars in whole or in part.

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     13. LOSS, DESTRUCTION, REQUISITION, ETC.

     (a) Lessee hereby assumes the risk of direct and consequential loss and
damage to the Cars. Except as otherwise provided herein, no loss or damage to
the Cars or any part thereof shall release or impair any obligations of Lessee
under this Lease. Lessee agrees that Lessor shall not incur any liability to
Lessee for any loss of business, loss of profits, expenses, or any other damages
resulting to Lessee by reason of any failure of or delay in delivery or any
delay caused by any non-performance, defective performance, or breakdown of the
Cars, nor shall Lessor at any time be responsible for personal injury or the
loss or destruction of any other property resulting from the Cars. In the event
of loss or damage to any Car which does not constitute an Event of Loss (as
hereinafter defined), Lessee shall, at its sole cost and expense, promptly
repair and restore such Car to the condition required by this Lease. Provided
that Lessee is not then in Default, upon receipt of evidence reasonably
satisfactory to Lessor of completion of such repairs, Lessor will apply any
insurance proceeds received by Lessor on account of such loss to the cost of
repairs.

     (b) In the event that any Car (i) shall suffer destruction, damage,
contamination or wear which, in Lessee's good faith opinion, makes repair
uneconomic or renders such Car unfit for commercial use, (ii) shall suffer theft
or disappearance, (iii) shall be permanently returned to the manufacturer
pursuant to any 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, (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 term of this Lease or (vii) shall become obsolete or not
usable for the purposes for which it was placed in service (any such occurrence
being hereinafter called an "Event of Loss"), Lessee, in accordance with the
provisions hereof, shall promptly and fully inform Lessor of such Event of Loss.

     (c) Upon the occurrence of an Event of Loss with respect to any Car, Lessee
shall within thirty (30) days thereafter notify Lessor 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 said election within said thirty (30) day
period, or if providing a Replacement Car could cause adverse tax consequences
to Lessor, Lessee shall be deemed to have elected to perform the option set
forth in the following paragraph (ii)):

          (i) as promptly as practicable, and in any event on or before the
     Business Day (as hereinafter defined) next preceding the sixtieth (60th)
     day next following the date of such notice, in replacement for such Car,
     Lessee shall convey or cause to be conveyed to Lessor a Replacement Car (as
     defined below) to be leased to Lessee hereunder, such Replacement Car to be
     free and clear of all liens (other than Permitted Liens), to be of a
     similar make and model to the Car so replaced and to have a fair market
     value, utility and remaining useful life at least equal to the Car so
     replaced (assuming such Car was in the condition required to be maintained
     by the terms of this Lease); provided that, if Lessee shall not perform its
     obligation to effect such replacement under this paragraph (i) during the
     period of time provided herein, then Lessee shall pay on the next
     succeeding date for the payment of rent to Lessor the amounts specified in
     paragraph (ii) below; provided, further that, if Lessee is diligently
     undertaking to convey such Replacement Car but is unable to do so within
     the allotted time due to circumstances beyond its control, then Lessee
     shall not be required to make the payments specified in paragraph (ii)
     below so long as it (A) provides Lessor written notice within forty-five
     (45) days of such notice of Event of Loss that Lessee will be unable to
     convey a Replacement Car within sixty (60) days of such notice of Event of
     Loss and (B) Lessee pays the Stipulated Loss Value of such Car as a deposit
     to Lessor, which deposit shall be applied against the purchase of the Car,
     which amount shall be payable on the ninetieth (90th) day following the
     date of such notice if no Replacement Car has been delivered by such date;
     or

          (ii) on the next succeeding date for the payment of rent that is at
     least sixty (60) days after the date of notice of such Event of Loss or
     deemed Event of Loss, Lessee shall pay or cause to be paid on such rent
     payment date to Lessor (A) an amount equal to the Stipulated Loss Value of
     each such Car, determined as of such rent payment date, (B) all rent
     payable on such date in respect of such Car, and (C) all other sums then
     due and payable hereunder, it being understood that until such Stipulated
     Loss Value is paid, there shall be no abatement or reduction of rent.

     (d) Upon the sale or replacement of any Car in compliance with this Section
13 or upon the payment of all sums required to be paid pursuant hereto in
respect of any Car for which Lessee has elected to pay or is deemed to have
elected to pay the amounts specified above, the term of this Lease with respect
to such Car and the obligation to pay rent for such Car accruing subsequent to
the date of payment of the Stipulated Loss Value pursuant to the terms hereof
shall terminate; provided that Lessee shall be obligated to pay all rent in
respect of such Car which has accrued up to and including the date of payment of
the Stipulated Loss Value. Upon the payment of all sums required to be paid
pursuant hereto in respect of any Car, Lessor will convey to Lessee or its
designee all right, title and interest of Lessor in and to such Car, "AS IS",
"WHERE IS", without recourse or warranty other than a warranty that whatever
title to such Cars was originally conveyed to Lessor has been conveyed to
Lessee, free and clear of any Liens created by or through Lessor, and shall
execute and deliver to Lessee or its designee such bill(s) of sale and other
documents and instruments as Lessee or its designee reasonably may request to
evidence such conveyance. As to each Car so disposed of, Lessee or its designee
shall be entitled to any amounts arising from such disposition, plus any awards,
insurance or other proceeds and damages (including any Association of American
Railroads interline settlement paid upon an Event of Loss) received by Lessee or
Lessor by reason of

                                       6

<PAGE>

such Event of Loss after having paid the Stipulated Loss Value attributable
thereto; provided, however, that, with respect to any Event of Loss referred to
in clauses (v) and (vi) of sub-part (b) above, any excess of such condemnation
awards over the amount of the Stipulated Loss Value of such Car shall be paid to
Lessee so long as the result of such condemnation was not directly or
proximately caused by Lessee's neglect, in which such case, any excess of such
condemnation awards over the amount of the Stipulated Loss Value of such Car
shall be paid to Lessor. At the time of or prior to any replacement of any Car,
Lessee, at its own cost and expense, will (A) furnish Lessor with a bill of sale
and an assignment of warranties with respect to the Replacement Car, (B) execute
and deliver to Lessor an amendment in form and substance acceptable to Lessor,
subjecting such Replacement Car to this Lease, and duly executed by Lessee, to
be delivered to Lessor for execution and, upon such execution and to the extent
required by Lessor, to be filed for recordation in the same manner as provided
for the original Lease, (C) furnish Lessor with copies of all filings made with
the STB and the Registrar General of Canada that are necessary or appropriate to
perfect and protect Lessor's interests in the Replacement Car, and (D) furnish
Lessor with a certificate of a qualified engineer (who may be the system chief
mechanical officer of Lessee) certifying that the Replacement Car has a fair
market value, utility and remaining useful life at least equal to the Car so
replaced (assuming such Car was in the condition required to be maintained by
the terms of this Lease) and setting forth a reasonable basis for such
conclusion in reasonable detail. For all purposes hereof, upon passage of title
thereto to Lessor, the Replacement Car shall be deemed part of the property
leased hereunder and the Replacement Car shall be deemed a "Car" as defined.
Upon such passage of title, Lessor will transfer to Lessee, without recourse or
warranty other than a warranty that title to such Car has been conveyed to
Lessee, free and clear of any Liens other than any Liens created by or through
Lessee, all Lessor's right, title and interest in and to the replaced Car.

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

     (f) As used in this Lease, "Stipulated Loss Value" shall mean the product
of the Total Cost of the Cars (as specified on the applicable Schedule) and the
applicable percentage factor set forth on the Schedule of Stipulated Loss Values
attached to the Schedule. After payment of the final payment of rent due under
the term of this Lease, Stipulated Loss Value shall be determined as of the date
of termination of this Lease, after payment of any rent due on such date, and
the applicable percentage factor shall be the last percentage factor set forth
on the Schedule of Stipulated Loss Values.

     14. INSURANCE.

     (a) Lessee will, at all times prior to the return of the Cars to Lessor, at
its own cost and expense, cause to be carried and maintained (1) property damage
insurance in respect of the Cars, and (2) public liability insurance with
respect to third-party personal and property damage, and Lessee will continue to
carry such insurance in such amounts and for such risks and with such insurance
companies and subject to such self-insurance as reasonably may be acceptable to
Lessor, but in any event not less comprehensive in amounts and against risks
customarily insured against by Lessee in respect of equipment owned or leased by
it similar in type to the Cars and consistent with prudent Class I railroad
industry standards, if any, at such time. Any policies of insurance carried in
accordance with this Section 14 and any policies taken out or altered in any
material way, in substitution or replacement for any of such policies (i) shall
provide that, if any such insurance is cancelled for any reason whatever or is
altered in any material way, Lessor shall receive thirty (30) days' prior notice
of such cancellation or alteration, (ii) shall name Lessor as an additional
insured, and (iii) with respect to property damage insurance shall provide that
in respect of the respective interest of Lessor, the insurance shall not be
invalidated by any action or inaction of Lessee and shall insure Lessor's
interest as it appears, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by Lessee provided that
Lessee and Lessor have not caused, contributed to or knowingly condoned the said
act or inaction. Lessee shall cause the property insurance on the Cars to
provide that the proceeds up to the amount of the Stipulated Loss Value, for any
loss or damage to any Car, if any, shall be payable to Lessor. Lessee shall, at
its own cost and expense and so long as it is not then in Default, be entitled
to make all proofs of loss and take all other steps necessary to collect the
proceeds of such insurance.

     (b) Lessee shall, upon execution hereof and with respect to each renewal,
furnish Lessor with (or cause to be furnished to Lessor) a certificate of
insurance showing the insurance then maintained by Lessee pursuant to this
Section 14 and specifically enumerating the special provisions referenced in
Section 14(a).

     (c) So long as there is no Default which is then occurred or is continuing,
fifty percent (50%) of the entire proceeds of any property or casualty insurance
or third party payments for damages to any Car (including any Association of
American Railroads interline settlements) received by Lessor shall be held by
Lessor until, with respect to such Car, the repairs referred to in clause (x)
below are made as specified therein or payment of the Stipulated Loss Value is
made, and such entire proceeds will be paid either: (x)

                                       7

<PAGE>

to Lessee promptly following receipt by Lessor of a written application signed
by Lessee for payment to Lessee for repairing or restoring the Car which has
been damaged, so long as (1) Lessee shall have complied with the applicable
provisions of this Lease, and (2) Lessee shall have certified that any damage to
such Car shall have been fully repaired or restored; or (y) if this Lease is
terminated with respect to such Car because of an Event of Loss and Lessee has
paid or cause to be paid the Stipulated Loss Value and all other amounts then
due as a result thereof, such proceeds promptly shall be paid over to, or
retained by, Lessee. The remaining fifty percent (50%) of the proceeds from any
property and casualty insurance or third party payment for damages to any Car
will paid immediately to Lessee, by Lessor, conditional on the use of these
proceeds by Lessee for immediate full repair and restoration of the damaged
Car(s) and further conditional on the fact that there has been no Default which
is then occurred or is continuing.

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

     15. REPORTS; INSPECTION. (a) From time to time, at the reasonable request
of Lessor, Lessee shall furnish Lessor with an accurate statement, as to the
amount, description and reporting marks of the Cars then leased hereunder, and
such other information concerning the condition or repair of the Cars as Lessor
reasonably may request. (b) Lessor shall have the right, but not the obligation,
at its expense to inspect the Cars and Lessee's records with respect thereto,
during Lessee's normal business hours and upon reasonable prior notice to Lessee
and provided that the Cars are on Lessee property (if the Cars not on Lessee
property Lessee agrees to use its best efforts in assisting Lessor to obtain
access to such premises); provided, however, that Lessee shall not be liable for
any injury to, or the death of, any person exercising, on behalf of Lessor or
any prospective user, the rights of inspection granted hereunder. No inspection
pursuant to this Section 15 shall interfere with the use, operation or
maintenance of the Cars or the normal conduct of Lessee's business, and Lessee
shall not be required to undertake or incur any additional liabilities in
connection therewith. Lessor agrees that Lessor shall bear the risk of loss to
any persons or property resulting from the exercise of Lessor's inspection
rights, and Lessor agrees to hold Lessee harmless and indemnity Lessee against
any loss or damage to any persons or property resulting from the exercise, of
Lessor's inspection rights so long as such loss or damage is not the result of
Lessee's gross negligence or the gross negligence of any person acting by,
through or under Lessee.

     16. REDELIVERY OF CARS. Lessee shall provide to Lessor not less than one
hundred eighty (180) and not more than two hundred forty (240) days' prior
written notice before the end of the then applicable term of this Lease before
returning the Cars. Upon expiration of the term of this Lease with respect to
any Car which has not been purchased by Lessee pursuant to the exercise by
Lessee of its purchase option hereunder or for which the Lessee has not already
paid Lessor the Stipulated Loss Value thereof pursuant to Section 13 hereof,
Lessee will, at its own cost and expense, redeliver or cause to be redelivered
possession of such Car to Lessor (a) in the same condition as when delivered to
Lessee hereunder, ordinary wear and tear resulting from proper use thereof alone
excepted, (b) free and clear of all liens, encumbrances or rights of others
whatsoever (other than Permitted Liens), (c) in the condition required by
Sections 9 and 10 hereof and in compliance with the provisions of Rider No. 2
attached hereto, (d) empty, clean and free from all Hazardous Substances (as
hereinafter defined), and otherwise fully in compliance with all Environmental
Laws (as hereinafter defined) and other applicable laws, (e) free of any
markings other than markings pursuant to Section 7 hereof, and (f) having
attached or affixed thereto any parts, alterations or additions and replacements
considered a Required Modification. For the purpose of delivering possession of
the Cars as required herein, Lessee shall, at Lessor's request and at Lessee's
cost, risk and expense: (1) cause the Cars to be stored on such storage tracks
at Lessee's facility or otherwise as Lessee reasonably may designate at not more
than ten (10) locations, for up to one hundred twenty (120) days of such return
date, without charge for rent or storage, and at Lessee's risk (and Lessee shall
provide insurance during the storage period), until the Cars have been sold,
leased or otherwise disposed of or repossessed by Lessor, and/or (2) forthwith
return the Cars to any location or locations specified by Lessor within the
Continental United States on or adjacent to tracks on which the Cars can be
operated; provided, however, Lessor shall only be permitted to make a single
election pursuant to Clause (1) or (2) for each Car. Upon request of Lessor and
at Lessee's own cost and expense, three (3) copies of all maintenance logs kept
by Lessee with respect to the Cars shall be made available to Lessor or its
designee as soon as practicable after the return of such Car.

     The assembling, delivery, storage and transporting of the Cars as
hereinabove provided shall be at the expense of Lessee and are of the essence of
this Lease, and upon application to any court of equity having jurisdiction in
the premises, Lessor shall be entitled to a decree against Lessee requiring
specific performance of the covenants of Lessee so to assemble, deliver, store
and transport the Cars. Subject to the restrictions in Section 15, during any
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 the Cars, to inspect the Cars. In the event that any Cars
are not purchased by the Lessee as provided in the Lease Documents and such Cars
are not returned on the day following the termination for such Cars as set forth
in the relevant Schedule, Lessee shall pay to Lessor rent at the rate set forth
in Section 2 (pro-rated daily) ("Base Rent") which shall accrue from the date of
termination for such Cars as set forth in the relevant Schedule until the first
to occur of (i) the redelivery of such Cars to Lessor pursuant to the conditions
required by this Lease, and (ii) the sixtieth (60th) day from the day of
termination of the term for such Cars. Any Cars that have not been delivered to
Lessor pursuant to and in the

                                       8

<PAGE>

condition required by this Lease within sixty (60) days following termination of
the term for such Cars shall thereafter accrue rent at a rate equal to one
hundred twenty-five percent (125%) of Base Rent (pro-rated daily), increasing by
an additional twenty-five percent (25%) of Base Rent on each thirty (30) day
period thereafter until such Cars are returned in accordance with this Lease.
All such amounts ("Holdover Rent") shall be payable at the end of each calendar
month through and including the month in which such Car has been returned and
acceptance of any Holdover Rent by the Lessor shall neither constitute a waiver
of any of the terms of this Lease or constitute a renewal of this Lease;
provided, however, that Holdover Rent shall not continue to accrue for each
group of fifty (50) Cars (or the balance of all Cars should the remaining
balance of Cars be less than fifty (50)) upon confirmation by Lessor that (i)
such a group of Cars is assembled (pursuant to this Section 16), and (ii) all
Cars in such group are in the condition required by this Lease. Lessor may, in
its sole discretion, cause the Cars to be inspected by an inspector selected by
Lessor at least sixty (60) days prior to the scheduled return or storage of the
Cars, and, if Lessor causes such inspection, Lessor promptly shall provide
Lessee with such inspector's written report identifying those repairs necessary
to put the Cars in the condition required by this Lease. If any Car is not in
the condition required by this Lease, Lessee shall pay the reasonable cost of
such inspection. Lessee may complete such repairs prior to the return or storage
of the Cars. If Lessee does not so repair, Lessee agrees to pay the cost of such
repairs and further agrees to pay Lessor rent for the period of time reasonably
necessary to accomplish such repairs based on a daily pro-rated amount of the
previously prevailing rent. Lessor's acceptance of such rent on account of such
delay or repair does not constitute a renewal of the term of this Lease or a
waiver of Lessor's right to prompt return of such Car in proper condition

                                       9

<PAGE>

     17. INDEMNITY. (a) General. Lessee assumes and agrees to indemnify, defend
                        -------
and keep harmless Lessor, and any assignee of Lessor's rights, obligations,
title or interests under any Schedule, its affiliates and their agents and
employees ("Indemnitees"), from and against any and all Claims (other than such
as may directly and proximately result from the gross negligence or willful
misconduct of such Indemnitees), by paying (on an after-tax basis taking into
account all relevant, current, and future costs and benefits) or otherwise
discharging same, when and as such Claims shall become due. Lessor shall give
Lessee prompt notice of any Claim hereby indemnified against, provided that
Lessor's failure to provide such notice shall not preclude Lessee's obligation
to indemnify for any Claim so long as such failure does not materially prejudice
Lessee. Lessee shall be entitled to control the defense thereof, so long as no
Default has occurred and is then continuing and so long as there is no conflict
of interest between Lessor and Lessee which, in Lessor's reasonable judgment,
makes it inadvisable for Lessee to control the defense thereof. Lessor shall
have the right to retain separate counsel to represent it in connection with any
claim at its own expense, provided that if Lessor shall have retained such
counsel as a result of a conflict of interest which would preclude Lessee and
Lessor from being represented by the same counsel, the fees and expenses of such
counsel shall be indemnified by Lessee hereunder. Lessor agrees that it will
cooperate (at Lessee's expense) with all reasonable requests of Lessee in the
defense of any action to which Lessor is entitled to indemnification and defense
hereunder. For the purposes of this Lease, the term "Claims" shall mean all
claims, allegations, harms, judgments, good faith settlements entered into,
suits, actions, debts, obligations, damages (whether incidental, consequential
or direct), demands (for compensation, indemnification, reimbursement or
otherwise), losses, penalties, fines, liabilities (including strict liability),
charges that Lessor has incurred or for which it is responsible, in the nature
of interest, Liens, and costs (including attorneys' fees and disbursements and
any other legal or non-legal expenses of investigation or defense of any Claim,
whether or not such Claim is ultimately defeated or enforcing the rights,
remedies or indemnities provided for hereunder, or otherwise available at law or
equity to Lessor), of whatever kind or nature, contingent or otherwise, matured
or unmatured, foreseeable or unforeseeable, by or against any person, arising on
account of (a) any Lease Document, or (b) the Cars, or any part thereof,
including the ordering, acquisition, delivery, installation or rejection of the
Cars, the possession, maintenance, use, condition, ownership or operation of any
Car, and by whomsoever owned, used or operated, during the term of any Schedule
with respect to that Car, the existence of latent and other defects (whether or
not discoverable by Lessor or Lessee) any claim in tort for negligence or strict
liability, any claim for patent, trademark or copyright infringement, and any
Environmental Claim or Environmental Loss (as such terms are hereinafter
defined), or the loss, damage, destruction, removal, return, surrender, sale or
other disposition of the Cars, or any item thereof. Notwithstanding the
foregoing, Lessee shall not have any obligation for any Claim to the extent that
such Claim results from (i) the willful misconduct or gross negligence of the
party or entity seeking indemnification, (ii) the incorrectness or inaccuracy of
any representation made by the party or entity seeking indemnification
hereunder, (iii) any taxes other than as provided in Section 17(b) (taxes being
the subject of a separate indemnity in Section 17(b), (iv) any Claims
attributable to a Lien created by or through Lessor, (v) any Claims resulting
from an assignment by Lessor pursuant to Section 21 (except an assignment in
connection with the exercise by Lessor of its remedies in Section 18), (vi) and
Claims arising in connection with any Cars after such Cars have been returned by
Lessee to Lessor in the condition required by Section 16 following the
expiration or early termination of the term for such Cars; provided, however,
nothing contained herein shall relieve Lessee of its obligation to indemnify the
Indemnitees for Claims which relate to or arise out of facts or conditions
giving rise to any Claim which occurred or were in existence prior to such
return, or (vii) any Liens created by or through Lessor.

     (b) Tax. (1) Lessee represents and warrants that: (A) Lessee shall not
         ---
permit any Car to be physically located outside the United States during more
than fifty (50) percent of any taxable year of Lessee; and (B) the Cars are, and
will be used by Lessee so as to remain, property eligible for the MACRS
Deductions (as defined below).

          (2) If(A) by reason of (i) any act or failure to act of Lessee
(including a breach of any covenant of Lessee set forth herein), or (ii) the
misrepresentation of or breach by Lessee of any of the warranties and
representations set forth in subpart (b)(1) of this Section, Lessor in computing
its taxable income or liability for tax, shall lose, or shall not have, or shall
lose the right to claim or there shall be disallowed or recaptured for Federal
and/or state income tax purposes, in whole or in part, the benefit of MACRS
Deductions; or (B) Lessor shall become liable for additional tax as a result of
Lessee having replaced any Car pursuant to the terms of the Lease, or having

                                       10

<PAGE>

added an attachment or made an alteration to the Cars, including (without
limitation) any such attachment or alteration which would increase the
productivity or capability of the Cars so as to violate the provisions of Rev.
Proc. 75-21, 1975-1 C.B. 715, or Rev. Proc. 79-48, 1979-2 C.B. 529 (as either or
both may hereafter be modified or superseded); or (C) Lessor shall be entitled
to claim a lesser credit for foreign taxes against its Federal income tax
liability for any taxable year than that to which Lessor would have been
entitled if each item of income, gain, loss and deduction with respect to the
Cars had been treated as income from sources within the United States pursuant
to Section 861 of the Code; hereinafter referred to as a "Loss"; then Lessee
shall pay Lessor the Tax Indemnification Payment as additional rent and Lessor
shall revise the Schedule(s) of Stipulated Loss Values to reflect the Loss. As
used herein, "MACRS Deductions" shall mean the deductions under Section 167 of
the Internal Revenue Code of 1986, as now or hereafter amended (the "Code"),
determined in accordance with the modified Accelerated Cost Recovery System with
respect to the Total Cost of any item of the Cars using the accelerated method
set forth in Section 168(b)(1) of the Code as in effect on the date of this
Lease for property assigned to the 7-year class of property; "Lessor" shall be
deemed to include the consolidated Federal taxpayer group of which Lessor or any
Assignee (as applicable) is a member; and "Tax Indemnification Payment" shall
mean such amount as, after consideration of (i) all taxes required to be paid by
Lessor in respect of the receipt thereof under the laws of any governmental or
taxing authority in the United States, and (ii) the amount of any interest or
penalty which may be payable by Lessor in connection with the Loss, shall be
required to cause Lessor's after-tax net return, calculated using the same
assumptions used by Lessor to calculate the rent specified for the affected Cars
on the date of the Schedule in which such Cars are listed except to the extent
that the Loss changes (or any prior Loss changed) any of those assumptions, (the
"Net Return") to be equal to, but no greater than, the Net Return computed
consistently with current tax laws (and with the assumption that Lessor is taxed
at the highest marginal Federal and state tax rates) as of the date of this
Lease that would have been available to Lessor had the Loss not occurred.

          (3) Lessor shall be responsible for, and shall not be entitled to a
Tax Indemnification Payment by Lessee on account of, any Loss to the extent
arising as a result of the occurrence of any one or more of the following
events: (a) the failure of Lessor to timely and properly claim MACRS Deductions
in the tax return of Lessor unless in the reasonable opinion of Lessor's tax
counsel there is no reasonable basis for such claim (a copy of which written
opinion shall have been received by Lessee at least 30 days before the fling of
the return on which Lessor failed to claim such MACRS Deductions); or (b) the
failure of Lessor to have sufficient taxable income before application of the
MACRS Deductions to offset the full amount of such MACRS Deductions; or (c) any
event which by the terms of the Lease requires payment by Lessee of the
Stipulated Loss Value if such payment is thereafter actually made to Lessor; or
(d) a sale of any item of the Cars or the Lease by Lessor unless in connection
with an exercise of remedies after the occurrence of a Default.

          (4) Lessor promptly shall notify Lessee in writing of such Loss
(provided that Lessor's failure to provide such notice shall not affect Lessee's
obligation to indemnify Lessor unless such failure precludes a contest of such
Loss) and Lessee shall pay to Lessor the Tax Indemnification Payment within
thirty (30) days after the latest of the following dates: (i) the date on which
Lessor gives Lessee such notice of the occurrence of such Loss (which notice
shall include a description in reasonable detail of such Loss and the
calculation of the Tax Indemnification Payment requested by Lessor), (ii) the
date on which Lessor files its federal income tax return, or makes a payment of
estimated tax, in which such Loss is taken into account, and (iii) if Lessee has
requested that such Loss be contested pursuant to Section 17(b)(5), the date of
the final determination of such contest. For these purposes, a Loss shall occur
upon the earliest of: (A) the happening of any event (such as disposition or
change in use of any of the Cars) which will cause such Loss, (B) the payment by
Lessor to the Internal Revenue Service or state taxing authority of the tax
increase (including an increase in estimated taxes) resulting from such Loss;
(C) the date on which the Loss is realized by Lessor; or (D) the adjustment of
the tax return of Lessor to reflect such Loss.

          (5) If Lessor receives from the Internal Revenue Service a written
notice of a proposed adjustment or notice of deficiency which, if accepted by
Lessor, would result in a Loss (a "Tax Claim"), Lessor shall send a copy of such
notice (or the portion thereof relating to such Loss) to Lessee within thirty
(30) days after receiving such notice. Provided that no Default has occurred and
is continuing, if Lessee so requests in writing within thirty (30) days after
Lessee receives such written notice, accompanied by a written opinion of
independent tax counsel

                                       11

<PAGE>

selected by Lessee and reasonably acceptable to Lessor ("Tax Counsel") to the
effect that there is a reasonable basis (within the meaning of ABA Formal
Opinion 85-352) for contesting such Tax Claim, and discussing the authority in
support of such opinion, Lessor shall in good faith contest such Tax Claim in
appropriate administrative and/or judicial proceedings so long as the amount of
such Tax Claim, together with any similar Tax Claim that may be made with
respect to the Cars, is greater than $100,000 and Lessee acknowledges in writing
its obligation to indemnify for such Loss unless the final determination of the
contest demonstrates that Lessee is not required by this Section 17(b) to
indemnify Lessor for such Loss (including all available appeals requested by
Lessee in writing, and, in the case of an appeal of an adverse court decision,
accompanied by a written opinion of Tax Counsel to the effect that there is a
meritorious basis for appeal, but provided that Lessor shall not be required to
seek Supreme Court review of an adverse decision ). Lessor shall control all
aspects of the contest, considering in good faith any suggestions made by
Lessee. Lessee shall pay all reasonable professional fees and other reasonable
out-of-pocket expenses incurred by Lessor to contest such Tax Claim. Lessor may
refuse to conduct a contest otherwise required under this Section 17(b)(5), or
may settle any Tax Claim that Lessee has requested Lessor to contest without the
prior written consent of Lessee, provided that in such event Lessee shall be
relieved of its obligation under this Section 17(b) to pay Lessor any Tax
Indemnification Payment for any Loss that was the subject of such Tax Claim or
for any related Loss in any other taxable year to the extent that such
settlement materially adversely affects a contest of such related Loss.

          (6) To the extent Lessor obtains a refund of any tax, penalty,
addition to tax and/or interest for which Lessee has indemnified Lessor, Lessor
shall pay to Lessee the amount of such refund plus the amount of any interest
received by Lessor with respect to such refund, plus the amount of any Lessor
tax saving resulting from such payment, provided that (i) the amount payable by
Lessor under this Section 17(b)(6) (excluding the amount thereof, if any,
representing interest received by Lessor with respect to such refund) shall not
exceed the amount paid by Lessee with respect to such Loss, and (ii) Lessor
shall not be required to pay such refund if a Default is continuing unless and
until such Default ceases to exist.

          (7) To the extent that the income tax liability of Lessor with respect
to any taxable year is reduced as a result of a Loss for which Lessee paid a Tax
Indemnification Payment to Lessor, Lessor shall pay to Lessee the amount of such
tax saving plus the amount of any additional Lessor tax saving resulting from
such payment, provided that (i) the amount payable by Lessor under this Section
17(b)(7) shall not exceed the amount paid by Lessee with respect to such Loss,
and (ii) Lessor shall not be required to make any such payment if a Default has
occurred and is continuing unless and until such Default ceases to exist. Lessee
shall indemnify Lessor for any refund or tax saving paid by Lessor to Lessee
which subsequently becomes disallowed or recaptured.

          (8) Lessor shall cause each of its Affiliates to comply with the
obligations of "Lessor" under this Section 17.

          (9) At Lessee's written request, Lessor's calculation of a Tax
Indemnification Payment which is at least $50,000 Dollars shall be submitted to
a nationally recognized public accounting firm selected by Lessor and reasonably
acceptable to Lessee to verify the accuracy of Lessor's calculations. If Lessee
pays a Tax Indemnification Payment before completion of such review, appropriate
adjustments will be made after completion of the review to take into account any
redetermination of such Tax Indemnification Payment by the accounting firm.
Lessee shall pay the fees and expenses charged by the accounting firm for such
review unless such accounting firm concludes that the Tax Indemnification
Payment calculated by the Lessor exceeds the Tax Indemnification Payment
properly due by an amount exceeding 10% of the Tax Indemnification Payment
calculated by Lessor.

     (c) The obligations of Lessee and Lessor under this Section, which accrue
during the term of this Lease, shall survive the expiration or termination of
this Lease.

     18. DEFAULT; REMEDIES. (a) Lessee shall be deemed to be in default
hereunder ("Default") if (1) Lessee shall fail to make any payment of rent or
any other payment hereunder within ten (10) days after the same shall have
become due; or (2) Lessee shall fail to obtain and maintain the insurance
required herein; (3) Lessee shall fail to

                                       12

<PAGE>

perform or observe any other covenant, condition or agreement to be performed or
observed by it hereunder and such failure shall continue unremedied for a period
of thirty (30) days after written notice thereof to Lessee by Lessor , unless
such failure is not curable within such thirty (30) days, and Lessee is
diligently pursuing a cure, in which case Lessee shall have ninety (90) days
written notice thereof to Lessee by Lessor to effect such cure; or (4) Lessee
shall (A) not pay its debts generally as they become due within the meaning of
the Bankruptcy Code; or (B) take action for the purpose of invoking the
protection of any bankruptcy or insolvency law, or any such law is invoked
against or with respect to Lessee or its property, and any such petition filed
against Lessee is not dismissed within ninety (90) days; or (5) Lessee shall
make or permit any unauthorized assignment or transfer of this Lease, a
Schedule, the Cars or any interest therein; (6) any certificate, statement,
representation, warranty or audit contained herein or heretofore or hereafter
furnished with respect hereto by or on behalf of Lessee proving to have been
false in any material respect at the time as of which the facts therein set
forth were stated or certified, or having omitted any material contingent or
unliquidated liability or claim against Lessee; or (7) Lessee shall be in
default under any (i) loan, lease, guaranty, installment sale or other financing
agreement or financing contract, of which Lessor or any of its affiliates is a
party or beneficiary, involving amounts owed in the aggregate in excess of Ten
Million Dollars ($10,000,000) or (ii) any material obligation for the payment of
borrowed money, for the deferred purchase price of property or any payment under
any lease agreement involving amounts owed in the aggregate in excess of Ten
Million Dollars ($10,000,000), and such default shall have been declared and not
yet cured; or (8) (i) Lessee shall have terminated its corporate existence,
consolidated with, merged into, or conveyed or leased substantially all of its
assets as an entirety to any Person or (ii) if Lessee is a privately-held
corporation and effective control of Lessee's voting stock, issued and
outstanding from time to time, is not retained by the present stockholders
excluding any initial public offering conducted by Lessee on or before December
31, 2001 (such actions under this Section 18(a)(8) being referred to as an
"Event"), unless immediately prior to such Event: (A) such Person executes and
delivers to Lessor an agreement satisfactory in form and substance to Lessor, in
its reasonable discretion, containing such Person's effective assumption, and
its agreement to pay, perform, comply with and otherwise be liable for, in due
and punctual manner, all of Lessee's obligations having previously arisen, or
thereafter arising, under any Lease Document or Lessor shall have consented to
the proposed disposition of stock in writing, as the case may be; and (B)(1)
such Person or the new entity has a Net Worth equal to or greater than Lessee's
Net Worth as of September 22, 2000, as published in Lessee's 10-Q as filed with
the Securities and Exchange Commission and has a credit rating from Standard &
Poor's equal to or better than B+; or (2) such Person or the new entity has a
Net Worth of at least $25,000,000 greater than Lessee's Net Worth as of
September 22, 2000, as published in Lessee's 10-Q as filed with the Securities
and Exchange Commission. Accounting terms used herein (including the term "Net
Worth") shall be as defined, and all calculations shall be made, in accordance
with GAAP.

     (b) The occurrence of a Default with respect to any Schedule shall, at the
sole discretion of Lessor, constitute a Default with respect to each or any
Schedule. Notwithstanding anything set forth herein, Lessor may exercise all
rights and remedies hereunder independently with respect to each Schedule.

     (c) Upon the occurrence of a Default Lessor may, at its option, declare
this Lease and/or a Schedule to be in default by written notice to Lessee
(without election of remedies), and at any time thereafter, may do any one or
more of the following, all of which are authorized by Lessee:

          (i) require Lessee to assemble any or all of the Cars to such
interchange point on the tracks of Lessee as Lessor shall designate; and/or to
return promptly, at Lessee's expense, any or all of the Cars to Lessor at the
location, in the condition and otherwise in accordance with all of the terms of
Section 6 hereof; and/or take possession of and render unusable by Lessee any or
all of the Cars, wherever they may be located, without any court order or other
process of law and without liability for any damages occasioned by such taking
of possession (other than to premises) not attributable to the gross negligence
or willful misconduct of Lessor or its agents (any such taking of possession
shall constitute an automatic cancellation of this Lease as it applies to those
items taken without further notice, and such taking of possession shall not
prohibit Lessor from exercising its other remedies hereunder);

          (ii) sell, re-lease or otherwise dispose of any or all of the Cars,
whether or not in Lessor's possession, in a commercially reasonable manner at
public or private sale with notice to Lessee (the parties agreeing that ten

                                       13

<PAGE>

(10) days' prior written notice shall constitute adequate notice of such sale),
with the right of Lessor to purchase and apply the net proceeds of such
disposition, after deducting all costs of such disposition (including, but not
limited to, costs of transportation, possession, storage, refurbishing,
advertising and brokers' fees), to the obligations of Lessee pursuant to this
sub-part (ii), with Lessee remaining liable for any deficiency and with any
excess being retained by Lessor; or retain any or all of the Cars; and recover
from Lessee damages, not as a penalty, but herein liquidated for all purposes as
follows:

               (1) if Lessor elects to dispose of the Cars pursuant to a lease
which is substantially similar to this Lease: in an amount equal to the sum of
(A) any accrued and unpaid rent due under this Lease as of the date of
commencement (the "Commencement Date") of the term of the new lease, and (B) the
present value as of the Commencement Date of the total rent for the then
remaining term of this Lease minus the present value as of the Commencement Date
of the rent under the new lease applicable to that period of the new lease term
which is comparable to the then remaining term of this Lease, and (C) any
incidental damages allowed under Uniform Commercial Code Article 2A - Leases
("Article 2A"), less expenses saved by Lessor in consequence of the Default
("Incidental Damages");

               (2) if Lessor elects to retain the Cars or to dispose of the Cars
by sale, by re-lease (pursuant to a lease which is not substantially similar to
this Lease), or otherwise: in an amount equal to the sum of: (A) any accrued and
unpaid rent as of the date Lessor repossesses the Cars or such earlier date as
Lessee tenders possession of the Cars to Lessor, (B) the present value as of the
date determined under clause (A) of the total rent for the then remaining term
of this Lease minus the present value as of the same date of the "market rent"
(as defined in Article 2A) at the place where the Cars were located on that date
computed for the same lease term, and (C) any Incidental Damages (provided,
however, that if the measure of damages provided is inadequate to put Lessor in
as good a position as performance would have, the damages shall be the present
value of the profit, including reasonable overhead, Lessor would have made from
full performance by Lessee, together with any incidental damages allowed under
Article 2A, due allowance for costs reasonably incurred and due credit for
payments or proceeds of disposition);

          (iii) In lieu of the damages specified in subpart (ii), Lessor may
recover from Lessee, as liquidated damages for loss of a bargain and not as a
penalty, an amount calculated as the sum of (1) the Stipulated Loss Value of the
Cars (as determined as of the next date on which a payment is or would have been
due after the declaration of a Default), together with all other sums due
hereunder through the date of such payment with respect to such Cars; plus (2)
the amount of all commercially reasonable cost and expenses incurred by Lessor
in connection with repossession, recovery, storage, repair, sale, release or
other disposition of the Cars, including reasonable attorneys' fees and costs
incurred in connection therewith or otherwise resulting from Lessee's Default;
provided, however, if Lessor has repossessed and disposed of the Cars, Lessor
shall apply the Net Proceeds of such disposition to reimburse Lessee for an
amount up to, but in no event exceeding, that portion of the Stipulated Loss
Value that Lessee has paid to Lessor pursuant to this subpart (iii); as used
herein, "Net Proceeds" shall mean (a), in the case of a disposition by sale, the
gross selling price actually received, or (b), in the case of a disposition by
lease, the present value of the rent actually due during that period of the new
lease term which is comparable to the then remaining term of this Lease, or, if
shorter, the new lease term plus the present value of the Lessor Risk Amount (as
defined in the applicable Schedule) at the end of the Lease term, in each case
less (A) amounts which (if not paid) would constitute a lien on the Cars for
which Lessee is responsible for under this Lease, and (B) applicable sales,
transfer, use or comparable taxes paid by Lessor. For purposes of the definition
of Net Proceeds, the new lease payments shall be discounted at a rate equal to
the rate implicit in the rent due during the term of this Lease in which the
Default occurs;

          (iv) cancel this Lease as to any or all of the Cars; and/or

          (v) proceed by appropriate court action, either at law or in equity
(including an action for specific performance), to enforce performance by Lessee
or to recover damages for the breach hereof; or exercise any other right or
remedy available to Lessor at law or in equity.

                                       14

<PAGE>

          All amounts to be present valued shall be discounted at a rate equal
to the discount rate of the Federal Reserve Bank of Richmond in effect on the
applicable date. Unless otherwise provided above, a cancellation hereunder shall
occur only upon written notice by Lessor to Lessee and only with respect to such
items of the Cars as Lessor specifically elects to cancel in such notice. Except
as to such Cars with respect to which there is a cancellation, this Lease shall
remain in full force and effect and Lessee shall be and remain liable for the
full performance of all its obligations hereunder. In addition, Lessee shall be
liable for all reasonable legal fees and other expenses incurred by reason of
any Default or the exercise of Lessor's remedies, including all expenses
incurred in connection with the return of any Cars in accordance with the terms
of Section 16 hereof or in placing such Cars in the condition required by said
Section. No right or remedy referred to in this Section is intended to be
exclusive, but each shall be cumulative and shall be in addition to any other
remedy referred to above or otherwise available at law or in equity, and may be
exercised concurrently or separately from time to time. The failure of Lessor to
exercise the rights granted hereunder upon any Default by Lessee shall not
constitute a waiver of any such right upon the continuation or reoccurrence of
any such Default. In no event shall the execution of a Schedule constitute a
waiver by Lessor of any pre-existing Default in the performance of the terms and
conditions hereof.

     19. [INTENTIONALLY OMITTED.]

     20. LESSOR'S RIGHT TO PERFORM. If Lessee fails to make any payment required
to be made by it hereunder or fails to perform or comply with any of its other
agreements contained herein and such failure can be cured with the payment of
money, Lessor may itself make such payment or perform or comply with such
agreement, but shall not be obligated hereunder to do so, and the amount of such
payment and of the reasonable expenses of Lessor incurred in connection with
such payment or the performance of or compliance with such agreement, as the
case may be, together with interest thereon at the Late Charge Rate, to the
extent permitted by applicable law, shall be payable by Lessee to Lessor on
demand.

     21. ASSIGNMENT. (a) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH
SHALL NOT UNREASONABLY BE WITHHELD), LESSEE WILL NOT ASSIGN, TRANSFER OR
ENCUMBER ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR ITS LEASEHOLD INTEREST,
SUBLET THE CARS OR OTHERWISE PERMIT THE CARS TO BE OPERATED OR USED BY, OR TO
COME INTO OR REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE, ITS EMPLOYEES AND
AGENTS PROVIDED, HOWEVER, THAT SO LONG AS NO EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING, LESSEE SHALL HAVE THE RIGHT, WITHOUT LESSOR'S PRIOR
CONSENT, TO PUT THE CARS IN THE POSSESSION OF ANY REPURABLE REPAIR FACILITY FOR
THE PURPOSE OF ANY REPAIRS, MODIFICATIONS, CHANGES OR ALTERATIONS PERMITTED
UNDER THE RELEVANT LEASE, SUCH WORK TO BE PERFORMED ON THE TERMS CONFERRING NO
MORE THAN A CONTRACTUAL RIGHT AGAINST LESSEE AND NO RIGHT AGAINST THE CAR; AND,
PROVIDED, FURTHER, THAT LESSEE MAY PLACE THE CARS INTO THE INTERCHANGE PROGRAM
UNDER THE AAR INTERCHANGE RULES. No assignment or sublease, whether authorized
in this Section or in violation of the terms hereof, shall relieve Lessee of its
obligations hereunder and Lessee shall remain primarily liable hereunder. Lessee
will not, without the prior written consent of Lessor, sublease or otherwise in
any manner deliver, transfer or relinquish possession of any Car. (b) Lessor may
assign any or all of its rights, obligations, title and interest hereunder, or
the right to enter into any Schedule ; provided, however, that no such
assignment by Lessor may materially increase the burdens or risks placed on
Lessee under the relevant Lease, or may resell (through syndication, assignment,
participation or placements) an interest in any or all of the Cars, this Lease
or any Schedule. Notwithstanding any assignment by Lessor, Lessee shall be
entitled to continue to make payments to LaSalle National Leasing Corporation
("LaSalle"), as agent for any and all assignees of LaSalle, and Lessee shall not
be required to provide notices to any parties other than to LaSalle, as agent
for any and all assignees. Each Schedule, incorporating by reference the terms
and conditions of this Lease, constitutes a separate instrument of lease, and
the "Lessor" named therein or its assignee shall have all rights as "Lessor"
thereunder separately exercisable by such named Lessor or assignee as the case
may be, exclusively and independently of Lessor or any assignee with respect to
other Schedules executed pursuant hereto. Lessee agrees to confirm in writing
receipt of

                                       15

<PAGE>

any notice of assignment, syndication, participation or placement, as reasonably
may be requested by Lessor or any such assignee or participant (collectively,
the "Assignee"). Without waiving any rights Lessee may have against Lessor,
Lessee hereby waives and agrees not to assert against any such Assignee any
defense, setoff, recoupment, claim or counterclaim which Lessee has or may at
any time hereafter have against Lessor or any Person other than such Assignee,
for any reason whatsoever. Lessee will provide reasonable assistance to Lessor
in whatever manner necessary but at Lessor's expense in order to permit Lessor
to complete any resale, syndication, assignment, participation or placement of
the transaction contemplated by this Lease. Lessee agrees that any such
assignment shall not materially change Lessee's duties or obligations under this
Lease or any Schedule, or materially increase Lessee's risks or burdens. Upon
such assignment and except as may otherwise by provided herein, all references
in this Lease to Lessor shall include such Assignee. (c) Subject always to the
foregoing, this Lease inures to the benefit of, and is binding upon, the
successors and assigns of the parties hereto.

     22. MISCELLANEOUS. (a) This Lease and the Schedules constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall not be rescinded, amended or modified in any manner except by a document
in writing executed by both parties. (b) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. (c) The representations,
warranties and covenants of Lessee herein shall be deemed to be continuing on
the closing hereunder. Each execution by Lessee of a Schedule shall be deemed a
reaffirmation and warranty that there shall have been no material adverse change
in the business or financial condition of Lessee from the date of execution
hereof. The obligations of Lessee under Sections 9, 11, 16 and 17, which accrue
during the term of this Lease, shall survive the termination of this Lease. The
obligations of Lessor under Sections 11 and 17, which accrue during the term of
this Lease, shall survive the termination Lease. (d) Lessor represents and
covenants to Lessee that Lessor has full authority to enter into this Lease and
that, conditioned upon Lessee performing all of the covenants and conditions
hereof, as to claims of Lessor or persons claiming under Lessor, Lessee shall
peaceably and quietly hold, possess and use the Cars during the term of this
Lease subject to the terms and provisions hereof. Lessor further agrees to
enforce Lessee's right of quiet enjoyment as provided for herein against Liens
(as defined in Section 12) of third parties created by or through Lessor. (e)
Lessee irrevocably appoints Lessor as Lessee's attorney-in-fact (which power
shall be deemed irrevocable and coupled with an interest) to execute, endorse
and deliver any documents and checks or drafts relating to or received in
payment for any loss or damage under the policies of insurance required by the
provisions of Section 11 hereof, but only to the extent that the same relates to
the Cars. (f) LESSEE HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH LESSEE AND LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING
TO THIS LEASE. IT IS HEREBY AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS LEASE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY LESSEE AND LESSEE
HEREBY ACKNOWLEDGES THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY
ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR
NULLIFY ITS EFFECT. LESSEE FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN
THE SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. (g) All notices (excluding billings and
communications in the ordinary course of business) hereunder shall be in
writing, personally delivered, delivered by overnight courier service, sent by
facsimile transmission (with confirmation of receipt), or sent by certified
mail, return receipt requested, addressed to the other party at its respective
address stated below the signature of such party or at such other address as
such party shall from time to time designate in writing to the other party; and
shall be effective upon receipt. (h) This Lease shall not be effective unless
and until accepted by execution by an officer of Lessor at the address, in the
State of New York, as set forth below the signature of Lessor. (i) All
warranties, representations, indemnities and covenants made by any party hereto,
herein or in any certificate or other instrument delivered by any such party or
on the behalf of any such party under this Lease shall be considered to have
been relied upon by each other party hereto and shall survive the

                                       16

<PAGE>

consummation of the transactions contemplated regardless of any investigation
made by any such party or on behalf of any such party. (j) If any payment is to
be made hereunder or any action is to be taken hereunder on any date that is not
a Business Day, such payment or action otherwise required to be made or taken on
such date shall be made or taken on the next succeeding Business Day. (k) THIS
LEASE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH
STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
REGARDLESS OF THE LOCATION OF THE CARS. (l) The parties agree that any action or
proceeding arising out of or relating to this Lease may be commenced in any
state or Federal court in the State of New York, and agree that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and shall confer personal jurisdiction if served personally or by
certified mail to it at its address hereinbelow set forth, or as it may provide
in writing from time to time, or as otherwise provided under the laws of the
State of New York. (m) This Lease and all of the other Lease Documents may be
executed in any number of counterparts and by different parties hereto or
thereto on separate counterparts, each of which, when so executed and delivered,
shall be an original, but all such counterparts shall together consist of but
one and the same instrument; provided, however, that to the extent that this
Lease and/or the Schedule would constitute chattel paper, as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest herein or therein may be created through the
transfer or possession of this Lease in and of itself without the transfer or
possession of the original of such Schedule and incorporating the Lease by
reference; and no security interest in this Lease and a Schedule may be created
by the transfer or possession of any counterpart of such Schedule other than the
original thereof, which shall be identified as the document marked "Original"
and all other counterparts shall be marked "Duplicate".

     23. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following terms when
used in this Lease or in any Schedule have the following meanings: (1)
"applicable law" or "law": any law, rule, regulation, ordinance, order, code,
common law, interpretation, judgment, directive, decree, treaty, injunction,
writ, determination, award, permit or similar norm or decision of any
governmental authority; (2) "UCC" or "Uniform Commercial Code": the Uniform
Commercial Code as in effect in the State of New York or in any other applicable
jurisdiction; and any reference to an article (including Article 2A) or section
thereof shall mean the corresponding article or section (however termed) of any
such other applicable version of the Uniform Commercial Code; (4) "governmental
authority": any Federal, state, county, municipal, regional or other
governmental authority, agency, board, body, instrumentality or court, in each
case, whether domestic or foreign. (b) The following terms when used herein or
in any Schedules shall be construed as follows: "herein," "hereof," "hereunder,"
etc.: in, of, under, etc. this Lease or such other Lease Document in which such
term appears (and not merely in, of, under, etc. the section or provision where
the reference occurs); "including": containing, embracing or involving all of
the enumerated items, but not limited to such items unless such term is followed
by the words "and limited to," or similar words; and "or": at least one, but not
necessarily only one, of the alternatives enumerated. Any defined term used in
the singular preceded by "any" indicates any number of the members of the
relevant class. Any Lease Document or other agreement or instrument referred to
herein means such agreement or instrument as supplemented and amended from time
to time. Any reference to Lessor or Lessee shall include their permitted
successors and assigns. Any reference to a law shall also mean such law as
amended, superseded or replaced from time to time. (c) Unless otherwise
expressly provided herein to the contrary, all actions that Lessee takes or is
required to take under any Lease Document shall be taken at Lessee's sole cost
and expense, and all such costs and expenses shall constitute claims and be
covered by Section 17(a) hereof. (d) To the extent Lessor is required to give
its consent or approval with respect to any matter, the reasonableness of
Lessor's withholding of such consent shall be determined based on the then
existing circumstances; provided, that Lessor's withholding of its consent shall
be deemed reasonable for all purposes if (i) the taking of the action that is
the subject of such request, might result (in Lessor's discretion), in (A) an
impairment of Lessor's rights, title or interests hereunder or under any
Schedule or other Lease Document, or to the Cars, or (B) expose Lessor to any
Claims, or (ii) to the extent Lessee fails to provide promptly to Lessor any
filings, certificates, opinions or indemnities specified by Lessor to Lessee in
writing. (e) As used herein, the following terms shall have the following
meaning:

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<PAGE>

     (1)  "Adverse Environmental Condition": shall mean (i) the existence or the
          continuation of the existence, of an Environmental Contamination
          (including, without limitation, a sudden or non-sudden accidental or
          non-accidental Environmental Contamination), of, or exposure to, any
          substance, chemical, material, pollutant, Hazardous Substance, odor or
          audible noise or other release or emission in, into or onto the
          environment (including without limitation, the air, ground, water or
          any surface) at, in, by, from or related to any Car, (ii) the
          environmental aspect of the transportation, storage, treatment or
          disposal of materials in connection with the operation of any Car, or
          (iii) the violation, or alleged violation, of any Environmental Law,
          permits or licenses of, by or from any governmental authority, agency
          or court relating to environmental matters connected with any Car.

     (2)  "Affiliate" shall mean, with respect to any given Person, any Person
          that directly or indirectly through one or more intermediaries,
          controls, or is controlled by, or is under common control with, such
          Person.

     (3)  "Business Day" shall mean any day other than a Saturday, a Sunday or
          any day on which commercial banks are authorized or required by law to
          be closed in the States of Maryland or California.

     (4)  "Environmental Claim" shall mean any accusation, allegation, notice of
          violation, claim, demand, abatement or other order on direction
          (conditional or otherwise) by any governmental authority or any Person
          for personal injury (including sickness, disease or death), tangible
          or intangible property damage, damage to the environment or other
          adverse affects on the environment, or for fines, penalties or
          restrictions, resulting from or based upon any Adverse Environmental
          Condition.

     (5)  "Environmental Contamination" shall mean any actual or threatened
          release, spill, emission, leaking, pumping, injection, presence,
          deposit, abandonment, disposal, discharge, dispersal, leaching or
          migration into the indoor or outdoor environment, or into or out of
          any Car, including, without limitation, the movement of any Hazardous
          Substance or other substance through or in the air, soil, surface
          water, groundwater or property.

     (6)  "Environmental Law" shall mean any present or future federal, foreign,
          state or local law, ordinance, order, rule or regulation and all
          judicial, administrative and regulatory decrees, judgments and orders,
          pertaining to health, industrial hygiene, the use, disposal or
          transportation of Hazardous Substances, Environmental Contamination,
          or pertaining to the protection of the environment, including, but not
          limited to, the Comprehensive Environmental Response, Compensation,
          and Liability Act ("CERCLA") (42 U.S.C.Section 9601 et seq.), the
                                                              -- ---
          Hazardous Material Transportation Act (49 U.S.C.Section 1801 et seq.),
                                                                       -- ---
          the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
                                                                          --
          seq.), the Resource Conservation and Recovery Act (42 U.S.C.Section
          ---
          6901 et seq.), the Clean Air Act (42 U.S.C.Section 7401 et seq.), the
               -- ---                                             -- ---
          Toxic Substances Control Act (15 U.S.C.Section 2601 et seq.), the
                                                              -- ---
          Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.Section
          1361 et seq.), the Occupational Safety and Health Act (19
               -- ---
          U.S.C.Section 651 et seq.), and the Hazardous and Solid Waste
                            -- ---
          Amendments (42 U.S.C.Section 2601 et seq.), as these laws have been or
                                            -- ---
          may be amended or supplemented, and any successor thereto, and any
          analogous foreign, state or local statutes, and the rules, regulations
          and orders promulgated pursuant thereto.

     (7)  "Environmental Loss" shall mean any loss, cost, damage, liability,
          deficiency, fine, penalty or expense (including, without limitation,
          reasonable attorneys' fees, engineering and other professional or
          expert fees), investigation, removal, cleanup and remedial costs
          (voluntarily or involuntarily incurred) and damages to, loss of the
          use of or decrease in value of any Car arising out of or related to
          any Adverse Environmental Condition.

     (8)  "Hazardous Substances" shall mean and include hazardous substances as
          defined in CERCLA; oil of any kind, petroleum products and their
          by-products, including, but not limited to, sludge or residue;
          asbestos containing materials; polychlorinated biphenyls; any and all
          other hazardous or toxic substances; hazardous waste, as defined in
          CERCLA; medical waste; infectious waste; those substances listed in
          the United States

                                       18

<PAGE>

          Department of Transportation Table (49 C.F.R. Section 172.101);
          explosives; radioactive materials; and all other pollutants,
          contaminants and other substances regulated or controlled by the
          Environmental Laws and any other substance that requires special
          handling in its collection, storage, treatment or disposal under the
          Environmental Laws.

     (9)  "Person" shall mean any individual, partnership, corporation, trust,
          unincorporated organization, government or department or agency
          thereof and any other entity.

                                       19

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Railcar Lease
Agreement to be duly executed, under seal, as of the day and year first above
set forth.

LASALLE NATIONAL LEASING CORPORATION            PACER INTERNATIONAL, INC.
Lessor                                          Lessee


By:                                   [SEAL]    By:                       [SEAL]
    ----------------------------------              ----------------------
Name:                                           Name:
     ---------------------------------------         ---------------------------
Title:                                          Title:
      --------------------------------------          --------------------------

     One West Pennsylvania Avenue                     1340 Treat Boulevard
     Suite 1000                                       Suite 200
     Towson, Maryland 21204                           Walnut Creek, CA 94596
     Facsimile:  (410) 769-9313                       Facsimile: 925-979-4215

                                       20

</TEXT>
</DOCUMENT>
