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EXHIBIT 10.16.4
---------------------------------------
EQUIPMENT LEASE AGREEMENT
(TRLIII 2003-1C)
Dated as of November 12, 2003
between
TRLIII 2003-1C RAILCAR STATUTORY TRUST,
a Connecticut Statutory Trust,
Lessor
and
TRINITY RAIL LEASING III L.P.,
Lessee
Tank Cars and Freight Cars
---------------------------------------
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO
THIS LEASE, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND
TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL
SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR
OF, WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND
SECURITY AGREEMENT (TRLIII 2003-1C), DATED AS OF NOVEMBER 12,
2003 BETWEEN SAID
INDENTURE TRUSTEE, AS SECURED PARTY, AND
LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY
INTEREST MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS
ADDRESS SET FORTH IN SECTION 20 OF THIS LEASE. SEE SECTION
25.2 FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL
HOLDER AND HOLDERS OF, THE VARIOUS COUNTERPARTS HEREOF.
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SECTION 1.
Definitions........................................................
1
SECTION 2.
Acceptance and Leasing of Equipment................................
1
SECTION 3.
Term and Rent......................................................
1
Section
3.1
Lease Term....................................................
1
Section
3.2
Basic Rent....................................................
1
Section
3.3
Supplemental Rent.............................................
2
Section
3.4
Adjustment of Rent............................................
2
Section
3.5
Manner of Payments............................................
3
SECTION 4.
Ownership and Marking of Equipment.................................
3
Section
4.1
Retention of Title............................................
3
Section
4.2 Duty
to Number and Mark Equipment.............................
3
Section
4.3
Prohibition Against Certain Designations......................
4
SECTION 5.
Disclaimer of Warranties...........................................
4
Section
5.1
Disclaimer of Warranties......................................
4
Section
5.2
Rights Under Subleases........................................
5
SECTION 6.
Return of Equipment; Storage.......................................
5
Section
6.1
Return; Holdover Rent.........................................
5
Section
6.2
Condition of Equipment........................................
7
SECTION 7.
Liens..............................................................
8
SECTION 8.
Maintenance; Possession; Compliance with Laws......................
8
Section
8.1
Maintenance and Operation.....................................
8
Section
8.2
Possession and Use............................................
10
Section
8.3
Sublease......................................................
10
SECTION 9.
Modifications......................................................
13
Section
9.1
Required Modifications........................................
13
Section
9.2
Optional Modifications........................................
13
Section
9.3
Removal of Property; Replacements.............................
14
SECTION 10.
Voluntary Termination..............................................
14
Section
10.1 Right of
Termination.......................................... 14
Section
10.2 Sale of
Equipment............................................. 15
Section
10.3 Retention
of Equipment by Lessor.............................. 16
Section
10.4
Termination of Lease..........................................
18
SECTION 11.
Loss, Destruction Requisition, Etc.................................
18
Section
11.1 Event of
Loss................................................. 18
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Section
11.2
Replacement or Payment upon Event of Loss; Substitution........
18
Section
11.3 Rent
Termination...............................................
20
Section
11.4
Disposition of Equipment; Replacement of Unit..................
21
Section
11.5 Eminent
Domain.................................................
22
SECTION 12.
Insurance...........................................................
22
Section
12.1
Insurance......................................................
22
Section
12.2 Physical
Damage Insurance...................................... 24
Section
12.3 Public
Liability Insurance.....................................
24
Section
12.4
Certificate of Insurance.......................................
26
Section
12.5 Additional
Insurance........................................... 26
Section
12.6 Post-Lease
Term Insurance...................................... 27
SECTION 13.
Reports;
Inspection.................................................
27
Section
13.1 Duty of
Lessee to Furnish......................................
27
Section
13.2
Inspection.....................................................
28
SECTION 14.
Lease Events of
Default............................................. 29
SECTION 15.
Remedies............................................................
32
Section
15.1
Remedies.......................................................
32
Section
15.2 Cumulative
Remedies............................................ 35
Section
15.3 No
Waiver......................................................
36
Section
15.4 Notice of
Lease Default........................................ 36
Section
15.5 Lessee's
Duty to Return Equipment Upon Default................. 36
Section
15.6 Specific
Performance; Lessor Appointed Lessee's Agent.......... 37
SECTION 16.
Filings; Further
Assurances......................................... 37
Section
16.1
Filings........................................................
37
Section
16.2 Further
Assurances.............................................
37
Section
16.3 Other
Filings..................................................
38
Section
16.4
Expenses.......................................................
38
SECTION 17.
Lessor's Right to
Perform........................................... 38
SECTION 18.
Assignment..........................................................
38
Section
18.1 Assignment
by Lessor........................................... 38
Section
18.2 Assignment
by Lessee........................................... 39
Section
18.3
Sublessee's or Others Performance and Rights...................
39
SECTION 19.
Net Lease,
Etc......................................................
39
SECTION 20.
Notices.............................................................
41
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SECTION 21.
Concerning the Indenture
Trustee................................................
42
Section
21.1 Limitation
of the Indenture Trustee's Liabilities..........................
42
Section
21.2 Right,
Title and Interest of the Indenture Trustee Under
Lease............. 42
SECTION 22.
Purchase Options; Renewal
Option................................................ 42
Section
22.1 Early
Purchase
Option......................................................
42
Section
22.2 Election
to Retain or Return Equipment at End of Basic or Renewal Term.....
44
Section
22.3 Purchase
Option............................................................
44
Section
22.4 Renewal
Option.............................................................
45
Section
22.5 Rent
Appraisal, Outside Renewal
Date....................................... 45
Section
22.6 Stipulated
Loss Amount and Termination Amount During Renewal Term..........
45
SECTION 23.
Limitation of Lessor's
Liability................................................
46
SECTION 24.
Investment of Security
Funds....................................................
46
SECTION 25.
Miscellaneous...................................................................
46
Section
25.1 Governing
Law; Severability................................................
46
Section
25.2 Execution
in Counterparts..................................................
46
Section
25.3 Headings
and Table of Contents; Section References.........................
46
Section
25.4 Successors
and Assigns.....................................................
47
Section
25.5 True
Lease.................................................................
47
Section
25.6 Amendments
and Waivers.....................................................
47
Section
25.7
Survival...................................................................
47
Section
25.8 Business
Days..............................................................
47
Section
25.9 Directly
or Indirectly; Performance by Managers............................
48
Section
25.10 Incorporation by
Reference.................................................
48
Section
25.11 No Partnership
Created.....................................................
48
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APPENDICES AND EXHIBITS
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Exhibit A - Form
of Lease Supplement
Exhibit B-1 - Form of Net Sublease
Exhibit B-2 - Form of Full Service Sublease
Appendix A -
Definitions
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iv
<PAGE>
EQUIPMENT LEASE AGREEMENT
(TRLIII 2003-1C)
This Equipment Lease Agreement (TRLIII 2003-1C), dated as of
November 12, 2003 (this "Lease"), is by and between TRLIII 2003-1C
Railcar
Statutory Trust, a Connecticut statutory trust, as Lessor, and
Trinity Rail
Leasing III L.P., a Texas limited partnership, as Lessee.
In consideration of the mutual agreements herein contained and
other
good and valuable consideration, receipt of which is hereby
acknowledged, the
parties hereto agree as follows:
SECTION 1. Definitions.
Unless otherwise defined herein or required by the context, all
capitalized terms used herein shall have the respective meanings
assigned to
such terms in Appendix A hereto for all purposes of this Lease.
SECTION 2. Acceptance and Leasing of Equipment.
Subject to Section 4 of the Participation Agreement, Lessor
hereby
agrees to accept delivery of each Unit from Lessee and to lease
such Unit to
Lessee hereunder, and Lessee hereby agrees, immediately following
such
acceptance by Lessor, to lease from Lessor hereunder such Unit,
such acceptance
by Lessor and lease by Lessee to be evidenced by the execution and
delivery by
Lessee and Lessor of a Lease Supplement covering such Unit, all in
accordance
with Section 2.3(b) of the Participation Agreement. Lessee hereby
agrees that
its execution and delivery of a Lease Supplement covering any Unit
shall,
without further act, irrevocably constitute acceptance by Lessee of
such Unit
for all purposes of this Lease.
SECTION 3. Term and Rent.
Section 3.1 Lease Term. The basic term of this Lease (the
"Basic
Term") shall commence on the Basic Term Commencement Date and,
subject to
earlier termination pursuant to Section 10, 11, 15 or 22.1, shall
expire at
11:59 p.m. (Chicago, Illinois time) on the date immediately prior
to the Basic
Term Expiration Date. Subject and pursuant to Section 22.4, Lessee
may elect one
Renewal Term.
Section 3.2 Basic Rent. Lessee hereby agrees to pay to Lessor
Basic
Rent for each Unit throughout the Basic Term applicable thereto in
consecutive
monthly installments payable on each Rent Payment Date. Each such
monthly
payment of Basic Rent shall be in an amount equal to the product of
the
Equipment Cost for each Unit subject to lease hereunder multiplied
by the Basic
Rent percentage set forth opposite such Rent Payment Date on
Schedule 3-A to the
Participation Agreement (as such Schedule 3-A shall be adjusted
pursuant to
Section 2.6 of the Participation Agreement). Notwithstanding
Lessee's payment
obligations set forth in the preceding two sentences, Lessee's
liability on
account of the use of the Units during each Lease Period shall
accrue and be
allocated within the meaning of Treasury Regulation Section
1.467-1(c)(2)(ii)(A)(2) to each Lease Period as set forth on
Schedule 3-B to the
Participation
<PAGE>
Agreement. Basic Rent shall be allocated to each calendar year in
the Basic Term
based upon the assumption that each calendar year in the Basic Term
is 360 days,
consisting of four 90-day quarters and twelve 30-day months. It is
the intention
of Lessor and Lessee that (x) the allocations of Basic Rent set
forth on
Schedule 3-B to the Participation Agreement constitute specific
allocations of
fixed rent within the meaning of Treasury Regulation Section
1.467-1(c)(2)(ii)
and (y) the first three Lease Periods shall constitute a rent
holiday to which
no Basic Rent is allocated. Stipulated Loss Amounts and Termination
Amounts have
been calculated on the basis that (i) any Basic Rents actually due
on the date
of such calculation shall not have been paid and (ii) any Basic
Rents scheduled
to have been paid prior to the date of such calculation are assumed
to have been
paid and have been appropriately reflected in such calculations.
Lessor and
Lessee agree to include in income and deduct the Basic Rents
allocated to each
Lease Period and calendar year according to Schedule 3-B of the
Participation
Agreement.
Notwithstanding anything to the contrary contained herein or in
the
Participation Agreement, each installment of Basic Rent (both
before and after
any adjustment pursuant to Section 2.6 of the Participation
Agreement) shall be,
under any circumstances and in any event, in an amount at least
sufficient for
Lessor to pay in full as of the due date of such installment, an
amount equal to
the sum of (x) any payment of principal of and interest on the
Equipment Notes
required to be paid by Lessor pursuant to the Indenture on such due
date in
accordance with the Scheduled Amortization and (y) the Policy
Provider Base
Premium Amount required to be paid on the due date of such
installment.
Section 3.3 Supplemental Rent. Lessee also agrees to pay to
Lessor,
or to whosoever shall be entitled thereto, any and all Supplemental
Rent, as and
when due, or where no due date is specified, promptly after demand
by the Person
entitled thereto, and in the event of any failure on the part of
Lessee to pay
any Supplemental Rent, Lessor shall have all rights, powers and
remedies
provided for herein or by law or equity or otherwise as in the case
of
nonpayment of Basic Rent. Lessee will also pay, as Supplemental
Rent, (i) on
demand, to the extent permitted by applicable law, an amount equal
to Late
Payment Interest on any part of any installment of Basic Rent not
paid when due
for any period for which the same shall be overdue and on any
payment of
Supplemental Rent not paid when due or promptly after demanded for
the period
from such due date or demand date, as applicable, until the same
shall be paid
and (ii) as and when due in accordance with the Trust Indenture or
the
Participation Agreement, any Make-Whole Amount payable with respect
to any
Equipment Note, including, without limitation, amounts of
Make-Whole Amount due
in the case of the termination of this Lease with respect to any
Unit pursuant
to Section 6.9 (other than clause 6.9(a)(C) thereof) of the
Participation
Agreement, and in the case of any refinancing of the Equipment
Notes pursuant to
Section 10.2 of the Participation Agreement but excluding any
Make-Whole Amount
payable pursuant to Section 4.4(b) of the Indenture. All
Supplemental Rent to be
paid pursuant to this Section 3.3 shall be payable in the type of
funds and in
the manner set forth in Section 3.5.
Section 3.4 Adjustment of Rent. Lessee and Lessor agree that
the
payments and allocations of Basic Rent, Stipulated Loss Values,
Stipulated Loss
Amounts, Termination Values and Termination Amount percentages and
the Early
Purchase Price shall be adjusted to the extent provided in Section
2.6 of the
Participation Agreement.
2
<PAGE>
Section 3.5 Manner of Payments. All Rent (other than
Supplemental
Rent payable to Persons other than Lessor, which shall be payable
to such other
Persons in accordance with written instructions furnished to Lessee
by such
Persons, as otherwise provided in any of the Operative Agreements
or as required
by law) shall be paid by Lessee to Lessor at its office at 225
Asylum Street,
23rd Floor, Hartford, CT 06103, Attention: Corporate Trust
Department, provided,
that so long as the Indenture shall not have been discharged
pursuant to the
terms thereof, Lessor hereby directs, and Lessee hereby agrees,
that all Rent
(excluding Excepted Property) payable to Lessor shall be paid from
the Payment
Account directly to the Indenture Trustee at the times and in funds
of the type
specified in this Section 3.5 at the office of the Indenture
Trustee at Rodney
Square North, 1100 N. Market Street, Wilmington, DE 19890-0001, ABA
No.
031100092, Account No. 64008-0, Ref: Trinity Rail-TRLIII 2003-1C,
or at such
other location in the United States of America as the Indenture
Trustee may
otherwise direct. All Rent shall be paid by Lessee to the recipient
not later
than 11:00 a.m. Chicago, Illinois time on the date of such payment
in funds
consisting of lawful currency of the United States of America,
which shall be
immediately available. Notwithstanding anything contained in this
Lease to the
contrary, any amounts received by any Person pursuant to
distribution from any
of the Accounts shall for all purposes hereof be deemed payment in
satisfaction
of the related obligation hereunder to which such distribution
relates and any
failure by Lessor, the Indenture Trustee or any Indemnified Party
to receive
from the Collateral Agent the full amount of any such distribution
measured by
reference to Basic Rent, Supplemental Rent or any component thereof
shall be
deemed a failure by Lessee to pay such Basic Rent or Supplemental
Rent
hereunder, as the case may be.
SECTION 4. Ownership and Marking of Equipment.
Section 4.1 Retention of Title. Lessor shall and hereby does
retain
full legal title to and beneficial ownership of each Unit for all
purposes
(including for all tax purposes) notwithstanding the delivery to
and possession
and use of such Unit by Lessee hereunder or any Sublessee under any
sublease
permitted hereby.
Section 4.2 Duty to Number and Mark Equipment. With respect to
the
Units to be delivered on the Closing Date, Lessee represents that
Manager has
caused, and on or prior to the date on which a Lease Supplement is
executed and
delivered in respect of a Replacement Unit pursuant to Section
11.4(b) (or, if
the applicable Replacement Unit is not in the possession of Lessee
or the
Manager, as soon as practicable and in any event no later than ten
Business Days
after the earliest date on which Lessee or the Manager obtains
possession of
such Replacement Unit (whether for purposes of repair or
maintenance or
otherwise)), Lessee will cause, each Unit to be numbered with the
reporting mark
shown on the Lease Supplement dated the date on which such Unit was
delivered
and covering such Unit, and will from and after such date keep and
maintain,
plainly, distinctly, permanently and conspicuously marked by a
plate or stencil
printed in contrasting colors upon each side of each Unit, in
letters not less
than one inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT
FILED WITH THE SURFACE TRANSPORTATION BOARD"
3
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with appropriate changes thereof and additions thereto as from time
to time may
be required by law in order to protect Lessor's right, title and
interest in and
to such Unit, its rights under this Lease and the rights of the
Indenture
Trustee. Except as provided hereinabove, Lessee will not place any
such Units in
operation or exercise any control or dominion over the same until
the required
legend shall have been so marked on both sides thereof, and will
replace
promptly any such word or words in such legend which may be
removed, defaced,
obliterated or destroyed. In the event of a change in the reporting
mark of any
Unit, as soon as practicable (and in any event within 60 days after
a
Responsible Officer of the Manager has received notice of any such
changed mark)
a statement of the new reporting mark to be substituted therefor
shall be
delivered by Lessee to Lessor and, so long as the Indenture shall
not have been
discharged pursuant to its terms, to the Indenture Trustee. As soon
as
practicable, but in any event within 30 days, after the delivery of
such
statement a supplement to this Lease and, if not so discharged, the
Indenture,
with respect to such new reporting marks, shall be filed or
recorded in all
public offices where this Lease and the Indenture shall have been
filed or
recorded and in such other places, if any, where Lessor and, so
long as the
Indenture shall not have been discharged pursuant to its terms, the
Indenture
Trustee may reasonably request in order to protect, preserve and
maintain its
right, title and interest in the Units. The costs and expenses of
all such
supplements, filings and recordings shall be borne by Lessee.
Section 4.3 Prohibition Against Certain Designations. Except as
provided in Section 4.2 above, Lessee will not allow or permit the
name of any
Person to be placed on any Unit as a designation that might
reasonably be
interpreted as a claim of ownership and shall not, and shall not
permit the
Manager, any Sublessee or any other Person to, alter the reporting
marks with
respect to any Unit. Lessee may cause or permit any Unit to be
lettered with the
names or initials or other insignia (other than reporting marks)
customarily
used by Lessee or any applicable Permitted Sublessee or any of
their respective
Affiliates on railcars used by it of the same or a similar type for
convenience
of identification of the right of Lessee to use such Unit hereunder
or such
Permitted Sublessee to use such Unit pursuant to a Permitted
Sublease.
SECTION 5. Disclaimer of Warranties.
Section 5.1 Disclaimer of Warranties. Without waiving any claim
Lessee may have against any seller, supplier or manufacturer,
LESSEE
ACKNOWLEDGES AND AGREES THAT (i) EACH UNIT IS OF A SIZE, DESIGN,
CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS
SATISFIED THAT
EACH UNIT IS SUITABLE FOR ITS PURPOSES AND LESSEE HAS ACCEPTED EACH
UNIT, (iii)
NEITHER LESSOR NOR OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER
IN PROPERTY
OF SUCH KIND OR HAS INSPECTED THE UNITS PRIOR TO DELIVERY TO AND
ACCEPTANCE BY
LESSEE, (iv) EACH UNIT IS LEASED HEREUNDER SUBJECT TO ALL
APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED AND (v)
LESSOR
LEASES AND LESSEE TAKES EACH UNIT "AS-IS", "WHERE-IS" AND "WITH ALL
FAULTS", IN
WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT NONE OF
LESSOR, AS
LESSOR OR IN ITS INDIVIDUAL CAPACITY, INDENTURE TRUSTEE, ANY LOAN
PARTICIPANT,
THE POLICY PROVIDER OR THE OWNER PARTICIPANT MAKES NOR SHALL BE
DEEMED TO HAVE
MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS,
WARRANTIES OR
4
<PAGE>
REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, USE,
CONDITION,
FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF
OR AS TO THE TITLE OF ANY UNIT, 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 AND EACH OF LESSOR, INDENTURE
TRUSTEE, ANY LOAN
PARTICIPANT, THE POLICY PROVIDER AND OWNER PARTICIPANT EXPRESSLY
DISCLAIMS
SELECTION OF THE UNITS, except that Lessor, in its individual
capacity,
represents and warrants that on the Closing Date, Lessor shall have
received
whatever title to each Unit as was conveyed to Lessor by Lessee and
each Unit
will be free of Lessor's Liens attributable to Lessor and provided
that the
foregoing disclaimer in clause (v) shall not extend to Owner
Participant's
representation and warranty contained in Section 3.5(e) of the
Participation
Agreement. Lessee's delivery of a Lease Supplement shall be
conclusive evidence
as between Lessee and Lessor that all Units described therein are
in all the
foregoing respects satisfactory to Lessee, and Lessee will not
assert any claim
of any nature whatsoever against Lessor based on any of the
foregoing matters.
Section 5.2 Rights and Obligations Under Subleases. Unless a
Lease
Event of Default shall have occurred and be continuing under
Section 14 and
Lessor shall have given written notice to Lessee, Lessor agrees to
make
available to Lessee such rights as Lessor may have, and Lessee
shall be entitled
to exercise all rights of Lessor under, each Sublease in each case,
subject to
the applicable provisions of this Lease and the Collateral Agency
Agreement, if
any. Lessor hereby delegates to Lessee, and Lessee hereby assumes
and shall be
obligated to perform, all obligations of Lessor under each
Sublease, in each
case subject to the applicable provisions of this Lease and
Collateral Agency
Agreement, if any.
SECTION 6. Return of Equipment; Storage.
Section 6.1 Return; Holdover Rent. (a) Not less than 180 days
prior
to the end of the Basic Term or the end of the Renewal Term, if
Lessee has
elected to return the Units under Section 22.2, Lessee will provide
Lessor with
a list of not less than ten (10) alternative storage locations
("Storage
Locations") used by Lessee for the storage of rolling stock within
the
Contiguous United States with sufficient available storage capacity
to store the
Units and the available storage capacities of such locations.
Unless Lessee
shall have purchased the Units pursuant to Section 22 of this Lease
or pursuant
to Section 6.9 of the Participation Agreement, not less than 90
days prior to
the end of the Lease Term, Lessor will give Lessee irrevocable
notice of its
decision either to take possession of or store the Units. If Lessor
shall have
decided to take possession of the Units, the terms of Section
6.1(b) will apply.
If Lessor shall have decided to store the Units, the terms of
Section 6.1(c)
will apply.
(b) Unless Lessee shall have purchased the Units pursuant to
Section
22 of this Lease or pursuant to Section 6.9 of the Participation
Agreement, if
Lessor shall have decided to take possession of the Units, Lessee
will, at its
sole risk and expense, deliver possession of the Units at any
storage
location(s), f.o.b. such location(s), (i) as may be agreed upon by
Lessor and
5
<PAGE>
Lessee in writing or (ii) in the absence of such agreement as
Lessor may
reasonably select by written notice to Lessee on or before the 90th
day before
the end of the Lease Term; provided, that (x) with respect to all
Units being so
delivered, there shall be no more than ten (10) locations (each of
which shall
be located within the Contiguous United States and shall have
adequate storage
capacities) and (y) Lessor's notice shall specify the total number
and type of
Units to be delivered to each location.
(c) (i) Unless Lessee shall have purchased the Units pursuant
to
Section 22 of this Lease or pursuant to Section 6.9 of the
Participation
Agreement, if Lessor shall have elected to store the Units upon the
expiration
of the Lease Term with respect thereto, Lessee shall store the
Units free of
charge and at the risk and expense of Lessee for a period (the
"Storage Period")
beginning, for any particular Storage Location, on the expiration
of the Lease
Term for such Units (the "Storage Period Commencement Date") and
ending not more
than 120 days after the later of (i) the date of such expiration
and (ii) the
date on which such Unit is in compliance with the conditions set
forth in
Section 6.2. On or before the 120th day before the end of the Lease
Term, Lessor
shall provide Lessee with written notice designating its choices
from among the
Storage Locations provided by Lessee pursuant to Section 6.1(a).
Any storage
provided by Lessee during the Storage Period shall be at the sole
risk and
expense of Lessee, and Lessee shall maintain the insurance required
by Section
12.1 with respect to all stored Units. During the Storage Period,
Lessee will
permit Lessor or any Persons designated by it, including the
authorized
representative or representatives of any prospective purchaser or
user of such
Units, to restencil the marks on such Units and to inspect the same
during
Lessee's normal business hours upon at least three Business Days'
prior written
or telephonic notice; provided, however, that such inspection and
restenciling
shall not interfere with the normal conduct of Lessee's business;
and provided,
further, that (x) such inspection and restenciling shall be at such
Person's own
risk and expense, (y) Lessee shall be indemnified by Lessor against
any loss or
damage incurred by it in connection with any such inspection or
restenciling by
such Person and (z) Lessee (except in the case of Lessee's gross
negligence or
willful misconduct) shall not be liable for any injury to, or the
death of, any
person exercising, either on behalf of Lessor or any prospective
purchaser or
user, the rights of inspection and restenciling granted pursuant
hereto. Lessee
shall not be required to store any Unit after the Storage Period.
If Lessee does
store any Unit after the expiration of the Storage Period, such
storage shall be
at the sole risk and expense of Lessor.
(ii) Upon the request and direction of Lessor (and at Lessor's
sole
risk and expense), on not more than one occasion with respect to
each stored
Unit and upon not less than 15 days' prior written notice from
Lessor to Lessee,
Lessee will, on or before the expiration of the Storage Period,
transport such
Unit to any railroad interchange point or points within the
Contiguous United
States on any railroad lines or to any connecting carrier for
shipment (with
appropriate instructions to cause such Unit to be transported to
such locations
in the Contiguous United States as Lessor shall direct), whereupon
Lessee shall
have no further liability or obligation with respect to such
Unit.
(iii) Upon receipt of Lessor's written notice designating its
choices from among the alternative Storage Locations provided by
Lessee under
Section 6.1(a), Lessee shall have the option to instead store such
Units at such
Storage Locations as it shall choose in which case the Storage
Period shall be
at the sole risk and expense of Lessee for a period of 60 days,
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<PAGE>
during which period Lessee shall be obligated to insure such Units
as provided
in Section 12. Upon receipt of such notice, Lessee will promptly
give notice to
Lessor of the locations at which Lessee will store such Units. If
Lessee shall
exercise such option, Lessee shall on or before the expiration of
the Storage
Period transport the Units to any railroad interchange point or
points within
the Contiguous United States on any railroad lines or to any
connecting carrier
for shipment (with appropriate instructions to cause such Units to
be
transported to such locations designated by Lessor upon not less
than 15 days'
prior written notice). The movement of any Unit from such Unit's
location as
designated by Lessee pursuant to this Section 6.1(c)(iii) to an
interchange
point thereafter designated by Lessor in accordance with the
foregoing sentence
will be at the risk and expense of Lessee. During any Storage
Period, Lessee
shall store the Units in such manner as the Manager normally stores
similar
units of railroad equipment owned or managed by it.
(d) Upon
the latest of (i) expiration of the Lease Term with respect
to a Unit, (ii) tender of such Unit at the location determined in
accordance
with Section 6.1(b) or, as applicable, the tender of such Unit for
storage in
accordance with Section 6.1(c) and (iii) compliance by such Unit
with Section
6.2, this Lease and the obligation to pay Basic Rent for such Unit
accruing
subsequent to the expiration of the Lease Term with respect to such
Unit shall
terminate.
(e) In the event any Unit is not (i) returned to Lessor in
accordance with the provisions of Section 6.l(b) on the last day of
the Lease
Term with respect thereto, or, if requested by Lessor pursuant to
Section
6.1(c), delivered and stored on such last day of the Lease Term,
and, in either
case, in the condition specified in Section 6.2 or (ii) deemed
automatically
renewed in accordance with the provisions of Section 22.7, the
Lease with
respect to such Unit shall continue in effect and Lessee shall pay
to Lessor for
each such day from the scheduled expiration of the Lease Term with
respect to
such Unit until the date on which such Unit is returned to Lessor
in accordance
with the provisions of Section 6.1(b) and in the condition
specified in Section
6.2, as liquidated damages and not as a penalty, an amount equal to
the daily
equivalent of the average Basic Rent for the Basic Term or the
Renewal Term, as
applicable, to such Unit. Notwithstanding the foregoing, nothing in
this Section
6.1(e) shall be construed as permitting or authorizing Lessee to
fail to meet,
or be construed as Lessor consenting to or waiving any failure by
Lessee to
perform, Lessee's obligation to return the Units in accordance with
the
requirements of this Lease. Nothing herein shall be in abrogation
of Lessor's
right to terminate this Lease under Section 15 as a result of such
failure or to
have such Unit returned to it for possession or storage.
(f) The assembling, delivery, storage and transporting of the
Units
as hereinbefore provided are of the essence of this Lease, and,
upon application
to any court of equity having jurisdiction on the premises, the
Lessor shall be
entitled to a decree against the Lessee requiring specific
performance thereof.
All rent earned in respect of the Units after the date of
termination of this
Lease shall belong to the Lessor and, if received by the Lessee,
shall be
promptly turned over to the Lessor.
Section 6.2 Condition of Equipment. Each Unit when returned to
Lessor pursuant to Section 6.1 shall be (i) capable of performing
the functions
for which it was designed, with all loading and unloading
components operating
in good working order with
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<PAGE>
allowance for normal wear and tear, (ii) suitable for continued
commercial use
in the commodity last carried immediately prior to such return,
(iii) suitable
for use in interchange in accordance with then applicable Federal
regulations,
the Field Manual of the AAR, the Interchange Rules and FRA rules
and
regulations, (iv) in all material respects in the condition
required by Section
8.1, (v) in conformance with any requirement pertaining to
warranties of the
Manufacturer of the Units during the warranty period then in
effect, (vi) empty,
(vii) cleaned in accordance with Prudent Industry Practice,
including with
respect to Hazardous Substances and (viii) free and clear of all
Liens except
Lessor's Liens. All logs, records, books and other materials, or
appropriate
copies of any thereof, relating to the maintenance of such Unit
shall be
delivered to Lessor or its designee upon the return of such Unit.
Lessor shall
have the right to inspect any Unit that is returned pursuant to
Section 6.1 to
ensure that such Unit is in compliance with the conditions set
forth in this
Section 6.2, at Lessor's sole cost, expense and risk (including,
without
limitation, the risk of personal injury or death), by its
authorized
representatives, during Lessee's normal business hours and upon
reasonable prior
notice to Lessee; provided, however, that Lessee shall not be
liable for any
injury to, or the death of, any Person exercising, on behalf of
Lessor, the
rights of inspection granted under this Section 6.2 unless caused
by Lessee's
gross negligence or willful misconduct); and provided further that
if as a
result of such inspection any Unit is found to be not in compliance
with this
Section 6.2, the Lessee will (i) promptly take such steps as are
necessary to
bring such Unit in compliance with the conditions set forth in this
Section 6.2
and (ii) pay the reasonable cost and expense of the original
inspection of such
Unit and any reinspection of such Unit conducted by Lessor required
because of
such non-compliance with Section 6.2. No inspection pursuant to
this Section 6.2
shall interfere with the normal conduct of Lessee's business or the
normal
conduct of any Sublessee's business, and Lessee shall not be
required to
undertake or incur any additional liabilities in connection
therewith. A Unit
shall not be deemed to have been returned for purposes of this
Lease unless and
until it is in compliance with the conditions set forth in this
Section 6.2.
SECTION 7. Liens.
Lessee will not directly or indirectly create, incur, assume,
permit
or suffer to exist any Lien, including without limitation any Lease
or Sublease,
on or with respect to any Unit or Lessee's leasehold interest
therein under this
Lease, except Permitted Liens, Lessor's Liens and Liens described
in Section
6.4(a) and 6.4(b) of the Participation Agreement. Lessee shall
promptly, at its
own expense, take such action or cause such action to be taken as
maybe
necessary to duly discharge (or bond to the reasonable satisfaction
of Lessor
and Indenture Trustee) any such Lien not excepted above if the same
shall arise
at any time.
SECTION 8. Maintenance; Possession; Compliance with Laws.
Section 8.1 Maintenance and Operation. (a) Lessee, at its own
cost
and expense, shall maintain, repair and keep each Unit, and cause
the Manager
under the Management Agreement to maintain, repair and keep each
Unit, (i)
according to Prudent Industry Practice and in all material
respects, in good
working order, and in good physical condition for railcars of a
similar age and
usage, normal wear and tear excepted, (ii) in a manner in all
material respects
consistent with maintenance practices used by the Manager in
respect of railcars
owned, leased or managed by the Manager similar in type to such
Unit or, with
respect to (A) any Equipment subject to an Existing Equipment
Sublease that is a
Net Sublease,
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<PAGE>
maintenance practices used by the applicable Sublessee in respect
of railcars
similar in type to such Unit used by such Sublessee on its domestic
routes in
the United States; (provided further, however that after the return
to the
Manager of any Unit which was subject to a Net Sublease immediately
prior to
such return, such Unit shall be maintained and repaired in all
material respects
in a manner consistent with maintenance practices used by the
Manager in respect
of railcars owned, leased or managed by the Manager similar in type
to such
Unit) and (B) any Permitted Sublease that is a Net Sublease entered
into after
the Closing Date where (x) the long term unsecured debt of the
applicable
Sublessee is rated at least BBB- by S&P and Baa3 by Moody's (or
at least BBB- by
S&P or Baa3 by Moody's if then rated by only one such rating
agency) or
similarly rated by any rating agency, (y) the applicable Sublessee
is organized
under the laws of the United States or any State thereof and (z)
the applicable
Sublessee is the owner or lessee of at least 250 railcars used
primarily on
domestic routes in the United States, maintenance practices used by
such
Sublessee in respect of railcars similar in type to such Unit,
(iii) in
accordance with all manufacturer's warranties in effect but only to
the extent
that the lack of compliance therewith would reasonably be expected
to adversely
affect the coverage thereunder and in accordance with all
applicable provisions,
if any, of insurance policies required to be maintained pursuant to
Section 12
and (iv) in compliance in all material respects with any applicable
laws and
regulations from time to time in effect, including, without
limitation, the
Field Manual of the AAR, FRA rules and regulations and Interchange
Rules as they
apply to the maintenance and operation of the Units in interchange
regardless of
upon whom such applicable laws and regulations are nominally
imposed; provided,
however, that, so long as the Manager or, with respect to any
Equipment subject
to an Existing Equipment Sublease which is a Net Sublease, the
applicable
Sublessee, as applicable, is similarly contesting such law or
regulation with
respect to all other similar equipment owned or operated by Manager
or, with
respect to any Equipment subject to an Existing Equipment Sublease
which is a
Net Sublease, the applicable Sublessee, as applicable, Lessee (or
such
Sublessee) may, in good faith and by appropriate proceedings
diligently
conducted, contest the validity or application of any such
standard, rule or
regulation in any manner that does not (w) materially interfere
with the use,
possession, operation or return of any of the Units, (x) materially
adversely
affect the rights or interests of Lessor, Policy Provider or the
Indenture
Trustee in the Units or hereunder, (y) expose Lessor, Policy
Provider or the
Indenture Trustee to criminal sanctions or (z) violate any
maintenance
requirements contained in any insurance policy required to be
maintained by the
Lessee under this Lease or the Collateral Agency Agreement if such
violation
would reasonably be expected to adversely affect the coverage
thereunder;
provided further, that Lessee shall promptly notify Lessor, Policy
Provider and
Indenture Trustee in reasonable detail of any such contest. In no
event shall
Lessee discriminate in any material respect as to the use or
maintenance of any
Unit (including the periodicity of maintenance or recordkeeping in
respect of
such Unit) as compared to equipment of a similar nature which the
Manager owns
or manages. Lessee will maintain all records, logs and other
materials required
by relevant industry standards or any governmental authority having
jurisdiction
over the Units required to be maintained in respect of any Unit,
all as if
Lessee were the owner of such Units, regardless of whether any
such
requirements, by their terms, are nominally imposed on Lessee,
Lessor or Owner
Participant.
(b) Without the written waiver or consent of Lessor (which waiver
or
consent will not be unreasonably withheld), Lessee shall not
change, or permit
any Sublessee to change, a DOT/AAR classification (as provided for
in 49 C.F.R.
Part 179 or any successor thereto), or permit any Sublessee to
operate any Unit
under a different DOT/AAR classification, from that
9
<PAGE>
classification in effect for such Unit on the Closing Date, except
for any
change in tank test pressure rating provided such change does not
increase the
pressure rating of the Unit above the tank test pressure to which
the Unit was
manufactured; provided however, that in the event Lessor shall not
have provided
Lessee with a written waiver or consent to such a reclassification
or operation
of any Unit within 10 Business Days after receipt of Lessee's
written request
therefor (or Lessor expressly rejects such a request by Lessee),
Lessee may
elect to replace such Unit in accordance with and subject to the
provisions of
Sections 11.2(a)(i), 11.3 and 11.4.
(c) Lessor hereby appoints and constitutes Lessee its agent and
attorney-in-fact during the Lease Term to assert and enforce, from
time to time,
in the name and for the account of Lessor and Lessee, as their
interests may
appear, but in all cases at the sole cost and expense of Lessee,
whatever claims
and rights Lessor may have as owner of each Unit against the
manufacturers or
any prior owner thereof, and Lessee agrees that it shall and shall
cause the
Manager to, assert and enforce all such claims and rights;
provided, however,
that if at any time a Lease Event of Default shall have occurred
and be
continuing, at Lessor's option, such power of attorney shall
terminate, and
Lessor may assert and enforce, at Lessee's sole cost and expense,
such claims
and rights.
Section 8.2 Possession and Use. Lessee shall be entitled to the
possession of the Units and to the use of the Units by it or any
Affiliate in
the United States and, subject to the remaining provisions of this
Section 8.2
and Section 8.3, Canada and Mexico, only in the manner for which it
was designed
and intended and so as to subject it only to ordinary wear and
tear. In no event
shall Lessee use, store or permit the use or storage of any Unit in
any
jurisdiction not included in the insurance coverage required by
Section 12. The
Units shall be used primarily on domestic routes in the United
States, and in no
event shall more than seventeen and one half percent (17.5%) of the
Units (as
determined by mileage records and measured annually on a calendar
year basis) be
used outside the Contiguous United States; provided, that such
maximum
percentage shall be increased to (i) 25% on the sixth anniversary
of the date
hereof and (ii) 40% on the ninth anniversary of the date hereof. In
addition, in
no event shall more than 30% of the Units, the Other Units and the
Pledged Units
in the aggregate (as determined by mileage records and measured at
the end of
each calendar quarter for the 12 month period ending on the last
day of the
calendar quarter immediately preceding such calendar quarter) be
used in Mexico.
Nothing in this Section 8.2 shall be deemed to constitute
permission by Lessor
to any Person that acquires possession of any Unit to take any
action
inconsistent with the terms and provisions of this Lease or any of
the other
Operative Agreements.
Section 8.3 Sublease. Lessee shall be entitled, without the
prior
approval of Lessor, to enter into Permitted Subleases.
A "Permitted Sublease" means each (a) Existing Equipment
Sublease
(including any renewal or extension thereof to the extent such
renewal or
extension complies with clauses (i), (iii), (iv), (v), (vi), (vii)
and (viii)
below) and (b) a sublease, car contract or other agreement granting
permission
for the use of a Unit, which sublease, car contract or other
agreement meets all
of the following requirements:
(i) the sublessee or user thereunder is a Permitted Sublessee
and,
after giving effect to the entering into of such agreement, the
number of Units,
Pledged Units and Other Units
10
<PAGE>
leased or subleased to such sublessee or user and all of its
Affiliates, in the
aggregate, does not exceed 10% of the sum of the aggregate number
of Units then
subject to this Lease, the aggregate number of Other Units subject
to the Other
Leases and the aggregate number of Pledged Units then subject to
the Lien of the
Collateral Agency Agreement; provided, that for purposes of this
clause (i),
"sublessee" shall mean each Person leasing such Units from the
Lessee as well as
each Person subleasing such Units from any other sublessee or other
Person.
(ii) if such agreement permits the sublessee or user thereunder
to
further sublease any of the Units subject to such agreement, then
such agreement
shall require that any such further sublease be conditioned on (A)
the sublessee
obtaining Lessee's (as sublessor) prior consent to such further
sublease, (B)
the sublessee agreeing that any such further sublease will have
provisions
making it terminable (as to the sub-sublessee) at the request of
the Lessor or
Lessee, as applicable, and prohibiting any further subleasing by
the
sub-sublessee and will not contain any purchase option in favor of
the
sub-sublessee, (C) such agreement providing that no such further
sublease shall
relieve the sublessee or user under the sublease from liability
thereunder and
(D) the applicable sub-sublessee satisfying the requirements for a
"Permitted
Sublessee" set forth below;
(iii) such agreement was on an arm's length basis with fair
market
terms on the date of its execution, and does not require any
prepayment of
rental payments throughout the term of such agreement;
(iv) such agreement does not contain any purchase option in favor
of
the sublessee or user thereunder;
(v) such agreement (or any related consent, acknowledgment of
assignment, side letter or similar written instrument executed by
such
sublessee) permits the assignment, pledge, mortgage or other
similar disposition
of the lease of the related railcar without notice to or consent by
the
sublessee (or, in the case of a written instrument described in the
foregoing
parenthetical, any further notice to or consent by the sublessee),
it being
understood that the inclusion within such permission or written
instrument of
language to the effect that such sublessee consent is conditioned
on the
assignees' agreement that it takes its interest in the railcar
and/or related
sublease subject to the rights of the sublessee in such railcar
under the
sublease, shall not in and of itself be deemed to constitute the
sublease as
other than a Permitted Sublease;
(vi) such agreement contains a legend in bold-faced capitalized
print stating that "This sublease and the railcars subleased
hereunder have been
assigned to TRLIII 2003-1C Railcar Statutory Trust by Trinity Rail
Leasing Trust
II pursuant to an Assignment and Assumption and a Bill of Sale each
dated as of
November 12, 2003 and TRLIII 2003-1C Railcar Trust has further
assigned this
sublease and such railcars to Wilmington Trust Company, as secured
party, in its
capacity as Indenture Trustee under the Trust Indenture and
Security Agreement
dated as of November 12, 2003 between TRLIII 2003-1C Railcar
Statutory Trust and
Wilmington Trust Company, as Indenture Trustee"; and
(vii) such agreement does not extend more than two years beyond
the
end of the Basic Term (without the prior written consent of the
Owner
Participant).
11
<PAGE>
As used herein, a "Permitted Sublessee" means any of the
following:
(i) a railroad company or companies (that is not a Credit
Bankrupt,
Trinity or any Affiliate of Trinity) organized under the laws of
the
United States of America or any state thereof or the District
of
Columbia, Canada or any province thereof, or Mexico or any
state
thereof, upon lines of railroad owned or operated by such
railroad
company or companies or over which such railroad company or
companies
have trackage rights or rights for operation of their trains, and
upon
connecting and other carriers in the usual interchange of
traffic;
(ii) responsible companies (i.e., a company with which the
Manager
would do business in the ordinary course of its business with
respect
to railcars which it owns or manages) (other than railroad
companies,
Trinity, Affiliates of Trinity or Credit Bankrupts) for use in
their
business; provided, however, that the credit profile of sublessees
of
the Units shall not vary materially from the credit profile of
sublessees of other railcars owned, leased or managed by the
Manager;
or
(iii) wholly-owned Subsidiaries of Trinity organized under the
laws
of (x) Canada or any political subdivision thereof or (y) Mexico or
any
political subdivision thereof, in each case so long as such
subleases
are on an arm's length basis;
provided, however, that a Person organized under the laws of Mexico
or any state
thereof (a "Mexican Sublessee") shall not constitute a Permitted
Sublessee
unless after giving effect to the contemplated sublease to such
Mexican
Sublessee, the percentage of Units, Other Units and Pledged Units
in the
aggregate (as measured by number of Units, Other Units and Pledged
Units and not
mileage records) subleased (or sub-subleased by a sublessee
organized under the
laws of the United States of America or any state thereof or the
District of
Columbia, Canada or any province thereof to a sub-sublessee
organized under the
laws of Mexico or any state thereof, as applicable) to all Mexican
Sublessees
does not exceed 15% of the sum of the Units, the Other Units and
the Pledged
Units in the aggregate, provided further, that at no time shall
more than 10% of
the Units, the Other Units and the Pledged Units, in the aggregate
be subleased
(or sub-subleased by a sublessee organized under the laws of the
United States
of America or any state thereof or the District of Columbia, Canada
or any
province thereof to a sub-sublessee organized under the laws of
Mexico or any
state thereof, as applicable) to Mexican Sublessees, the long term
unsecured
debt of which is unrated or rated below BBB- or Baa3, as determined
by S&P and
Moody's, as applicable.
Notwithstanding the foregoing, in no event shall Lessee or any
of
its Affiliates be required to take any action to perfect any
security interest
which any Person may have in any Sublease, other than the filing of
a UCC-1
Financing Statement against the Partnership in the Partnership's
jurisdiction of
formation and/or other similar filings with the STB, the Registrar
General of
Canada and any applicable Canadian provinces covering all Subleases
generally
and delivery of the original copies of the applicable Subleases in
the manner
set forth in the Collateral Agency Agreement.
Lessee will use commercially reasonable efforts to have each
Sublease other than Existing Equipment Subleases be substantially
in the form
attached as Exhibit B-1 or Exhibit B-2
12
<PAGE>
and contain provisions relating to the requirement that such
Sublease be subject
and subordinate to the rights of assignees and/or security interest
grantees in
respect thereof. Promptly after the execution of each Sublease,
Lessee shall
deliver the original, fully executed counterpart number one of each
such
Sublease to the Collateral Agent in accordance with the provisions
of the
Collateral Agency Agreement or, if the circumstance described in
Section 2.5(d)
of the Collateral Agency Agreement shall have occurred, to the
custodian
described in such Section 2.5(d).
No sublease entered into by Lessee hereunder shall relieve Lessee
of
any liability or obligation hereunder, which shall be and remain
those of a
principal and not a surety. Nothing in this Section 8.3 shall be
deemed to
constitute permission to any Person in possession of any Unit
pursuant to any
such sublease to take any action inconsistent with the terms and
provisions of
this Lease or any of the other Operative Agreements. As used in
this Section
8.3, "sublease" as a noun means a sublease, car contract or other
contract
granting permission for the use of a Unit and "sublease" as a verb
means to
enter into any of the foregoing.
SECTION 9. Modifications.
Section 9.1 Required Modifications. In the event a Required
Modification to a Unit is required, Lessee agrees to make or cause
to be made
such Required Modification at its own expense; provided, however,
that Lessee
(or applicable Sublessee) 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 manner that does not
materially interfere
with the use, possession, subleasing, operation, maintenance or
return of any
Unit or materially adversely affect the rights or interests of
Lessor or the
Indenture Trustee in the Units or Subleases or expose Lessor,
Policy Provider or
the Indenture Trustee to criminal sanctions. Title to any Required
Modification
shall immediately vest in Lessor. Notwithstanding anything herein
to the
contrary, if Lessee determines in its reasonable judgment
consistent with
Prudent Industry Practice (as evidenced by an Officer's Certificate
of Lessee to
such effect, confirmed by an Officer's Certificate of the Manager)
that any
Required Modification to a Unit would be economically impractical,
in lieu of
making the Required Modification as provided above, Lessee may
provide written
notice of such determination to Lessor in such Officer's
Certificate and treat
such Unit as if an Event of Loss had occurred as of the date of
such written
notice with respect to such Unit and in such event the provisions
of Sections
11.2(ii), 11.3 and 11.4 shall apply with respect to such Unit;
provided,
however, that Lessee shall not discriminate against such Unit in
making such
determination of economic impracticability as compared with other
equipment of
the same type and similarly situated that is owned or leased by
Lessee or
managed by Manager.
Section 9.2 Optional Modifications. Lessee at any time may or
may
permit a Sublessee to, in its discretion and at its own or such
Sublessee's cost
and expense, modify, alter or improve any Unit in a manner which is
not required
by Section 9.1 (a "Modification"); provided that no Modification
(i) shall
diminish the fair market value, residual value, utility or
remaining economic
useful life of such Unit below the fair market value, residual
value, utility or
remaining economic useful life thereof immediately prior to such
Modification,
in more than a de minimis respect, assuming such Unit was then at
least in the
condition required to be maintained by the terms of this Lease or
(ii) cause
such Unit to become "limited use property" within the meaning of
Revenue
Procedure 2001-28 or Revenue Procedure 2001-29. Title to any
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<PAGE>
Non-Severable Modification shall be immediately vested in Lessor.
Title to any
Severable Modification (other than Required Modifications) shall
remain with
Lessee or the Sublessee as applicable. If Lessee shall at its cost
cause such
Severable Modifications (other than Required Modifications) to be
made to any
Unit, Lessor shall have the right, upon 90 days prior written
notice in the case
of the return of such Unit pursuant to Section 6.1, to purchase any
such
Severable Modifications (other than Severable Modifications
consisting of
proprietary or communications equipment) title to which is held by
Lessee at
their then Fair Market Sales Value (taking into account their
actual condition).
If Lessor does not so elect to purchase such Severable
Modifications, Lessee may
remove such Severable Modifications at Lessee's cost and expense,
and if
requested (which request shall be made by not less than 90 days
prior written
notice in the case of a return other than pursuant to Section 15.6)
by Lessor
will so remove such Severable Modifications at Lessee's cost and
expense, and
Lessee shall, at its expense, repair any damage resulting from the
removal of
any such Severable Modifications in a manner consistent with
Section 8.1;
provided that such removal shall not (i) diminish the fair market
value,
residual value, utility or remaining economic useful life of the
Unit to which
such Severable Modifications relate below the fair market value,
residual value,
utility or remaining economic useful life thereof immediately prior
to the
addition of such Severable Modifications, in more than a de minimis
respect,
assuming such Unit was then at least in the condition required to
be maintained
by the terms of this Lease or (ii) cause such Unit to become
"limited use
property" within the meaning of Revenue Procedure 2001-28 or
Revenue Procedure
2001-29. If Lessee has not removed any Severable Modification prior
to the
return of the related Unit as provided herein, title to such
Severable
Modification shall pass to Lessor as of the date of such
return.
Section 9.3 Removal of Property; Replacements. Lessee may, in
the
ordinary course of maintenance or repair of any Unit, remove any
item of
property constituting a part of such Unit, and unless the removal
of such item
is required by Section 9.1 hereof, Lessee shall replace such item
as promptly as
practicable by an item of property that is free and clear of all
Liens (other
than Permitted Liens) and in as good operating condition as, and
with a fair
market value, residual value, utility and remaining economic useful
life at
least equal to, the item of property being replaced, assuming that
such replaced
item was in the condition required to be maintained by the terms of
this Lease;
provided that Lessee may not remove any item if such removal would
cause such
Unit to become "limited use property" within the meaning of Revenue
Procedure
2001-28 or Revenue Procedure 2001-29. Any item of property removed
from such
Unit in the ordinary course of maintenance and repair as provided
in the
preceding sentence shall remain the property of Lessor until
replaced in
accordance with the terms of such sentence, but shall then, without
further act,
become the property of Lessee. Any replacement property which is
incorporated
into a Unit in the ordinary course of maintenance and repair shall,
without
further act, become the property of Lessor and be deemed part of
such Unit for
all purposes hereof.
SECTION 10. Voluntary Termination.
Section 10.1 Right of Termination. Lessee shall have the right,
at
its option at any time or from time to time during the Basic Term
on or after
the seventh anniversary of the Basic Term Commencement Date to
terminate the
Lease with respect to any or all of the Units (provided that,
Lessee shall
exercise such termination hereunder and under the comparable
provisions
contained in the Other Leases (i) with respect to at least 100
railcars and,
(ii) the determination as to which Units are subject to termination
shall
otherwise be made by Lessee on
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a random basis without discrimination based on maintenance status,
operating
condition of the Units in question or otherwise) (such Units, the
"Terminated
Units") if (x) Lessee determines in good faith (as evidenced by a
certified copy
of a resolution adopted by the General Partner's Board of Directors
and a
certificate executed by the Chief Financial Officer of the General
Partner and
the Chief Financial Officer of the Manager) that such Units have
become obsolete
or surplus to Lessee's requirements, (y) Lessor has received (i) an
Officer's
Certificate from Lessee and the Manager to the effect that there
has been no
discrimination in the selection of the Terminated Units when
measured against
the other Units, and that, following the termination of this Lease
with respect
to the Terminated Units, the Units remaining subject to this Lease
will
constitute a pool of Units which is of a sufficient quantity and
quality to
sustain over the remaining Basic Term the Coverage Ratios
applicable at the time
of such termination and (ii) a Rating Agency Confirmation and (z)
Lessee
delivers at least 120 days' prior notice to Lessor and the
Indenture Trustee
specifying a proposed date of termination for such Units (the
"Termination
Date"), which date shall be a Rent Payment Date, any such
termination to be
effective on the Termination Date upon Lessee's compliance with
this Section 10.
Notwithstanding anything herein contained to the contrary, there
shall be no
determination that a Unit is surplus or obsolete for purposes of
this Lease if,
on the Termination Date, such Unit is subject to a Sublease. Except
as expressly
provided otherwise herein, there will be no conditions to Lessee's
right to
terminate this Lease with respect to the Terminated Units pursuant
to this
Section 10.1. So long as (a) Lessor shall not have given Lessee a
notice of
election to retain the Terminated Units in accordance with Section
10.3 or (b)
notice of prepayment of the Equipment Notes shall not have been
given pursuant
to Section 2.10 of the Indenture, Lessee may withdraw the
termination notice
referred to above at any time prior to the 60th day prior to the
scheduled
Termination Date, whereupon this Lease shall continue in full force
and effect
with respect to the Terminated Units; provided that Lessee may not
exercise its
right to withdraw a termination notice more than once annually or
more than four
times during the Basic Term (irrespective of which Units are
covered thereby).
Lessee agrees that whether or not it withdraws a termination notice
it will
reimburse Lessor, the Policy Provider and the Indenture Trustee for
all
reasonable out-of-pocket costs and expenses (including reasonable
legal fees and
expenses) incurred by any thereof in connection with such
termination or
proposed termination.
Section 10.2 Sale of Equipment. During the period from the date
of
such notice given pursuant to Section 10.1 to the Termination Date,
Lessee, as
non-exclusive agent for Lessor and, except as provided in Section
10.3, at
Lessee's sole cost and expense, shall use reasonable best efforts
to obtain bids
from Persons other than Lessee, the Manager or any of their
respective
Affiliates for the cash purchase of the Terminated Units, and
Lessee shall
promptly, and in any event at least five Business Days prior to the
proposed
date of sale, certify to Lessor in writing the amount and terms of
each such
bid, the proposed date of such sale and the name and address of the
party
submitting such bid. Unless Lessor shall have elected to retain the
Terminated
Units in accordance with Section 10.3, on the Termination Date: (i)
Lessee shall
deliver the Terminated Units (excluding any optional Severable
Modifications
removed by Lessee pursuant to Section 9.2) to the bidder (which
shall not be
Lessee or Manager or an Affiliate of Lessee or Manager (for the
avoidance of
doubt the bidder may be a Customer, or a customer of the Manager,
and neither
the Manager nor any Affiliate shall be prohibited from managing the
Units for
such bidder after the purchase by such bidder)) that shall have
submitted the
highest cash bid prior to such date (or to such other bidder as
Lessee and
Lessor shall agree) and (ii) subject to the prior or concurrent
receipt (x) by
Lessor of all amounts owing to Lessor
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pursuant to the next sentence and (y) by the Persons entitled
thereto of all
unpaid Supplemental Rent due on or before the Termination Date,
Lessor shall,
without recourse or warranty (except as to the absence of any
Lessor's Lien)
simultaneously therewith transfer all of its right, title and
interest in and to
the Terminated Units to such bidder. The net proceeds of sale
realized at such
sale shall be paid to Lessor and, in addition, on the Termination
Date, Lessee
shall pay to Lessor (A) all Basic Rent with respect to such
Terminated Units due
and payable prior to the Termination Date (exclusive of any Basic
Rent with
respect to the Terminated Units due on such date), (B) the excess,
if any, of
(1) the Termination Amount for the Terminated Units computed as of
the
Termination Date over (2) the net cash sales proceeds (after the
deduction of
all applicable sales, transfer or similar taxes) of the Terminated
Units, (C) an
amount equal to any unpaid Late Payment Interest in respect of any
Rent in
respect of the Terminated Units not paid when due (including, for
the avoidance
of doubt, Rent corresponding to the principal amount of the
Equipment Notes to
be prepaid in accordance with Section 2.10(a) of the Indenture) and
(D) all
other Rent in respect of the Terminated Units (exclusive of any
Basic Rent on
the Terminated Units due on such date) then due and payable
hereunder (which
shall include, without limitation, a portion of the Policy Provider
Amounts and
Policy Provider Reimbursement Costs, if any, equal to the product
obtained by
multiplying the unpaid Policy Provider Amounts and Policy Provider
Reimbursement
Costs by a fraction, the numerator of which shall be the Equipment
Cost of the
Terminated Units and the denominator of which shall be the
aggregate Equipment
Costs of all Units then subject to this Lease and Late Payment
Interest related
thereto), so that, after receipt and application of all such
payments, but
without withdrawal from any CAA Accounts other than the applicable
Non-Shared
Payments Account, (i) Lessor shall be entitled under the terms of
the Collateral
Agency Agreement to receive, and does receive, taking into account
all payments
of Basic Rent, in respect of all such Units, the sum of the portion
of the
Accumulated Equity Deficiency Amount allocable to the Terminated
Units and Late
Payment Interest related thereto and any other amounts then due to
Lessor and
(ii) the Policy Provider has received the portion of Policy
Provider Amounts and
Policy Provider Reimbursement Costs calculated above. If no sale
shall have
occurred, whether as a result of Lessee's failure to pay all of the
amounts
hereinabove required or otherwise, this Lease shall continue in
full force and
effect with respect to such Units and Lessee agrees to reimburse
Lessor, Policy
Provider and the Indenture Trustee for all reasonable costs and
expenses
(including reasonable legal fees and expenses) incurred by any
thereof in
connection therewith. Lessee, in acting as agent for Lessor, shall
have no
liability to Lessor for failure to obtain the best price, shall act
in its sole
discretion and shall be under no duty to solicit bids publicly or
in any
particular market. Owner Participant shall have the right, but not
the
obligation, to obtain bids either directly or through agents other
than Lessee.
Section 10.3 Retention of Equipment by Lessor. Notwithstanding
the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect
by written
notice to Lessee, (with a copy to the Policy Provider) not later
than 60 days
after receipt of Lessee's notice of termination, not to sell the
Terminated
Units on the Termination Date, whereupon Lessee shall (i) deliver
the Terminated
Units to Lessor in the same manner and condition as if delivery
were made to
Lessor pursuant to Section 6.1(b) and Section 6.2, and shall extend
storage
rights to the same extent as provided in Section 6.1(c), treating
the
Termination Date as the termination date of the Lease Term with
respect to the
Terminated Units and (ii) pay to Lessor, or to the Persons entitled
thereto, all
Basic Rent due and owing on the Termination Date and unpaid
(exclusive of any
Basic Rent due on such date in respect of the Terminated Units),
any unpaid Late
Payment
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Interest in respect of any Rent in respect of the Terminated Units
not paid when
due (including, for the avoidance of doubt, Rent corresponding to
the principal
amount of the Equipment Notes to be prepaid in accordance with
Section 2.10(a)
of the Indenture), and all other Rent in respect of the Terminated
Units
(exclusive of any Basic Rent on the Terminated Units due on such
date) then due
and payable hereunder (including, without limitation, a portion of
the Policy
Provider Amounts and Policy Provider Reimbursement Costs, if any
equal to the
product obtained by multiplying the unpaid Policy Provider Amounts
and Policy
Provider Reimbursement Costs by a fraction, the numerator of which
shall be the
Equipment Costs of the Terminated Units and the denominator of
which shall be
the aggregate Equipment Costs of all Units then subject to this
Lease), so that,
after receipt and application of all such payments, but without
withdrawal from
any CAA Accounts other than the applicable Non-Shared Payments
Account, Lessor
shall be entitled under the terms of the Collateral Agency
Agreement to receive,
and does receive, taking into account all payments of Basic Rent,
in respect of
all such Units, the sum of the portion of the Accumulated Equity
Deficiency
Amount allocable to the Terminated Units and Late Payment Interest
related
thereto and any other amounts then due to Lessor and the Policy
Provider has
received the portion of the Policy Provider Amounts and Policy
Provider
Reimbursement Costs calculated above. On any Termination Date where
Lessee is
required to make payments pursuant to the preceding sentence,
Lessee shall pay
as additional Basic Rent (or Lessor shall pay as a refund of Basic
Rent) an
amount equal to the Basic Rent Adjustment (or the absolute value of
the negative
Basic Rent Adjustment) set forth on Schedule 4-B to the
Participation Agreement
for the relevant Rent Payment Date. Also on such date, Lessor shall
pay, or
cause to be paid, to the Indenture Trustee an amount equal to the
product
obtained by multiplying the unpaid principal amount of the
Equipment Notes
outstanding on such date (after deducting therefrom the principal
installment,
if any, to be paid on such date) by a fraction, the numerator of
which shall be
the Equipment Cost of the Terminated Units and the denominator of
which shall be
the aggregate Equipment Costs of all Units then subject to this
Lease; provided,
that if the Lessor or Owner Participant is the Lessee or an
Affiliate of the
Lessee, Lessee shall pay to Lessor such additional amounts as are
necessary to
pay in full all Policy Provider Amounts, calculated pursuant to
clause (II) of
the definition thereof, and Policy Provider Reimbursement Costs,
calculated
pursuant to clause (I) of the definition thereof. Unless all
amounts described
above in this Section 10.2 shall have been paid to the Persons
entitled thereto
on the Termination Date, this Lease shall continue in full force
and effect with
respect to the Terminated Units. Lessor agrees that in the event
that Lessor
elects to retain (and does retain) the Terminated Units as provided
in this
Section 10.3, for a period of one year after payment by Lessor of
all amounts
due and owing by Lessor under this Section 10.3, Lessor may not
sell or lease
any of such Terminated Units to Lessee or any of its Affiliates. If
after giving
the notice referred to above Lessor shall fail to pay the amounts
required
pursuant to the third sentence of this Section 10.3 and as a result
thereof this
Lease shall not be terminated with respect to the Terminated Units
on a proposed
Termination Date, Lessor shall (x) thereafter no longer be entitled
to exercise
its election to retain such Terminated Units and (y) reimburse
Lessee for any
reasonable out-of-pocket expenses (including reasonable legal fees
and expenses)
incurred by it in attempting to sell the Terminated Units pursuant
to Section
10.2 immediately prior to Lessor's exercise of such preemptive
election, and
Lessee may at its option at any time thereafter prior to the
immediately
following Rent Payment Date submit a new termination notice
pursuant to Section
10.1 with respect to such Terminated Units specifying a proposed
Termination
Date occurring on a Determination Date occurring not earlier than
25 days from
the date of such notice.
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Section 10.4 Termination of Lease. In the event of either (x)
any
such sale and receipt by Lessor and the Indenture Trustee of all of
the amounts
provided in Section 10.2 in respect of the Terminated Units or (y)
retention of
the Terminated Units and full performance by Lessor and Lessee of
their
respective payment obligations in compliance with Section 10.3, and
upon
compliance by Lessee with the other provisions of this Section 10,
the
obligation of Lessee to pay Basic Rent hereunder for such
Terminated Units shall
cease and the Lease Term for the Terminated Units shall end.
SECTION 11. Loss, Destruction Requisition, Etc.
Section 11.1 Event of Loss. In the event that any Unit (i)
shall
suffer damage or contamination which, in Lessee's reasonable
judgment (as
evidenced by an Officer's Certificate of Lessee to such effect,
confirmed by an
Officer's Certificate of the Manager), makes repair uneconomic or
renders such
Unit unfit for commercial use, (ii) shall suffer destruction which
constitutes a
total loss, or shall suffer theft or disappearance (after
reasonable efforts by
Lessee to locate the same) for a period exceeding 6 months (or, if
earlier, the
end of the Basic Term or Renewal Term then in effect), (iii) shall
have title
thereto taken or appropriated by any governmental authority, agency
or
instrumentality under the power of eminent domain or otherwise, or
(iv) shall be
taken or requisitioned for use by any governmental authority or any
agency or
instrum
