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EXHIBIT 10.16.4
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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
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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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Table of
Contents
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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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Table of
Contents
(continued)
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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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Table of Contents
(continued)
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APPENDICES
AND EXHIBITS
Page
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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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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
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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.
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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
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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
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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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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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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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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
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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
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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).
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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
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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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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
