-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, We6kjIDirjJr1yH3lhZnp/4jxneF9y35F4hHmrPXkaRCfU9K6L1GtHJs5MhYDbGn Zss8O1VCXSOGaeTuaqsWow== 0000950134-02-002346.txt : 20020415 0000950134-02-002346.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950134-02-002346 CONFORMED SUBMISSION TYPE: 10KT405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRINITY INDUSTRIES INC CENTRAL INDEX KEY: 0000099780 STANDARD INDUSTRIAL CLASSIFICATION: RAILROAD EQUIPMENT [3743] IRS NUMBER: 750225040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KT405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06903 FILM NUMBER: 02579820 BUSINESS ADDRESS: STREET 1: 2525 STEMMONS FREEWAY CITY: DALLAS STATE: TX ZIP: 75207-2401 BUSINESS PHONE: 2146314420 FORMER COMPANY: FORMER CONFORMED NAME: TRINITY STEEL CO INC DATE OF NAME CHANGE: 19720407 10KT405 1 d94851e10kt405.txt FORM 10-K TRANSITION REPORT FOR DECEMBER 31, 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-K --------------------- (MARK ONE) [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM APRIL 1, 2001 TO DECEMBER 31, 2001. COMMISSION FILE NUMBER 1-6903 TRINITY INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-0225040 (State of Incorporation) (I.R.S. Employer Identification No.) 2525 STEMMONS FREEWAY DALLAS, TEXAS 75207-2401 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 631-4420 Securities Registered Pursuant to Section 12(b) of the Act
Name of each exchange Title of each class on which registered ------------------- --------------------- COMMON STOCK, $1.00 PAR VALUE......... NEW YORK STOCK EXCHANGE, INC. RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK, $1.00 PAR VALUE........................... NEW YORK STOCK EXCHANGE, INC.
Securities Registered Pursuant to Section 12(g) of the Act: NONE --------------------- INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] No [ ]. INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NONAFFILIATES OF THE REGISTRANT WAS $776,996,742 AS OF FEBRUARY 28, 2002. AT FEBRUARY 28, 2002 THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING WAS 44,371,946. THE INFORMATION REQUIRED BY PART III OF THIS REPORT, TO THE EXTENT NOT SET FORTH HEREIN, IS INCORPORATED BY REFERENCE FROM THE REGISTRANTS DEFINITIVE PROXY STATEMENT RELATING TO THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 2002. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRINITY INDUSTRIES, INC. FORM 10-K TABLE OF CONTENTS
CAPTION PAGE ------- ---- PART I Item 1. Business.................................................... 1 Item 2. Properties.................................................. 9 Item 3. Legal Proceedings........................................... 9 Item 4. Submission of Matters to a Vote of Security Holders......... 9 PART II Item 5. Market for the Company's Common Stock and Related Stockholder Matters....................................... 10 Item 6. Selected Financial Data..................................... 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 12 Item 7a. Quantitative and Qualitative Disclosures About Market Risk...................................................... 21 Item 8. Financial Statements and Supplementary Data................. 22 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 41 PART III Item 10. Directors and Executive Officers of the Company............. 42 Item 11. Executive Compensation...................................... 42 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 42 Item 13. Certain Relationships and Related Transactions.............. 42 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................................... 43
i PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS. Trinity Industries, Inc., incorporated in 1933, is one of the nation's leading diversified industrial companies providing a variety of high volume, repetitive products and services for the transportation, industrial, and construction sectors of the marketplace. We compete in cyclical markets and are continuously looking for opportunities to improve our competitive positions. In September 2001, we changed our year-end from March 31 to December 31. Unless stated otherwise, all references to fiscal year 2000 shall mean the full fiscal year ended on March 31, 2000 and fiscal year 2001 shall mean the full fiscal year ended March 31, 2001. The nine months ended December 31, 2001 covers the period from April 1, 2001 to December 31, 2001. In October 2001, we completed our merger transaction with privately owned Thrall Car Manufacturing Company. This merger combines Trinity's strength in tank car production, Thrall's strength in auto rack manufacturing and research and development expertise across the entire spectrum of railcars. Trinity became a Delaware Corporation in 1987. The Company's principal executive offices are located at 2525 Stemmons Freeway, Dallas, Texas 75207-2401, and our telephone number is 214-631-4420. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Financial information about our industry segments for the nine months ended December 31, 2001 and fiscal years 2001 and 2000 is presented in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 12 through 21. NARRATIVE DESCRIPTION OF BUSINESS. The Company is engaged in the manufacture, marketing, and leasing of a variety of products consisting of the following five business groups: TRINITY RAIL GROUP. Our railcar group primarily serves two markets: North America and Europe. We develop and manufacture a comprehensive selection of railcars used for transporting a wide variety of liquids, gases and dry cargo. We are the leading railcar manufacturer in North America. Our railcar operations offer a wide range of car types to take advantage of changing industry trends and developing market opportunities including: - - Tank Cars -- Tank cars transport products such as liquified petroleum gas, liquid fertilizer, sulfur, sulfuric acids and corn syrup. - - Auto Carrier Cars -- Auto carrier cars transport automobiles and sport utility vehicles. - - Hopper Cars -- Covered hopper cars carry cargo such as grain, dry fertilizer, plastic pellets and cement. Open-top hoppers are most often used to haul coal. - - Box Cars -- Box cars transport products such as food goods, auto parts, wood products and paper. - - Intermodal Cars -- Intermodal cars transport intermodal containers and trailers, which are generally interchangeable among railcar, truck and ship, thus making it possible to move cargo without repeated loading and unloading. - - Gondola Cars -- Rotary gondolas are used for coal service, and top-loading gondola cars transport a variety of other heavy bulk commodities such as scrap metals, steel products, machinery and lumber. - - Specialty Cars -- Specialty cars are designed to address the special needs of a particular industry or customer, such as pressure differential cars used to haul fine grain food products such as sugar and flour, waste hauling gondolas and side dump cars. We also manufacture and sell railcar parts, such as auto carrier doors and accessories, hatch rings, discharge gates, covers, floors, yokes, couplers, axles, hitches, bogies, brakes, center plates and chutes. These parts are ultimately used in manufacturing and repair of railcars. We have the ability to maintain, repair and modify railcars through our repair network, Trinity Railcar Repair, Inc. This network consists of five major repair facilities and fourteen mini/mobile repair shops. The repair network locations are spread across the United States, including locations in Georgia, Montana, Pennsylvania and Texas. Our customers include railroads, leasing companies, and shippers, such as utilities, petrochemical companies, grain shippers, and major construction 1 and industrial companies. We compete against five major railcar manufacturers. We hold patents of varying duration for use in our manufacture of railcar and component products. We cannot quantify the importance of such patents, but patents are believed to offer a marketing advantage in certain circumstances. No material revenues are received from licensing of these patents. CONSTRUCTION PRODUCTS GROUP. Our Construction Products segment is composed of highway safety products, concrete and aggregates, beams and girders used in highway construction and weld pipe fittings. We are one of the largest manufacturers of roadside safety products in North America. Our products include highway safety guardrails and patented products such as guardrail end terminals, crash cushions, and other protective barriers that absorb and dissipate the force of impact in collisions between vehicles and fixed roadside objects. Our predominantly galvanized steel product lines use the principles of momentum transfer and kinetic energy absorption to safely decelerate errant vehicles. The Federal Highway Administration determines which products are eligible for federal funds for highway projects and has approved most of our products as acceptable permanent and construction zone highway hardware according to requirements of the National Cooperation Highway Research Program. We hold patents and are a licensee for certain of our guardrail and end-treatment products that enhance our competitive position for these products. We sell highway safety products in all 50 U.S. states, Canada, Mexico and other countries. We compete against several national and regional guardrail producers. We supply ready mix concrete and construction aggregates, such as crushed stone, sand and gravel, asphalt rock and recycled concrete, primarily in Texas. Our customers are primarily owners, contractors and subcontractors in the construction and foundation industry who are located near our plant locations. We compete with ready mix concrete producers and aggregate producers located in Texas, Louisiana, and Arkansas. Weld pipe fittings, such as caps, elbows, return bends, tees, concentric and eccentric reducers and full and reducing outlet tees, are sold primarily to pipeline, petrochemical, and non-petrochemical process industries. We compete with numerous companies throughout the United States. Competition for fittings has been intense during the previous three years. We manufacture structural steel beams and girders for the construction of new, restored and/or replacement railroad bridges, county, municipal and state highway bridges and power generation plants. We sell bridge construction and support products primarily to owners, general contractors and subcontractors on highway and railroad construction products. Our competitors primarily include fabricators with facilities located in Texas, Oklahoma and Arkansas. INLAND BARGE GROUP. We are the largest producer of inland barges in the United States and one of the largest producers of fiberglass barge covers. Our six manufacturing facilities are located along the United States inland river system allowing for rapid delivery to our customers. We manufacture a variety of dry-cargo barges, such as deck barges and, open or covered hopper barges that transport various commodities, such as grain, coal and aggregates. We also produce tank barges used to transport liquid products at high or low temperatures. Fiberglass reinforced lift covers are primarily for grain and rolling covers are for other bulk commodities, such as steel, paper, salt and cement. Our Inland Barge segment customers primarily include commercial marine transportation companies. Many companies have the capability to enter into, and from time to time do enter into, the inland barge manufacturing business. The Company strives to compete through efficiency in operations and quality of product. INDUSTRIAL PRODUCTS GROUP. We are a leading producer of tank containers and tank heads for pressure vessels. We manufacture tanks in the United States, Mexico and Brazil. We market a portion of our industrial products in Mexico under the brand name of TATSA. The following paragraphs describe the types of tanks and heads that we purchase. Pressure liquefied petroleum gas containers are used by industrial plants, utilities and small businesses and in suburban and rural areas for residential heating and cooking needs. We manufacture 2 fertilizer containers for highway and railway transport, bulk storage, farm storage and the application and distribution of anhydrous ammonia. Our tanks range from 120-gallon tanks for residential use to 120,000-gallon bulk storage containers. We sell our containers to experienced propane dealers and technicians. We generally deliver the containers to our customers who install and fill the containers. Our competitors include large and small manufacturers. We manufacture container heads, which are pressed metal components used in the manufacturing of many of our finished products. In addition, we sell container heads to other manufacturers. We manufacture the container heads in various shapes, and we produce pressure rated or non-pressure rated container heads, depending on their intended use. We use a significant portion of the heads we manufacture in the production of our tank cars and containers. We also sell our heads to a broad range of other manufacturers. Competition for heads in recent years has been intense and has resulted in sharply reduced prices for these products. TRINITY RAILCAR LEASING AND MANAGEMENT SERVICES GROUP. Through our wholly owned subsidiaries, primarily Trinity Industries Leasing Company, we lease specialized types of railcars, both tank cars and freight cars. As of December 31, 2001, we owned or leased approximately 22,000 railcars that were 93.6% leased. Additionally, we managed another 37,000 railcars on behalf of independent third parties. We lease our railcars to industrial companies in the petroleum, chemical, agricultural, energy and other industries that supply their own railcars to the railroads. The terms of our railcar leases generally vary from one to twenty years and provide for fixed monthly rentals, with an additional mileage charge when usage exceeds a specified maximum. The leasing business in which we are engaged is very competitive and there are a number of well-established companies that actively compete with us in the business of owning and leasing railcars. There are also a number of banks, investment partnerships and other financial institutions which compete with us in railcar leasing. ALL OTHER. All Other includes our captive insurance and transportation companies, structural towers, and other peripheral businesses. FOREIGN OPERATIONS. Trinity's foreign operations are primarily in Mexico, Romania, the United Kingdom, the Czech Republic, Brazil, Switzerland and Slovakia. Sales to foreign customers, primarily in Europe and Mexico, represented 7.6%, 5.3% and 2.6% of our consolidated revenues for the nine months ended December 31, 2001 and for fiscal years 2001 and 2000, respectively. As of December 31, 2001 and March 31, 2001 and 2000, we had approximately 11.0%, 14.4%, and 13.8% of our long-lived assets located outside the United States. We manufacture railcars and LP Gas Containers at our Mexico facilities for export to the United States. Any material change in the quotas, regulations, or duties on imports imposed by the United States government and its agencies or on exports by the government of Mexico or its agencies could adversely affect our operations in Mexico. Our foreign activities are also subject to various other risks of doing business in foreign countries, including currency fluctuations, political changes, changes in laws and regulations and economic instability. Although our operations have not been materially affected by any of such factors to date, any substantial disruption of business as it is currently conducted could adversely affect our operations at least in the short term. BACKLOG. As of December 31, 2001, our backlog for new railcars was $153.7 million and was $133.6 million for Inland Barge products. Included in the backlog for the railcars is $31.3 million of railcars to be sold to the Rail Leasing and Management Services Group. All of our backlog is expected to be delivered in the 12 months ending December 31, 2002. As of March 31, 2001, our backlog for new railcars was $408.5 million and was $141.1 million for Inland Barge products. Included in the backlog for the railcars was $85.3 million of railcars to be sold to the Rail Leasing and Management Services Group. MARKETING. We sell substantially all of our products through our own salesmen operating from offices in the following states and foreign countries: Alabama, Arkansas, Arizona, Connecticut, Florida, Illinois, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Vermont, Utah, Brazil, Mexico, Romania, Sweden, and Canada. We also use independent sales representatives to a limited extent. Except in the case of 3 weld fittings, guardrail and standard size LPG containers, we ordinarily fabricate our products to our customer's specifications contained in a purchase order. RAW MATERIALS AND SUPPLIERS. RAILCAR MANUFACTURING. Products manufactured at our railcar manufacturing facilities require a significant supply of raw materials such as steel as well as numerous specialty components such as brakes, wheels and axles. Steel is available from numerous domestic and foreign sources. Specialty components purchased from third parties comprise approximately 50% of the cost of the production of each railcar. Although the number of alternative suppliers of specialty components has declined in recent years, at least two suppliers continue to produce most components. We continually monitor supply inventory levels to ensure adequate support for our production. We maintain good relationships with our suppliers and have not experienced any significant interruptions in recent years in the supply of raw materials or specialty components. Changes in the price of components and raw materials have not had a material effect on earnings. AGGREGATES. Aggregates can be found in abundant quantities throughout the United States, and many producers exist nationwide. However, as a general rule, shipments from an individual quarry are limited in geographic scope because the cost of transporting processed aggregates to customers is high in relation to the value of the product itself. We operate 14 mining facilities strategically located in Texas and Louisiana to fulfill some of our needs for aggregates. We have not experienced difficulty fulfilling the rest of our needs from local suppliers. OTHER. The principal material used by us in our other operating segments is steel. We believe that many domestic and foreign sources can provide an adequate supply of these materials. EMPLOYEES. As of December 31, 2001, Trinity had approximately 15,300 employees, of which approximately 11,900 were production employees and 3,400 were administrative, sales, supervisory and office employees. In connection with the Thrall merger, we added approximately 1,700 employees as of December 31, 2001. Of this total 500 were administrative. ACQUISITIONS. We made certain acquisitions during the nine months ended December 31, 2001 and during fiscal 2001 and 2000 accounted for by the purchase method. The acquired operations have been included in the consolidated financial statements from the effective dates of the acquisitions. See Note 4 to the consolidated financial statements. ENVIRONMENTAL MATTERS. We are subject to comprehensive federal, state, local and foreign environmental laws and regulations relating to the release or discharge of materials into the environment, the management, use, processing, handling, storage, transport or disposal of hazardous materials, or otherwise relating to the protection of human health and the environment. Such laws and regulations not only expose us to liability for our own negligent acts, but also may expose us to liability for the conduct of others or for our actions which were in compliance with all applicable laws at the time these actions were taken. In addition, such laws may require significant expenditures to achieve compliance, and are frequently modified or revised to impose new obligations. Civil and criminal fines and penalties may be imposed for non-compliance with these environmental laws and regulations. Our operations that involve hazardous materials also raise potential risks of liability under the common law. Environmental operating permits are, or may be, required for our operations under these laws and regulations. These operating permits are subject to modification, renewal and revocation. We regularly monitor and review our operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of our businesses, as it is with other companies engaged in similar businesses. Therefore, environmental liabilities may have a material adverse effect on us in the future. We believe that our operations and facilities, owned, managed, or leased, are in substantial compliance with applicable laws and regulations and that any noncompliance is not likely to have a material adverse effect on our operations or financial condition. However, future events, such as changes in or modified interpretations of existing laws and regulations or enforcement policies, or further investigation or evaluation of the potential health hazards of products or business activities, may give rise to additional compliance and other 4 costs that could have a material adverse effect on our financial conditions and operations. In addition to environmental laws, the transportation of commodities by railcar or barge raises potential risks in the event of a derailment, spill or other accident. Generally, liability under existing law in the United States for a derailment, spill or other accident depends on the negligence of the party, such as the railroad, the shipper or the manufacturer of the railcar. However, for certain hazardous commodities being shipped, strict liability concepts may apply. GOVERNMENTAL REGULATION Railcar Industry The primary regulatory and industry authorities involved in the regulation of the railcar industry are the Environmental Protection Agency; the Research and Special Programs Administration, a division of the Department of Transportation; the Federal Railroad Administration, a division of the Department of Transportation; and the Association of American Railroads. These organizations establish rules and regulations for the railcar industry, including construction specifications and standards for the design and manufacture of railcars; mechanical, maintenance and related standards for railcars; safety of railroad equipment, tracks and operations; and packaging and transportation of hazardous materials. We believe that our operations are in substantial compliance with these regulations. We cannot predict whether future changes that affect compliance costs would have a material adverse effect on financial conditions and operations. Inland Barge Industry The primary regulatory and industry authorities involved in the regulation of the barge industry are the United States Coast Guard; the National Transportation Safety Board; the United States Customs Service; the Maritime Administration of the United States Department of Transportation; and private industry organizations such as the American Bureau of Shipping. These organizations establish safety criteria, investigate vessel accidents and recommend improved safety standards. Violations of these regulations and related laws can result in substantial civil and criminal penalties as well as injunctions curtailing operations. We believe that our operations are in substantial compliance with these regulations. Occupational Safety and Health Administration and similar regulations Our operations are subject to regulation of health and safety matters by the United States Occupational Safety and Health Administration. We believe that we employ appropriate precautions to protect our employees and others from workplace injuries and harmful exposure to materials handled and managed at our facilities. However, claims may be asserted against us for work-related illnesses or injury, and our operations may be adversely affected by the further adoption of occupational health and safety regulations in the United States or in foreign jurisdictions in which we operate. While we do not anticipate having to make material expenditures in order to remain in substantial compliance with these health and safety laws and regulations, we are unable to predict the ultimate cost of compliance. Accordingly, there can be no assurance that the Company will not become involved in future litigation or other proceedings or if the Company were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to the Company. OTHER MATTERS. To date, we have not suffered any material shortages with respect to obtaining sufficient energy supplies to operate our various plant facilities or its transportation vehicles. Future limitations on the availability or consumption of petroleum products, particularly natural gas for plant operations and diesel fuel for vehicles, could have an adverse effect upon our ability to conduct our business. The likelihood of such an occurrence or its duration, and its ultimate effect on our operations, cannot be reasonably predicted at this time. 5 EXECUTIVE OFFICERS OF THE COMPANY. The following table sets forth the names and ages of all executive officers of the Company, all positions and offices with the Company presently held by them, the year each person first became an executive officer and the term of each person's office:
OFFICER TERM NAME(1) AGE OFFICE SINCE EXPIRES - ------- --- ------ ------- -------- Timothy R. Wallace..................... 48 Chairman, President & Chief 1985 May 2002 Executive Officer John L. Adams.......................... 57 Executive Vice President 1999 May 2002 Mark W. Stiles......................... 53 Senior Vice President & Group 1993 May 2002 President Jim S. Ivy............................. 58 Vice President & Chief Financial 1998 May 2002 Officer Michael E. Flannery.................... 42 Chief Executive Officer of Trinity 2001 May 2002 Rail Group, LLC Andrea F. Cowan........................ 39 Vice President, Shared Services 2001 May 2002 Jack L. Cunningham, Jr. ............... 57 Vice President, Labor Relations 1982 May 2002 Michael G. Fortado..................... 58 Vice President & Secretary 1997 May 2002 John M. Lee............................ 41 Vice President, Business 1994 May 2002 Development Charles Michel......................... 48 Controller 2001 May 2002 Joseph F. Piriano...................... 64 Vice President, Purchasing 1992 May 2002 S. Theis Rice.......................... 51 Vice President, Legal Affairs 2002 May 2002 Linda S. Sickels....................... 50 Vice President, Government 1995 May 2002 Relations Neil O. Shoop.......................... 58 Treasurer 1985 May 2002
- --------------- (1) Mr. Adams joined the Company in 1999. Prior to that, Mr. Adams served as chief executive officer for a national financial institution. Mr. Ivy joined the Company in 1998. Prior to that, Mr. Ivy was a senior audit partner for a national public accounting firm. Mr. Flannery joined the Company in 2001. Prior to that he was Chief Administrative Officer and General Counsel of Duchossois Industries, Inc. and Vice Chairman of Thrall Car Manufacturing Company, a railcar manufacturing company that merged with a subsidiary of the Company in October of 2001. Ms. Cowan joined the Company in January 2000 as a divisional officer. Prior to that she was a consultant to Trinity for six months having spent fifteen years with the State of Texas in a variety of positions relating to policy and finance. Mr. Fortado joined the Company in 1997. Prior to that, Mr. Fortado served one year as senior vice president, general counsel, and corporate secretary for an oil and gas exploration company and prior to that as vice president, corporate secretary, and assistant general counsel for an integrated energy company. Mr. Michel joined the Company in 2001. Prior to that he served as Vice President and Chief Financial Officer of a national restaurant/entertainment company from 1994 to 2001. All of the other above-mentioned executive officers have been in the full time employment of the Company or its subsidiaries for more than five years. Although the titles of certain such officers have changed during the past five years, all have performed essentially the same duties during such period of time except for Timothy R. Wallace, Mark W. Stiles and S. Theis Rice. Mr. Wallace became Chairman and Chief Executive Officer on December 31, 1998. He was previously the President and Chief Operating Officer. In addition to Group President, Mr. Stiles became Senior Vice President on June 10, 1999. Mr. Rice was most recently serving as President of the Company's European operations. FORWARD LOOKING STATEMENTS. This annual report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performance, estimates, projections, goals and forecasts. Potential factors which could cause our actual results of operations 6 to differ materially from those in the forward-looking statements include: - - market conditions and demand for our products; - - the cyclical nature of both the railcar and barge industries; - - abnormal periods of inclement weather in areas where construction products are sold and used; - - the timing of introduction of new products; - - the timing of customer orders; - - price erosion; - - changes in mix of products sold; - - the extent of utilization of manufacturing capacity; - - availability of supplies and raw materials; - - price competition and other competitive factors; - - changing technologies; - - steel prices; - - interest rates and capital costs; - - taxes; - - the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico and Romania; - - changes in import and export quotas and regulations; - - business conditions in emerging economies; and - - legal, regulatory and environmental issues. Any forward-looking statement speaks only as of the date on which such statement is made. Trinity undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS. We wish to caution you that there are risks and uncertainties that could cause our actual results to be materially different from those indicated by forward-looking statements that we make from time to time in filings with the Securities and Exchange Commission, news releases, reports, proxy statements, registration statements and other written communications, as well as oral forward-looking statements made from time to time by representatives of our Company. These risks and uncertainties include, but are not limited to, those risks described below. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. The cautionary statements below discuss important factors that could cause our business, financial condition, operating results and cash flows to be materially adversely effected. The cyclical nature of our business results in lower revenues during economic downturns. We operate in cyclical industries. Downturns in overall economic conditions usually have a significant adverse effect on cyclical industries due to a decreased demand for new and replacement products. This decreased demand could continue to result in lower sales volumes, lower prices and/or a loss of profits. In addition, our recent acquisition of Thrall has increased our exposure to the effects of the cyclical nature of the railcar business. The railcar industry is in a deep down cycle and operating with a minimal backlog. If this down cycle continues, we could experience increased losses and could make additional plant closures and incur related costs. We have potential exposure to environmental liabilities, which may increase costs and lower profitability. Our operations are subject to extensive and frequently changing federal, state and local environmental laws and regulations, including those dealing with air quality and the handling and disposal of waste products, fuel products and hazardous substances. In particular, we may incur remediation costs and other related expenses because: - - Some of our manufacturing facilities were constructed and operated before the adoption of current environmental laws and the institution of compliance practices; and - - Some of the products that we manufacture are used to transport hazardous materials. Furthermore, although we intend to conduct appropriate due diligence with respect to environmental matters in connection with future acquisitions, we may be unable to identify or be indemnified for all potential environmental liabilities relating to any acquired business. Environmental liabilities incurred by us, if not covered by adequate insurance or indemnification, will increase our respective costs and have a negative impact on our profitability. 7 We compete in highly competitive industries, which may impact our respective financial results. We face aggressive competition in all geographic markets and each industry sector in which we operate. As a result, competition on pricing is often intense. The effect of this competition could reduce our revenues, limit our ability to grow, increase pricing pressure on our products, and otherwise affect our financial results. Risks related to our operations outside of the United States could adversely impact our respective operating results. Our operations outside of the United States are subject to the risks associated with cross-border business transactions and activities. Political, legal, trade or economic changes or instability could limit or curtail our respective foreign business activities and operations. Some foreign countries where we operate have regulatory authorities that regulate railroad safety, railcar design and railcar component part design, performance and manufacture used on their railroad systems. If we fail to obtain and maintain certifications of our railcars and railcar parts within the various foreign countries where we operate, we may be unable to market and sell our railcars in those countries. In addition, unexpected changes in regulatory requirements, tariffs and other trade barriers, more stringent rules relating to labor or the environment, adverse tax consequences and price exchange controls could limit operations and make the manufacture and distribution of our products difficult. Furthermore, any material change in the quotas, regulations or duties on imports imposed by the U.S. government and agencies or on exports by the government of Mexico or its agencies could affect our ability to export the railcars and liquefied petroleum gas containers that we manufacture in Mexico. The uncertainty of the legal environment in these and other areas could limit our ability to enforce our respective rights effectively. Because we do not have employment contracts with our key management employees, we may not be able to retain their services in the future. Our success depends on the continued services of our key management employees, none of whom currently have employment agreements with us. Although we have historically been successful in retaining the services of our key management, we may be unable to do so in the future. The loss of the services of one or more key members of our management team could result in increased costs associated with attracting and retaining a replacement and could disrupt our operations and result in a loss of revenues. Although our businesses were not directly impacted by the recent terrorist attacks against the United States, the long-term effect of these events, or the domestic or foreign response to them, could negatively affect our respective ability to operate profitably in the future. The terrorist attacks that occurred in the United States on September 11, 2001, the subsequent military response by the United States, other terrorist attacks and future events occurring in response to or in connection with these attacks may negatively impact the economy in general. In particular, the negative impacts of these events may affect the industries in which we operate. This could result in delays in or cancellations of the purchase of our products or shortages in raw materials or component parts. Any of these occurrences could have a significant adverse impact on our operating results, revenues and costs. Fluctuations in the supply of component parts used in the production of our products could have a material adverse effect on our ability to cost- effectively manufacture and sell our products. A significant portion or our business depends on the adequate supply of numerous specialty components such as brakes, wheels, side frames and bolsters at competitive prices. We depend on outside suppliers for a significant portion of our component part needs. While we endeavor to be diligent in its contractual relationships with our suppliers, a significant decrease in the availability of specialty components could materially increase our cost of goods sold or prevent us from manufacturing our products on a timely basis. Our manufacturer's warranties expose us to potentially significant claims. We warrant the workmanship and materials of many of our products under limited warranties. Accordingly, we may be subject to significant warranty claims in the future such as multiple claims based on one defect repeated throughout our mass production process or claims for which the cost of repairing the defective part is highly disproportionate to the original cost of the part. We have never experienced any material losses attributable to warranty claims, but the possibility exists for these types of warranty claims to result in costly product recalls, significant repair costs and damage to our reputation. 8 We may be liable for product liability claims that exceed our insurance coverage. The nature of our business subjects us to product liability claims, especially in connection with the repair and manufacture of products that carry hazardous or volatile materials. We maintain reserves and liability insurance coverage at levels based upon commercial norms in the industries in which we operate and our historical claims experience. However, an unusually large product liability claim or a string of claims based on a failure repeated throughout our mass production process may exceed our insurance coverage or result in damage to our reputation. We may incur increased costs due to fluctuations in interest rate and foreign currency exchange rates. We are exposed to risks associated with fluctuations in interest rate and changes in foreign currency exchange rates. We seek to minimize these risks, when considered appropriate, through the use of currency and interest rate hedges and similar financial instruments and other activities, although these measures may not be implemented or effective. Any material and untimely changes in interest rates or exchange rates could result in significant losses to us. ITEM 2. PROPERTIES. We principally operate in various locations throughout the United States with other facilities in Mexico, Brazil, Romania and Slovakia, all of which are considered to be in good condition, well maintained and adequate for our purposes.
APPROXIMATE SQUARE FEET PRODUCTIVE ---------------------- CAPACITY OWNED LEASED UTILIZED ---------- --------- ---------- Rail Group............ 6,125,500 1,952,000 20% Construction Products Group............... 2,347,000 10,000 85% Inland Barge Group.... 692,000 45,000 85% Industrial Products Group............... 648,500 -- 50% Executive Offices..... 173,000 -- N/A All Other............. 35,000 -- 0% ---------- --------- 10,021,000 2,007,000 ========== =========
ITEM 3. LEGAL PROCEEDINGS. In December 1999, a grand jury sitting in the Western District of Louisiana returned a two-count felony indictment against Trinity Baton Rouge, Inc., a wholly owned subsidiary of Trinity. The indictment charges Trinity Baton Rouge, Inc. with transporting hazardous waste without a proper manifest to an unpermitted facility in violation of the Resource Conservation Recovery Act. Trinity Baton Rouge, Inc. continues to deny all charges in the indictment and is defending this matter vigorously. In September 1999, the United States Environmental Protection Agency filed a complaint against Trinity seeking penalties of approximately $225,000. The complaint alleges that Trinity failed to file certain submissions timely to the United States Environmental Protection Agency in an alleged violation of the Emergency Planning Community Right to Know Act. Trinity denies all allegations and is defending this matter vigorously. We are involved in various other claims and lawsuits incidental to our business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on our consolidated financial statements. ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 9 PART II ITEM 5.MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The Company's common stock is traded on the New York Stock Exchange with the ticker symbol "TRN". The following table shows the price range of the Company's common stock for the nine months ended December 31, 2001 and fiscal year 2001:
PRICES --------------- FISCAL YEAR 2001 HIGH LOW - ---------------- ------ ------ Quarter ended June 30, 2000........... $23.56 $18.50 Quarter ended September 30, 2000...... 23.38 18.37 Quarter ended December 31, 2000....... 26.63 22.56 Quarter ended March 31, 2001.......... 25.00 18.97
NINE MONTHS ENDED DECEMBER 31, 2001 HIGH LOW - ----------------- ------ ------ Quarter ended June 30, 2001........... $23.80 $17.50 Quarter ended September 30, 2001...... 27.85 20.70 Quarter ended December 31, 2001....... 28.04 21.33
The Company's transfer agent and registrar is The Bank of New York, New York, NY. HOLDERS At December 31, 2001, the Company had approximately 1,991 record holders of common stock. The par value of the stock is $1. DIVIDENDS Since April 1, 2000, Trinity has paid quarterly dividends of $0.18 per common share and has paid 152 consecutive quarterly dividends. On March 14, 2002, the board of directors declared a quarterly dividend of $0.06 per share. See Management's Discussion and Analysis of Financial Condition and Results of Operations. RECENT SALES OF UNREGISTERED SECURITIES On October 26, 2001, Trinity completed a merger with Thrall Car Manufacturing Company, Inc. Pursuant to the terms of the merger agreement, Trinity issued 7,150,000 shares of common stock to Thrall Car Management Company, Inc. The 7,150,000 shares issued to Thrall Car Management Company, Inc. were not registered and were issued pursuant to the exemptions provided by Regulation D of the Securities Act of 1933, as amended. On November 9, 2001, Trinity acquired the outstanding interest of Transport Capital, LLC from a group of individuals for 34,000 shares of common stock. The 34,000 shares were not registered and were issued in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended. 10 ITEM 6. SELECTED FINANCIAL DATA. The following financial information for the nine months ended December 31, 2001 and 2000 and for the four years ended March 31, 2001 has been derived from the Company's consolidated financial statements. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included elsewhere herein.
NINE MONTHS ENDED DECEMBER 31, YEAR ENDED MARCH 31, ---------------------- ----------------------------------------- 2001 2000 2001 2000 1999 1998 -------- ----------- -------- -------- -------- -------- (UNAUDITED) (IN MILLIONS EXCEPT PERCENT AND PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues......................... $1,347.8 $1,485.6 $1,904.3 $2,740.6 $2,926.9 $2,473.0 Operating profit (loss)(1)....... (16.4) (7.9) (66.1) 279.0 284.9 255.9 Net income (loss)(2)............. (34.7) (34.7) (74.4) 165.5 185.3 103.7 Basic net income (loss) per common share(2)................ (0.90) (0.92) (1.98) 4.17 4.31 2.41 Diluted net income (loss) per common share(2)................ $ (0.90) $ (0.92) $ (1.98) $ 4.15 $ 4.25 $ 2.36 Weighted average common shares outstanding: Basic....................... 38.7 37.6 37.5 39.7 43.0 43.1 Diluted..................... 38.7 37.6 37.5 39.9 43.6 43.9 Dividend per share............... $ 0.54 $ 0.54 $ 0.72 $ 0.72 $ 0.69 $ 0.68 BALANCE SHEET DATA: Total assets..................... $1,952.0 $1,755.4 $1,825.9 $1,738.5 1,684.9 1,573.9 Long-term debt(3)................ 476.3 44.5 504.0 95.4 120.6 149.6 Stockholders' equity............. $1,009.4 926.0 879.0 1,015.1 959.1 887.5 Ratio of total debt to total capital........................ 32.1% 32.7% 38.0% 20.7% 23.9% 22.0% Book value per share............. $ 22.79 $ 25.16 $ 23.89 $ 26.50 $ 23.22 $ 20.40
- --------------- (1) Includes charges of: - $64.3 million for unusual charges for the nine months ended December 31, 2001, - $85.1 million for unusual charges for the nine months ended December 31, 2000, and - $140.9 million for unusual charges for fiscal year 2001. (2) Includes after tax charges or credit of: - $50.4 million ($1.30 per share) for unusual charges for the nine months ended December 31, 2001, - $75.2 million ($2.00 per share) for unusual charges for the nine months ended December 31, 2000, - $110.9 million ($2.96 per share) for unusual charges for fiscal year 2001, - $14.0 million ($0.32 per share) for the gain on a sale of an investment in land in fiscal year 1999, and - $43.8 million ($1.00 per share) charge for litigation in fiscal year 1998. (3) Long-term debt as of December 31, 2001 and March 31, 2001 increased from the levels as of December 31, 2000 due to the Company completing a committed revolving bank facility in June 2001 which has been classified as long-term debt. The proceeds of the new facility were used to repay short-term debt. See note 8 to the consolidated financial statements. 11 ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgements, including those related to bad debts, inventories, property, plant and equipment, goodwill, income taxes, warranty obligations, insurance restructuring costs, and contingencies and litigation. Management bases its estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgements and estimates used in the preparation of its consolidated financial statements. Inventory We are required to state our inventories at the lower of cost or market. In assessing the ultimate realization of inventories, we are required to make judgements as to future demand requirements and compare that with the current or committed inventory levels. We have recorded significant changes in inventory carrying values in recent periods due to discontinuances of product lines as well as changes in market conditions due to changes in demand requirements. It is possible that changes in required inventory reserves may continue to occur in the future due to current market conditions in the railcar business. Goodwill We periodically evaluate acquired businesses for potential impairment indicators that are based on legal factors, market conditions in the United States and Europe and operational performance of our acquired businesses. Future events could cause us to conclude that impairment indicators exist and that goodwill associated with our acquired businesses is impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations. Warranties We provide for the estimated cost of product warranties at the time we recognize revenue. We base our estimates on historical product failure rates. We also provide for specifically identified warranty obligations. Should actual product failure rates differ from our estimates, revisions to the estimated warranty liability would be required. Insurance We effectively self-insure for workers' compensation claims. A third-party administrator processes all such claims. We accrue our workers' compensation liability based upon an independent actuarial study. To the extent actuarial assumptions change and claims experience rates differs from historical rates, our liability may change. Contingencies and Litigation We are currently involved in certain legal proceedings. As discussed in Note 15 of our consolidated financial statements, as of December 31, 2001, we have accrued our estimate of the probable costs for the resolution of these claims. This estimate has been developed in consultation with outside counsel handling our defense in these matters and is based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. We do not believe these proceedings will have a material adverse effect on our consolidated financial position. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions related to these proceedings. 12 BASIS OF PRESENTATION We are one of the nation's leading diversified industrial manufacturers. As of December 31, 2001, we modified our segment reporting to align the reportable segments with current management responsibilities and internal reporting. The new reporting format includes the following business segments: (1) the Trinity Rail group, which manufactures and sells railcars and component parts; (2) the Construction Products group, which manufactures and sells highway guardrail and safety products, concrete and aggregate, girders and beams used in the construction of highway and railway bridges and weld fittings used in pressure piping systems; (3) the Inland Barge group, which manufactures and sells barges and related products for inland waterway services; (4) the Industrial Products group, which manufactures and sells container heads and pressure and non-pressure containers for the storage and transportation of liquefied gases and other liquid and dry products; and (5) the Trinity Railcar Leasing and Management Services group, which provides services such as fleet management and leasing. Finally, All Other includes the Company's captive insurance and transportation companies, structural towers, and other peripheral businesses. Sales from Trinity Rail group to Trinity Railcar Leasing and Management Services group are recorded in Trinity Rail group and eliminated in consolidation. Sales of railcars from the lease fleet are included in the Trinity Railcar Leasing and Management Services group segment. See notes to the consolidated financial statements for further discussion of business segments. 13 UNUSUAL CHARGES During the nine months ended December 31, 2001, Trinity recorded special pretax charges of approximately $66.4 million, $50.4 million net of tax or $1.30 per share, related primarily to restructuring our Rail group in connection with the Thrall merger and other matters. Of these charges, $64.3 million were charged to operating profit. These charges are reflected in the following income statement categories and segments (in millions).
RAILCAR LEASING & CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE RAIL PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL ------- ------------ ------ ---------- ---------- --------- ------ Cost of revenues......... $ 46.1 $ 0.8 $ -- $ -- $ -- $ 9.9 $ 56.8 Selling, engineering & administrative......... 4.2 0.1 -- -- -- 3.2 7.5 ------ ----- ---- ---- ----- ------ ------ Charged to operating profit................. 50.3 0.9 -- -- -- 13.1 64.3 Operating profit (loss) before charges......... (15.5) 46.5 9.8 3.9 30.2 (27.0) 47.9 ------ ----- ---- ---- ----- ------ ------ Operating profit (loss) reported............... $(65.8) $45.6 $9.8 $3.9 $30.2 $(40.1) $(16.4) ====== ===== ==== ==== ===== ====== ======
Unusual charges reported in other expenses amounted to $2.1 million primarily for the write down of equity investments in nine months ended December 31, 2001. During fiscal year 2001, we recorded pre-tax charges of approximately $173.3 million, $110.9 million net of tax or $2.96 per share, primarily related to the restructuring of our railcar operations, investment and asset write downs, litigation reserves and other charges. Of these charges, $140.9 million were charged to operating profit. These charges are reflected in the following income statement categories and segments (in millions):
RAILCAR LEASING & CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE RAIL PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL ------- ------------ ------ ---------- ---------- --------- ------ Cost of revenues......... $ 73.7 $13.7 $ 4.4 $0.7 $ -- $ 32.8 $125.3 Selling, engineering & administrative......... 6.7 -- -- -- -- 8.9 15.6 ------ ----- ----- ---- ----- ------- ------ Charged to operating profit................. 80.4 13.7 4.4 0.7 -- 41.7 140.9 Operating profit (loss) before charges......... 40.3 42.8 16.1 6.1 41.6 (72.1) 74.8 ------ ----- ----- ---- ----- ------- ------ Operating profit (loss) reported............... $(40.1) $29.1 $11.7 $5.4 $41.6 $(113.8) $(66.1) ====== ===== ===== ==== ===== ======= ======
Unusual charges reported in other expenses amounted to $32.4 million primarily for the write down of equity investments in fiscal year 2001. NINE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED MARCH 31, 2001 - -- RESULTS OF OPERATIONS We changed our year-end in 2001 from March 31 to December 31 and, as a result, our most recent Statement of Operations is for the nine months ended December 31, 2001. Compared to the prior twelve month period, revenues and operating profit declined due to the shorter time period of three months and the significant downturn in the railcar market. Results of operations were also affected by the acquisition of Thrall on October 26, 2001, which added $47.3 million in revenue since the acquisition date with corresponding increases in other costs of our operations of $52.9 million. Interest expense also increased slightly as a result of increased debt incurred to acquire Thrall. Results of operations were also affected by the unusual pre-tax charges discussed above which were $66.4 million in the nine months ended December 31, 2001 compared to $173.3 million in the fiscal year 2001. Our management discussion and analysis which follows is based on a comparison of the nine months ended December 31, 2001 to the comparable nine month period in 2000. 14 NINE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH NINE MONTHS ENDED DECEMBER 31, 2000 -- RESULTS OF OPERATIONS Revenues decreased $137.8 million to $1,347.8 million for the nine months ended December 31, 2001 compared to $1,485.6 million for the nine months ended December 31, 2000, a decrease of 9.3%. The decline in revenues was primarily due to the reduction in railcar shipments and prices offset by increased revenues of $47.3 million due to the Thrall acquisition. The following table reconciles the revenue amounts discussed under each segment with the consolidated total revenues shown in the Selected Financial Data (in millions).
NINE MONTHS ENDED DECEMBER 31, 2001 NINE MONTHS ENDED DECEMBER 31, 2000 ------------------------------------- ------------------------------------- REVENUES REVENUES ------------------------------------- ------------------------------------- OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL --------- ------------- --------- --------- ------------- --------- Rail Group................... $ 521.3 $ 142.8 $ 664.1 $ 639.3 $ 166.9 $ 806.2 Construction Products Group...................... 427.2 5.0 432.2 432.4 9.6 442.0 Inland Barge Group........... 148.2 -- 148.2 144.5 -- 144.5 Industrial Products Group.... 106.7 2.3 109.0 127.1 4.5 131.6 Railcar Leasing and Management Services Group...................... 94.0 -- 94.0 108.6 -- 108.6 All Other.................... 50.4 28.1 78.5 33.7 30.0 63.7 Eliminations & Corporate Items...................... -- (178.2) (178.2) -- (211.0) (211.0) -------- ------- -------- -------- ------- -------- Consolidated Total........... $1,347.8 $ -- $1,347.8 $1,485.6 $ -- $1,485.6 ======== ======= ======== ======== ======= ========
Operating loss increased $8.5 million to $16.4 million for the nine months ended December 31, 2001 compared to $7.9 million for the same period in 2000. The increase was caused by a $29.3 million decrease in operating profits because of lower revenues, higher cost of revenues and the additional Thrall costs of $52.9 million offset by lower selling, engineering and administrative expenses. Additionally, special charges for the nine months ended December 31, 2001 were $20.8 million lower than the amount recorded for the same period in 2000. Selling, engineering and administrative expenses decreased $32.4 million to $129.7 million for the nine months ended December 31, 2001 compared to $162.1 million for the period in 2000, a decrease of 20.0%. The decrease was a result of lower head counts, cost reduction efforts and a lesser amount of special charges. Interest expense, net of interest income, increased $3.4 million to $19.2 million for the nine months ended December 31, 2001 compared to $15.8 million for the same period in 2000, an increase of 21.5%. The increase was primarily attributable to lower interest income. Other, net decreased $25.6 million to $4.9 million for the nine months ended December 31, 2001 from $30.5 million for the same period in 2000, a 83.9% decrease. This decrease was due to the write down of equity investments during the nine months ended December 31, 2000. The current year effective tax rate of 14.3% is due to lower foreign tax rates and valuation allowances. Net loss for the nine months ended December 31, 2001 was $34.7 million, or $0.90 per diluted share as compared to a net loss of $34.7 million, or $0.92 per diluted share, the same period in 2000. TRINITY RAIL GROUP
NINE MONTHS ENDED DECEMBER 31, --------------- 2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $664.1 $806.2 Operating profit (loss) including unusual charges..................... $(65.8) $ 3.4 Operating profit (loss) before unusual charges............................. $(15.5) $ 36.6 Operating profit (loss) margin before unusual charges..................... (2.3)% 4.5%
Revenues declined 17.6% for the nine months ended December 31, 2001 compared to the same period in 2000. This decline is due to the current downturn in the North American railcar industry 15 offset by increased revenues of $47.3 million due to the Thrall acquisition. Railcar units shipped dropped 22% compared to the prior year to approximately 7,800 cars. Operating profit margins were impacted by the inefficiencies of lower production levels, costs associated with more frequent changeovers to different car types and sizes, price pressures in the current competitive environment, and additional costs from Thrall. With the current railcar market, shipments are expected to decline further to 5,000 to 7,000 in fiscal year 2002 resulting in a very competitive market. In the nine months ended December 31, 2001 railcar sales to Trinity Industries Leasing Company included in the Rail Group results were $139.2 million compared to $162.8 million in the same period in 2000 with profit of $6.6 million compared to $12.2 million for the same period in 2000. Sales to Trinity Industries Leasing Company and related profits are eliminated in consolidation. CONSTRUCTION PRODUCTS GROUP
NINE MONTHS ENDED DECEMBER 31, --------------- 2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $432.2 $442.0 Operating profit including unusual charges............................. $ 45.6 $ 25.8 Operating profit before unusual charges............................. $ 46.5 $ 39.5 Operating profit margin before unusual charges............................. 10.8% 8.9%
Revenues declined 2.2% for the nine months ended December 31, 2001 compared to the same period in 2000. The decrease in revenues was primarily attributable to exiting the flange and valve business offset by increased revenue and profits related to improved weather conditions in the concrete and aggregate and bridge business. Operating profit margins increased as a result of cost reduction associated with the consolidation of plants and elimination of unprofitable products. INLAND BARGE GROUP
NINE MONTHS ENDED DECEMBER 31, --------------- 2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $148.2 $144.5 Operating profit including unusual charges............................. $ 9.8 $ 9.9 Operating profit before unusual charges............................. $ 9.8 $ 14.3 Operating profit margin before unusual charges............................. 6.6% 9.9%
Revenues increased 2.6% for the nine months ended December 31, 2001 compared to the same period in 2000. The increase in revenues was attributable to increased deliveries of tank barges offset by lower volumes in hopper barge sales. The decrease in Inland Barge operating profit margin is mainly due to competitive price pressures for both hopper barges and tank barges. INDUSTRIAL PRODUCTS GROUP
NINE MONTHS ENDED DECEMBER 31, --------------- 2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $109.0 $131.6 Operating profit including unusual charges............................. $ 3.9 $ 6.5 Operating profit before unusual charges............................. $ 3.9 $ 7.2 Operating profit margin before unusual charges............................. 3.6% 5.5%
Revenues declined 17.2% for the nine months ended December 31, 2001 compared to the same period in 2000. The decline in revenues is primarily attributable to reduced demand from gas distributors and pricing pressures in the Mexico liquified petroleum gas market. Sales of propane cylinders in Mexico have been negatively affected by a temporary halt in purchasing by Mexican propane distributors related to price controls and other matters. When these issues will be resolved, and the impact on Trinity's consolidated profits, cannot be determined. RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
NINE MONTHS ENDED DECEMBER 31, --------------- 2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $ 94.0 $108.6 Operating profit...................... $ 30.2 $ 34.2 Operating profit margin............... 32.1% 31.5%
Revenues declined 13.4% for the nine months ended December 31, 2001 compared to the same period in 2000. The decrease in revenues was due to a decline in quantity of railcars sold offset by increases in lease revenues from net additions to the lease fleet and an increase in the fleet managed under management agreements. Included in the results of this group are revenues from the sale of railcars from the lease fleet of $20.9 million in the nine months ended December 31, 2001 and $48.3 million in the same period in 2000, and operating profits of $2.6 million in the nine months ended December 31, 2001 and $8.8 million in the same period in 2000. 16 ALL OTHER Revenues in All Other increased from $63.7 million in the nine months ended December 31, 2000 to $78.5 million in the nine months ended December 31, 2001, due primarily to recording wind tower revenues for the entire period compared to the prior period start-up year. This increase is partially offset by discontinuing the operations of TEMCO during the same period in 2000. TEMCO produced concrete mixers, concrete batch plants and component parts for concrete related industries. Operating loss was $21.1 for the nine months ended December 31, 2001, and $44.4 in the same period in 2000. Restructuring charges included in the nine months ended December 31, 2000 were $20.9 million primarily related to exiting the TEMCO business referred to above and environmental liabilities. Restructuring charges for the nine months ended December 31, 2001 were $13.1 million primarily related to exiting our internet related business and to our wind tower business which has been affected by the Enron bankruptcy. Excluding restructuring charges, a larger operating loss was recorded in the same period in 2000 due primarily to operating losses associated with TEMCO recorded in such period. FISCAL YEAR 2001 COMPARED WITH FISCAL YEAR 2000 -- RESULTS OF OPERATIONS Revenues decreased $836.3 million to $1,904.3 million in fiscal 2001 compared to $2,740.6 million in fiscal 2000, a decrease of 30.5%. The decline was due to the reduction in railcar shipments and prices, a $13.4 million decline in liquid petroleum gas container sales and our decision to exit the flange and valve business. The following table reconciles the revenue amounts disclosed under each segment with the consolidated total revenue shown in the Selected Financial Data (in millions).
YEAR ENDED MARCH 31, 2001 YEAR ENDED MARCH 31, 2000 REVENUES REVENUES ---------------------------------- ---------------------------------- OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL -------- ------------ -------- -------- ------------ -------- Rail Group................... $ 818.0 $281.7 $1,099.7 $1,632.0 $ 66.3 $1,698.3 Construction Products Group...................... 549.0 11.1 560.1 581.4 10.1 591.5 Inland Barge Group........... 202.9 0.1 203.0 210.1 -- 210.1 Industrial Products Group.... 160.3 9.8 170.1 179.2 8.1 187.3 Railcar Leasing and Management Services Group...................... 128.7 -- 128.7 131.5 -- 131.5 All Other.................... 45.4 45.8 91.2 6.4 54.4 60.8 Eliminations & Corporate Items...................... -- (348.5) (348.5) -- (138.9) (138.9) -------- ------ -------- -------- ------- -------- Consolidated Total........... $1,904.3 $ -- $1,904.3 $2,740.6 $ -- $2,740.6 ======== ====== ======== ======== ======= ========
Operating profit decreased to a loss of $66.1 million in fiscal year 2001 compared to an operating profit of $279.0 million for fiscal year 2000. The decrease was caused by a decrease in operating profits because of lower revenues and higher cost of revenues and selling, engineering and administrative expenses. Additionally, we incurred special operating charges of $140.9 million for fiscal year 2001 primarily due to restructuring and plant closers. Selling, engineering and administrative expenses increased $30.3 to $213.7 million in fiscal year 2001 compared to $183.4 million in fiscal year 2000, an increase of 16.5%. This increase is primarily a result of international expansion and expenses associated with start-up operations and development activities plus $15.6 million in special charges. Interest expense, net of interest income, increased $3.6 million to $22.0 million in fiscal year 2001 compared to $18.4 million for fiscal year 2000, an increase of 19.6%. This increase was primarily due to a higher level of short-term debt outstanding during fiscal year 2001 offset by higher interest income. Other income, net changed from income of $2.3 million in fiscal year 2000 to a loss of 17 $28.2 million in fiscal year 2001 primarily due to the unusual charges from the write down of equity investments noted above. The current year benefit for income taxes is primarily related to the deferred tax deductions attributable for the unusual charges. We believe that this asset is fully realizable given current tax carry back availability and existing deferred tax liabilities. Net loss in fiscal year 2001 was $74.4 million, or $1.98 loss per share as compared to net income of $165.5 million, or $4.15 per diluted share, in fiscal year 2000. TRINITY RAIL GROUP
2001 2000 -------- -------- (IN MILLIONS) Revenues........................... $1,099.7 $1,698.3 Operating profit (loss) including unusual charges.................. $ (35.2) $ 174.6 Operating profit before unusual charges.......................... $ 40.3 $ 174.6 Operating profit margin before unusual charges.................. 3.7% 10.3%
Revenues declined 35.2% in fiscal year 2001 compared to fiscal year 2000. This decline is due to the current downturn in the North American railcar industry. Railcar units shipped dropped 37% compared to the prior year to approximately 14,000 cars. Operating profit margins were negatively impacted by the inefficiencies of lower production levels, costs associated with more frequent changeovers to different car types and sizes, and price pressures in the current competitive environment. Fiscal year 2001 railcar sales to Trinity Industries Leasing were $262.5 million compared to $67.5 million in the prior year with profit of $17.7 million compared to $6.6 million in fiscal year 2000. Sales to Trinity Industries Leasing and the related profit are eliminated in consolidation. CONSTRUCTION PRODUCTS GROUP
2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $560.1 $591.5 Operating profit including unusual charges............................. $ 29.1 $ 62.1 Operating profit before unusual charges............................. $ 42.8 $ 62.1 Operating profit margin before unusual charges............................. 7.6% 10.5%
Revenue declined 5.3% in fiscal year 2001 compared to fiscal year 2000. An increase in revenues of beam and girders for highway bridges were offset by a decline in both highway safety products and concrete and aggregate. The decline in concrete and aggregate was due to the significant increase in adverse weather conditions experienced in fiscal year 2001 in the Texas market compared to fiscal year 2000. Operating profit and operating profit margins declined due to the inefficiencies of lower volumes caused by the poor weather and softer pricing in selected markets. INLAND BARGE GROUP
2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $203.0 $210.1 Operating profit including unusual charges............................. $ 11.7 $ 25.7 Operating profit before unusual charges............................. $ 16.1 $ 25.7 Operating profit margin before unusual charges............................. 7.9% 12.2%
Revenues declined 3.4% for fiscal year 2001 compared to fiscal year 2000. The decrease in Inland Barge revenues and operating profit is mainly due to competitive price pressures for both hopper barges and tank barges. These factors are primarily a result of depressed freight rates, which negatively impacted the Inland Barge group customers and reduced grain exports. INDUSTRIAL PRODUCTS GROUP
2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $170.1 $187.3 Operating profit including unusual charges............................. $ 5.4 $ 13.0 Operating profit before unusual charges............................. $ 6.1 $ 13.0 Operating profit margin before unusual charges............................. 3.6% 6.9%
Revenue declined 9.2% in fiscal 2001 compared to fiscal 2000. The decline in revenues is primarily attributable to reduced demand in the liquid petroleum gas market and competitive pricing pressures. Operating profits declined primarily due to pricing pressures in the container head products market and the Mexico liquid petroleum gas market. Sales of propane cylinders in Mexico have been negatively affected by a temporary halt in purchasing by Mexican propane distributors related to price controls and other matters. 18 RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
2001 2000 ------ ------ (IN MILLIONS) Revenues.............................. $128.7 $131.5 Operating profit...................... $ 42.0 $ 51.3 Operating profit margin............... 32.3% 39.0%
Operating profit declined in fiscal year 2001 compared to fiscal year 2000 due to lower profits on car sales, higher operating expenses related to leasing and management fleet expansion and higher lease expenses from leverage lease transactions. Included in the results of this group are revenues from the sale of railcars from the lease fleet of $50.1 million in fiscal year 2001 and $57.9 million in fiscal year 2000, and operating profits of $9.0 million in fiscal year 2001 and $14.7 million in fiscal year 2000. ALL OTHER Revenues in All Other increased from $60.8 million in fiscal year 2000 to $91.2 million in fiscal year 2001 due primarily to start-up businesses, TEMCO and wind towers. TEMCO produced concrete mixers, concrete batch plants and component parts for concrete related industries. This business was closed and certain assets were sold in the fourth quarter of fiscal year 2001. Operating loss increased to $59.1 million in fiscal year 2001 from $8.2 million in fiscal year 2000. Operating loss for fiscal year 2001 includes restructuring charges of $20.9 million primarily related to exiting the TEMCO business as referred to above and environmental liabilities. This remaining operating decline was due primarily to operating losses recorded by TEMCO in fiscal year 2001. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities for the nine months ended December 31, 2001 increased to $200.1 million compared to $56.0 million for the same period in 2000. The increase was due to working capital changes, primarily reduced accounts receivable and inventory balances. Capital expenditures for the nine months ended December 31, 2001 were $133.3 million, of which $86.9 million were for additions to the lease portfolio. This compares to $229.3 million of capital expenditures for the same period last year, of which $152.5 million was for additions to the lease portfolio. Proceeds from the sale of property, plant and equipment were $188.2 million for the nine months ended December 31, 2001 composed primarily of the sale of cars from the lease fleet, compared to $55.8 million for the same period in 2000. During the nine months ended December 31, 2001, the Company completed a committed revolving bank facility for $450 million. Amounts borrowed under the facility bear interest at LIBOR plus 0.95% or other alternative rates at the Company's option (3.09% at December 31, 2001) and can be converted to a one-year term in June 2002. The agreement requires maintenance of ratios related to interest coverage, leverage, and minimum net worth and restricts the amount of dividend payments. Accounts receivable and inventory are pledged as collateral for this facility. At December 31, 2001, $95.4 million was available under the facility. Proceeds from the facility were used to repay outstanding short-term debt as of March 31, 2001. We expect to finance future operating requirements with net cash flow from operations, long-term and short-term debt, and privately placed equity. Continued worsening of the railcar market, declines in other businesses, the need to invest in additions to the railcar lease fleet or other factors could result in exceeding certain ratios in our debt covenants in the second half of the year. The debt covenant ratios that could be exceeded are the ratios of debt to EBITDA and EBITDA to interest expense. Based on discussion with our lead banks, we expect to renegotiate or replace existing debt agreements including changes to debt covenants and, if necessary, to take other actions designed to prevent exceeding debt covenant limitations. On February 15, 2002, Trinity Industries Leasing sold $170,000,000 of 2002-1 Pass Through Certificates with interest payments at 7.755%, commencing on August 15, 2002 and due semiannually thereafter. Equipment notes issued by Trinity Industries Leasing for the benefit of the holders of the Pass Through Certificates are collateralized by interest in certain railcars owned by Trinity Industries Leasing and the leases pursuant to which such railcars are leased to customers. The equipment notes, including the obligations to make payments of principal and interest thereon are direct obliga- 19 tions of Trinity Industries Leasing and are fully and unconditionally guaranteed by Trinity as guarantor. On March 6, 2002, we privately placed a total of 1.5 million unregistered shares of our common stock for net proceeds of $31.5 million. We are obligated to register these shares. SALE/LEASEBACK TRANSACTION During the nine months ended December 31, 2001, we completed an off balance sheet financing arrangement for $199.0 million in railcars. We sold the railcars to an independent trust. The trust financed the purchase of the railcars with $151.3 million in debt and $47.7 million in equity provided by large independent financial institutions. The equity investor in the trust has the risk of ownership of the assets in the trust except for the $6.5 million of cash collateral discussed herein. Trinity has made no guarantees with respect to amounts at risk. An independent trustee for the trust has the authority for the appointment of the railcar fleet manager. The debt is repayable by the trust over 19 years. Trinity, through a newly formed, wholly owned, qualified subsidiary, leased the cars from the trust and subleased the railcars to independent third party customers. Future operating lease obligations of our subsidiary under the lease agreement are as follows (in millions): 2002 -- $17.0; 2003 -- $16.8; 2004 -- $17.1; 2005 -- $16.3; 2006 -- $15.8; and $225.5 thereafter. Future minimum rental revenues from subleased railcars as of December 31, 2001 are as follows (in millions): 2002 -- $19.5; 2003 -- $18.2; 2004 -- $16.8; 2005 -- $14.1; 2006 -- $12.8 and $76.9 thereafter. Under the terms of the operating lease agreement, Trinity has the option to purchase the railcars from the trust at the end of sixteen years at a predetermined, fixed price. Trinity also has an option to purchase the railcars at the end of the lease agreement at the then fair market value of the railcars. At the expiration of the operating lease agreement, Trinity has no further obligation or ownership interest in the assets of the trust. Included in our accompanying consolidated balance sheet are cash and railcars totaling $28.4 million which are pledged as collateral for the duration of the lease obligations to the trust and an additional $6.5 million of cash which is pledged as collateral for the equity investor's investment. Trinity, under the terms of a servicing and remarketing agreement, will endeavor, consistent with customary commercial practice as would be used by a prudent person, to maintain railcars under lease for the benefit of the trust. Trinity also receives management fees under the terms of the agreement. Certain ratios must be maintained in order for excess cash flow, as defined, from the leases to third parties, to be available to Trinity. The sale of the railcars by Trinity to the trust was accounted for as a sale/leaseback transaction. No revenue or profit was recorded at the time of the transaction and all profit was deferred and is being amortized over the term of the operating lease. Neither the assets of the trust, amounts due by the trust under the terms of debt to the financial institutions, or equity of the trust are reflected on the consolidated balance sheet of Trinity. 20 CONTRACTUAL OBLIGATION AND COMMERCIAL COMMITMENTS. As of December 31, 2001, we had the following contractual obligations (in millions):
PAYMENTS DUE BY PERIOD ------------------------------------- 1 YEAR 2-3 4-5 AFTER 5 CONTRACTUAL OBLIGATIONS TOTAL OR LESS YEARS YEARS YEARS - ----------------------- ------ ------- ------ ----- ------- Long-term debt.................................. $476.3 $11.5 $291.0 $50.5 $123.3 Operating leases................................ 50.7 10.1 17.4 13.2 10.0 ------ ----- ------ ----- ------ Total........................................... $527.0 $21.6 $308.4 $63.7 $133.3 ====== ===== ====== ===== ======
As of December 31, 2001, we had the following other commercial commitments (in millions):
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD TOTAL -------------------------------------------- AMOUNTS 1 YEAR 2-3 4-5 AFTER 5 OTHER COMMERCIAL COMMITMENTS COMMITTED OR LESS YEARS YEARS YEARS - ---------------------------- --------- ------- ------- ------- -------- Letters of Credit.......................... $ 81.2 $16.4 $ 0.2 $ 0.6 $ 64.0 Operating leases under sale/leaseback transaction.............................. 308.5 17.0 33.9 32.1 225.5 ------ ----- ----- ----- ------ $389.7 $33.4 $34.1 $32.7 $289.5 ====== ===== ===== ===== ======
INFLATION Changes in price levels of products and services did not significantly affect our operations during the nine months ended December 31, 2001 or in fiscal years 2001 and 2000. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our earnings are affected by changes in interest rates due to the impact those changes have on our variable rate debt obligations, which represented approximately 96% of our total debt as of December 31, 2001. We have hedged a portion of this exposure with interest rate swaps leaving approximately 49% of our total debt exposed to fluctuations in interest rates. If interest rates average one percentage point more in fiscal year 2002 than they did during the nine months ended December 31, 2001, our interest expense would increase by approximately $2.3 million. In comparison, at March 31, 2001, we estimated that if interest rates averaged one percentage point more in fiscal year 2002 than they did in fiscal year 2001, interest expense would have increased by approximately $4.9 million. The impact of an increase in interest rates was determined based on the impact of the hypothetical change in interest rates and scheduled principal payments on our variable-rate debt obligations as of December 31, 2001 and March 31, 2001. In addition, we are subject to market risk related to our net investments in our foreign subsidiaries. The net investment in foreign subsidiaries as of December 31, 2001 is $209.8 million. However, the impact of such market risk exposures as a result of foreign exchange rate fluctuations has not been material to us. 21 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. TRINITY INDUSTRIES, INC., INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Auditors.............................. 23 Consolidated Statement of Operations for the nine months ended December 31, 2001 and 2000 (unaudited) and for the years ended March 31, 2001 and 2000....................... 24 Consolidated Balance Sheet as of December 31, 2001 and March 31, 2001.................................................. 25 Consolidated Statement of Cash Flows for the nine months ended December 31, 2001 and 2000 (unaudited) and for the years ended March 31, 2001 and 2000....................... 26 Consolidated Statement of Stockholders' Equity for the nine months ended December 31, 2001 and for the years ended March 31, 2001 and 2000................................... 27 Notes to Consolidated Financial Statements.................. 28
22 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Trinity Industries, Inc. We have audited the accompanying consolidated balance sheets of Trinity Industries, Inc. as of December 31, 2001 and March 31, 2001, and the related consolidated statement of operations, cash flows and stockholders' equity for the nine months ended December 31, 2001 and for each of the two years in the period ended March 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trinity Industries, Inc. at December 31, 2001 and March 31, 2001, and the consolidated results of its operations and its cash flows for the nine months ended December 31, 2001 and for each of the two years in the period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Dallas, Texas March 13, 2002 23 TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, YEAR ENDED MARCH 31, ----------------------- -------------------- 2001 2000 2001 2000 -------- ----------- -------- -------- (UNAUDITED) (IN MILLIONS EXCEPT PER SHARE DATA) Revenues......................................... $1,347.8 $1,485.6 $1,904.3 $2,740.6 Operating costs: Cost of revenues............................... 1,234.5 1,331.4 1,756.7 2,278.2 Selling, engineering and administrative expenses.................................... 129.7 162.1 213.7 183.4 -------- -------- -------- -------- 1,364.2 1,493.5 1,970.4 2,461.6 -------- -------- -------- -------- Operating profit (loss).......................... (16.4) (7.9) (66.1) 279.0 Other (income) expense: Interest income................................ (2.5) (5.5) (6.9) (2.0) Interest expense............................... 21.7 21.3 28.9 20.4 Other, net..................................... 4.9 30.5 28.2 (2.3) -------- -------- -------- -------- 24.1 46.3 50.2 16.1 -------- -------- -------- -------- Income (loss) before income taxes................ (40.5) (54.2) (116.3) 262.9 Provision (benefit) for income taxes: Current........................................ 3.3 17.8 3.8 84.4 Deferred....................................... (9.1) (37.3) (45.7) 13.0 -------- -------- -------- -------- (5.8) (19.5) (41.9) 97.4 -------- -------- -------- -------- Net income (loss)................................ $ (34.7) $ (34.7) $ (74.4) $ 165.5 ======== ======== ======== ======== Net income (loss) per common share: Basic.......................................... $ (0.90) $ (0.92) $ (1.98) $ 4.17 ======== ======== ======== ======== Diluted........................................ $ (0.90) $ (0.92) $ (1.98) $ 4.15 ======== ======== ======== ======== Weighted average number of shares outstanding: Basic.......................................... 38.7 37.6 37.5 39.7 Diluted........................................ 38.7 37.6 37.5 39.9
See accompanying notes to consolidated financial statements. 24 TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, MARCH 31, 2001 2001 ------------ --------- (IN MILLIONS) ASSETS Cash and cash equivalents................................... $ 22.2 $ 13.5 Receivables (net of allowance for doubtful accounts of $9.5 at December 31, 2001 and $4.8 at March 31, 2001).......... 204.3 245.7 Inventories: Raw materials and supplies................................ 159.5 235.5 Work in process........................................... 42.4 43.5 Finished goods............................................ 73.3 73.5 -------- -------- 275.2 352.5 Property, plant and equipment, at cost...................... 1,434.9 1,534.1 Less accumulated depreciation............................... (555.8) (541.7) -------- -------- 879.1 992.4 Goodwill.................................................... 415.7 77.3 Other assets................................................ 155.5 144.5 -------- -------- $1,952.0 $1,825.9 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Notes payable............................................... $ -- $ 33.8 Accounts payable and accrued liabilities.................... 424.9 364.2 Long-term debt.............................................. 476.3 504.0 Deferred income taxes....................................... -- 7.1 Other liabilities........................................... 41.4 37.8 -------- -------- 942.6 946.9 Stockholders' equity: Common stock -- shares issued and outstanding at December 31, 2001 -- 51.0; at March 31, 2001 -- 43.8............ 51.0 43.8 Capital in excess of par value............................ 464.7 291.8 Retained earnings......................................... 703.4 759.4 Accumulated other comprehensive loss...................... (26.0) (21.1) Treasury stock (6.6 shares at December 31, 2001 and 7.0 shares at March 31, 2001).............................. (183.7) (194.9) -------- -------- 1,009.4 879.0 -------- -------- $1,952.0 $1,825.9 ======== ========
See accompanying notes to consolidated financial statements. 25 TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT CASH FLOWS
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, --------------------- ----------------- 2001 2000 2001 2000 ------- ----------- ------- ------- (UNAUDITED) (IN MILLIONS) Operating activities: Net income (loss)................................... $ (34.7) $ (34.7) $ (74.4) $ 165.5 Adjustments to reconcile net income (loss) to net cash provided (required) by operating activities: Depreciation and amortization.................. 66.2 69.8 89.1 80.3 Deferred income taxes.......................... (9.1) (37.3) (45.7) 13.0 Gain on sale of property, plant, equipment and other assets................................ (1.1) (9.8) (11.2) (10.5) Unusual charges................................ 66.4 117.5 173.3 -- Other.......................................... 2.5 1.9 1.0 2.4 Changes in assets and liabilities, net of effects from acquisitions and unusual charges: Decrease in receivables................... 78.9 122.9 92.3 17.4 (Increase) decrease in inventories........ 112.8 (59.6) (24.3) 43.0 (Increase) decrease in other assets....... (5.2) (53.7) (33.3) 2.8 Decrease in accounts payable and accrued liabilities............................ (80.3) (55.1) (75.1) (60.4) Increase (decrease) in other liabilities............................ 3.7 (5.9) (0.8) 14.7 ------- ------- ------- ------- Total adjustments...................... 234.8 90.7 165.3 102.7 ------- ------- ------- ------- Net cash provided by operating activities............. 200.1 56.0 90.9 268.2 Investing activities: Proceeds from sale of property, plant, equipment and other assets..................................... 188.2 55.8 62.8 77.7 Capital expenditures................................ (133.3) (229.3) (350.2) (167.2) Payment for purchase of acquisitions, net of cash acquired......................................... (165.0) (13.7) (13.5) (25.6) ------- ------- ------- ------- Net cash required by investing activities........... (110.1) (187.2) (300.9) (115.1) Financing activities: Issuance of common stock............................ -- -- -- 2.3 Net borrowings (repayments) of short-term debt...... (35.8) 235.5 323.7 (10.9) Payments to retire long-term debt................... (25.5) (51.4) (55.5) (27.5) Stock repurchases................................... -- (34.6) (34.6) (84.9) Dividends paid...................................... (20.0) (20.4) (27.0) (28.7) ------- ------- ------- ------- Net cash provided (required) by financing activities....................................... (81.3) 129.1 206.6 (149.7) ------- ------- ------- ------- Net increase (decrease) in cash and equivalents....... 8.7 (2.1) (3.4) 3.4 Cash and equivalents at beginning of period........... 13.5 16.9 16.9 13.5 ------- ------- ------- ------- Cash and equivalents at end of period................. $ 22.2 $ 14.8 $ 13.5 $ 16.9 ======= ======= ======= =======
Interest paid for the nine months ended December 31, 2001 and 2000 and years ended March 31, 2001 and 2000 was $22.3, $18.3, $29.0, and $20.7, respectively. See accompanying notes to consolidated financial statements. 26 TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON COMMON CAPITAL SHARES STOCK IN EXCESS (100,000,000 $1.00 PAR OF PAR RETAINED AUTHORIZED) VALUE VALUE EARNINGS ------------ --------- --------- -------- (IN MILLIONS EXCEPT SHARE AND PER SHARE DATA) Balance at March 31, 1999...... 43,705,636 $43.7 $292.6 $722.9 Net income................... -- -- -- 165.5 Currency translation adjustments................ -- -- -- -- Comprehensive income......... Cash dividends ($0.72 per share)..................... -- -- -- (27.8) Stock repurchases............ -- -- -- -- Other........................ 90,715 0.1 2.5 -- ---------- ----- ------ ------ Balance at March 31, 2000...... 43,796,351 43.8 295.1 860.6 Net loss..................... -- -- -- (74.4) Currency translation adjustments................ -- -- -- -- Comprehensive loss........... Cash dividends ($0.72 per share)..................... -- -- -- (26.8) Stock repurchases............ -- -- -- -- Other........................ -- -- (3.3) -- ---------- ----- ------ ------ Balance at March 31, 2001...... 43,796,351 43.8 291.8 759.4 Net loss..................... -- -- -- (34.7) Currency translation adjustments................ -- -- -- -- Unrealized loss on derivative financial instruments...... -- -- -- -- Comprehensive loss........... Cash dividends ($0.54 per share)..................... -- -- -- (21.3) Stock issued for mergers and acquisitions............... 7,150,000 7.2 175.8 -- Other........................ -- -- (2.9) -- ---------- ----- ------ ------ Balance at December 31, 2001... 50,946,351 $51.0 $464.7 $703.4 ========== ===== ====== ====== ACCUMULATED OTHER TREASURY TOTAL COMPREHENSIVE TREASURY STOCK AT STOCKHOLDERS' LOSS SHARES COST EQUITY ------------- ---------- -------- ------------- (IN MILLIONS EXCEPT SHARE AND PER SHARE DATA) Balance at March 31, 1999...... $(20.6) (2,363,932) $ (79.5) $ 959.1 Net income................... -- -- -- 165.5 Currency translation adjustments................ 0.8 -- -- 0.8 -------- Comprehensive income......... 166.3 Cash dividends ($0.72 per share)..................... -- -- -- (27.8) Stock repurchases............ -- (2,941,839) (84.9) (84.9) Other........................ -- (149,972) (0.2) 2.4 ------ ---------- ------- -------- Balance at March 31, 2000...... (19.8) (5,455,743) (164.6) 1,015.1 Net loss..................... -- -- -- (74.4) Currency translation adjustments................ (1.3) -- -- (1.3) -------- Comprehensive loss........... (75.7) Cash dividends ($0.72 per share)..................... -- -- -- (26.8) Stock repurchases............ -- (1,618,900) (34.6) (34.6) Other........................ -- 121,257 4.3 1.0 ------ ---------- ------- -------- Balance at March 31, 2001...... (21.1) (6,953,386) (194.9) 879.0 Net loss..................... -- -- -- (34.7) Currency translation adjustments................ (0.4) -- -- (0.4) Unrealized loss on derivative financial instruments...... (4.5) -- -- (4.5) -------- Comprehensive loss........... (39.6) Cash dividends ($0.54 per share)..................... -- -- -- (21.3) Stock issued for mergers and acquisitions............... -- 34,000 1.3 184.3 Other........................ -- 310,864 9.9 7.0 ------ ---------- ------- -------- Balance at December 31, 2001... $(26.0) (6,608,522) $(183.7) $1,009.4 ====== ========== ======= ========
See accompanying notes to consolidated financial statements. 27 TRINITY INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The financial statements of Trinity Industries, Inc. and its consolidated subsidiaries ("Trinity" or the "Company") include the accounts of all majority owned subsidiaries. The equity method of accounting is used for companies in which the Company has significant influence and less than 50% ownership. All significant intercompany accounts and transactions have been eliminated. CHANGE IN YEAR END In September 2001 the Company changed its year end from March 31 to December 31. Unless stated otherwise, all references to "fiscal year 2000" shall mean the full fiscal year ended March 31, 2000 and "fiscal year 2001" shall mean the full fiscal year ended March 31, 2001. REVENUE RECOGNITION The Company generally recognizes revenue when products are shipped or services are provided. Revenues for contracts providing for a large number of units and few deliveries are recorded as the individual units are produced, inspected and accepted by the customer. Revenue from rentals and operating leases are recorded monthly as the fees accrue. INCOME TAXES The liability method is used to account for income taxes. Deferred income taxes are provided for the temporary effects of differences in the recognition of revenues and expenses for financial statement and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized. NET INCOME (LOSS) PER SHARE For fiscal year 2000 diluted net income per common share is based on the weighted average shares outstanding plus the assumed exercise of dilutive stock options less the number of treasury shares assumed to be purchased from the proceeds using the average market price of Trinity's common stock. Basic net income per common share is based on the weighted average number of common shares outstanding for the period. The numerator for both basic net income (loss) per common share and diluted net income per common share is net income (loss). The difference between the denominator in the basic calculation and the denominator in the diluted calculation is attributable to the effect of employee stock options. Diluted loss per common share for the nine months ended December 31, 2001 and for fiscal 2001 is based only on the weighted average number of common shares outstanding during the period, as the inclusion of stock options would have been antidilutive. The amounts of antidilutive options for the nine months ended December 31, 2001 and 2000 and for fiscal years 2001 and 2000 were 173,422, 66,739, 58,019 and 222,745, respectively. FINANCIAL INSTRUMENTS The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Financial instruments which potentially subject the Company to concentration of credit risk are primarily cash investments and receivables. The Company places its cash investments in investment grade, short-term debt instruments and limits the amount of credit exposure to any one commercial issuer. Concentrations of credit risk with respect to receivables are limited due to control procedures to monitor the credit worthiness of customers, the large number of customers in the Company's customer base, and their dispersion across different industries and geographic areas. The Company maintains an allowance for losses based upon the expected collectibility of all receivables. Effective April 1, 2001, the Company adopted SFAS 133, Accounting for Derivative Instruments and Hedging Activities. In accordance with SFAS 133, the Company formally documents all hedging instruments and assesses on an ongoing basis whether hedging transactions are highly effective. It is the Company's policy not to speculate in hedging activities. All hedging instruments outstanding at December 31, 2001 have been designated as cash flow hedges and are considered highly effective. The adoption of SFAS 133 did not have a material impact on the Company's financial statements. 28 Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. During the nine months ended December 31, 2001, the Company entered into eight interest rate swap agreements with a total notional amount of $225.0 million which expire in 2002 and 2003. The Company pays an average fixed rate of 4.30% and receives a floating rate based on the three-month LIBOR rates. As of December 31, 2001, the fair value of these swaps was recorded as a liability on the Company's books of $4.5 million with the offset to other comprehensive income. Foreign operations give rise to risks from changes in foreign currency exchange rates. Forward exchange contracts with established financial institutions are utilized to hedge a portion of such risk. Realized and unrealized gains and losses are deferred and recognized in earnings concurrent with the hedged transaction. Although forward exchange contracts are entered into to mitigate the impact of currency fluctuations, certain exposure remains that may affect operating results. As of December 31, 2001, the fair value of the forward exchange contracts is not material. INVENTORIES Inventories are valued at the lower of cost or market, with cost determined principally on the specific identification method. Market is replacement cost or net realizable value. PROPERTY, PLANT AND EQUIPMENT Depreciation and amortization are generally computed by the straight-line method over the estimated useful lives of the assets, generally 2 to 30 years. The costs of ordinary maintenance and repair are charged to expense while renewals and major replacements are capitalized. The Company recognizes an impairment on its long-lived assets if the sum of the expected future cash flows generated by an asset or group of assets is less than the carrying amount of the respective asset(s). The Company measures an impairment loss of its assets to be disposed of by the amount by which the carrying amount of the asset exceeds the fair value of the asset. INSURANCE The Company's insurance for workers' compensation is effectively self-insured. A third party administrator is used to process claims. The Company accrues the workers' compensation liability based upon on independent actuarial study. WARRANTIES The Company provides for the estimated cost of product warranties at the time revenue is recognized. FOREIGN CURRENCY TRANSLATION Operations outside the United States prepare financial statements in currencies other than the United States Dollar; the income statement amounts are translated at average exchange rates for the year, while the assets and liabilities are translated at year-end exchange rates. Translation adjustments are accumulated as a separate component of stockholders' equity and comprehensive income. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments and the effective unrealized portions of changes in fair value of the Company's derivative financial instruments. STOCK-BASED COMPENSATION Compensation expense for stock-based employee compensation is measured using the method prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. If material, pro forma disclosures of net earnings (loss) and earnings (loss) per common share will be made as if the method prescribed by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for stock Based Compensation, had been applied in measuring compensation expense. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial 29 statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain reclassifications have been made to prior year statements to conform to the current period presentation primarily related to segment information. PROSPECTIVE ACCOUNTING CHANGES In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years beginning after December 15, 2001. SFAS 144 addresses accounting and reporting of long-lived assets, except goodwill, that are held and used or disposed of through sale or other means. The Company, while currently evaluating the impact of this statement on the consolidated financial statements, does not believe it will have a significant impact. NOTE 2. SEGMENT INFORMATION As of December 31, 2001, the Company modified its segment reporting to align the reportable segments with current management responsibilities and internal reporting. The new reporting format includes the following business segments: (1) the Trinity Rail group, which manufactures and sells railcars and component parts; (2) the Construction Products group which manufactures and sells highway guardrail and safety products, concrete and aggregate, girders and beams used in the construction of highway and railway bridges and weld fittings used in pressure piping systems; (3) the Inland Barge group which manufactures and sells barges and related products for inland waterway services; (4) the Industrial Products group, which manufactures and sells container heads and pressure and non-pressure containers for the storage and transportation of liquefied gases and other liquid and dry products; and (5) the Trinity Railcar Leasing and Management Services group, which provides services such as fleet management and leasing. Finally, All Other includes the Company's captive insurance and transportation companies, structural towers, and other peripheral businesses. Sales from Trinity Rail group to Trinity Railcar Leasing and Management Services group are recorded in Trinity Rail group and eliminated in consolidation. Sales of railcars from the lease fleet are included in the Trinity Railcar Leasing and Management Services group segment. Sales among groups are recorded at prices comparable to external customers. The financial information for these segments is shown in the tables below. The Company operates principally in the continental United States, Mexico, Romania, the United Kingdom, the Czech Republic, Brazil, Switzerland and Slovakia. Intersegmental sales are at market prices. NINE MONTHS ENDED DECEMBER 31, 2001
REVENUES OPERATING ---------------------------------- PROFIT DEPRECIATION & CAPITAL OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES -------- ------------ -------- --------- -------- -------------- ------------ (IN MILLIONS) Rail Group................ $ 521.3 $ 142.8 $ 664.1 $(65.8) $ 868.7 $21.3 $ 22.9 Construction Products Group................... 427.2 5.0 432.2 45.6 250.0 18.7 11.9 Inland Barge Group........ 148.2 -- 148.2 9.8 86.6 2.7 1.8 Industrial Products Group................... 106.7 2.3 109.0 3.9 104.6 4.7 5.3 Railcar Leasing and Management Services Group................... 94.0 -- 94.0 30.2 482.8 11.4 87.6 All Other................. 50.4 28.1 78.5 (21.1) 52.5 3.9 2.3 Eliminations & Corporate Items................... -- (178.2) (178.2) (19.0) 106.8 3.5 1.5 -------- ------- -------- ------ -------- ----- ------ Consolidated Total........ $1,347.8 $ -- $1,347.8 $(16.4) $1,952.0 $66.2 $133.3 ======== ======= ======== ====== ======== ===== ======
30 YEAR ENDED MARCH 31, 2001
REVENUES OPERATING ---------------------------------- PROFIT DEPRECIATION & CAPITAL OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES -------- ------------ -------- --------- -------- -------------- ------------ (IN MILLIONS) Rail Group................ $ 818.0 $ 281.7 $1,099.7 $(35.2) $ 596.7 $24.4 $ 35.2 Construction Products Group................... 549.0 11.1 560.1 29.1 282.4 27.5 28.0 Inland Barge Group........ 202.9 0.1 203.0 11.7 77.2 4.3 1.7 Industrial Products Group................... 160.3 9.8 170.1 5.4 155.6 5.2 12.4 Railcar Leasing and Management Services Group................... 128.7 -- 128.7 42.0 553.1 14.0 259.8 All Other................. 45.4 45.8 91.2 (59.1) 63.2 7.0 10.7 Eliminations & Corporate Items................... -- (348.5) (348.5) (60.0) 97.7 6.7 2.4 -------- ------- -------- ------ -------- ----- ------ Consolidated Total........ $1,904.3 $ -- $1,904.3 $(66.1) $1,825.9 $89.1 $350.2 ======== ======= ======== ====== ======== ===== ======
YEAR ENDED MARCH 31, 2000
REVENUES OPERATING ---------------------------------- PROFIT DEPRECIATION & CAPITAL OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES -------- ------------ -------- --------- -------- -------------- ------------ (IN MILLIONS) Rail Group................ $1,632.0 $ 66.3 $1,698.3 $174.6 $ 739.5 $23.9 $ 38.1 Construction Products Group................... 581.4 10.1 591.5 62.1 314.7 25.9 27.8 Inland Barge Group........ 210.1 -- 210.1 25.7 63.6 5.2 1.5 Industrial Products Group................... 179.2 8.1 187.3 13.0 120.1 4.1 11.4 Railcar Leasing and Management Services Group................... 131.5 -- 131.5 51.3 359.2 9.2 64.2 All Other................. 6.4 54.4 60.8 (8.2) 53.5 6.0 7.8 Eliminations & Corporate Items................... -- (138.9) (138.9) (39.5) 87.9 6.0 16.4 -------- ------- -------- ------ -------- ----- ------ Consolidated Total........ $2,740.6 $ -- $2,740.6 $279.0 $1,738.5 $80.3 $167.2 ======== ======= ======== ====== ======== ===== ======
Total revenues from external customers attributed to foreign operations for the nine months ended December 31, 2001 and for fiscal years 2001 and 2000 are $102.2 million, $99.5 million, and $71.9 million, respectively. The Rail Group includes revenues from one customer that accounted for 12.6 percent of consolidated revenues in fiscal 2000. Long-lived assets located outside the United States for the nine months ended December 31, 2001 and for fiscal 2001 and 2000 are $159.4 million, $179.2 million, an $136.6 million, respectively. Corporate assets are composed of cash and equivalents, notes receivable, land held for investment, certain property, plant and equipment, and other assets. Capital expenditures do not include business acquisitions. NOTE 3. UNUSUAL CHARGES In December 2001, the Company recorded special pretax charges of $66.4 million ($50.4 million after tax), or $1.30 per share, related primarily to restructuring the Company's Rail Group in connection with the Thrall merger in North America and in Europe and other matters. 31 COSTS INCLUDED IN THE CHARGES ARE SUMMARIZED AS FOLLOWS:
TOTAL RESERVES AT CHARGES DECEMBER 31, 2001 ------- ----------------- (IN MILLIONS) Property, plant & equipment -- write-downs to net realizable value and related plant closing costs..................... $46.5 $ 9.9 Severance costs -- approximately 2,100 employees............ 3.8 3.8 ----- ----- Railcar restructuring charges.......................... 50.3 13.7 Asset write-downs and exit costs related to wholly owned businesses................................................ 15.5 0.2 Non railcar severance -- 11 employees....................... 0.6 0.6 ----- ----- Total charges.......................................... $66.4 $14.5 ===== =====
The reserves at December 31, 2001 represent future cash requirements. Classification of the charges by segment and income statement line items are shown below:
CONSTRUCTION ALL RAILCAR PRODUCTS OTHER TOTAL ------- ------------ ----- ----- (IN MILLIONS) Cost of revenues.......................................... $46.1 $0.8 $ 9.9 $56.8 Selling, engineering & administrative..................... 4.2 0.1 3.2 7.5 ----- ---- ----- ----- Charged to operating profit............................... 50.3 0.9 13.1 64.3 Other (income) expense.................................... -- -- -- 2.1 ----- ---- ----- ----- Total charges........................................... $50.3 $0.9 $13.1 $66.4 ===== ==== ===== =====
In fiscal year 2001, the Company recorded pretax charges of $173.3 million ($110.9 million after tax), or $2.96 per share, related primarily to restructuring the Company's railcar operations, exiting the flange and valve businesses, writing down certain inventory, curtailing international barge operations, environmental liabilities associated with previously closed facilities, litigation reserve for an adverse jury verdict, write-down of certain equity investments and acquired assets, including a 20% investment in a Russian transportation company obtained with the acquisition of Transcisco Industries in the fall of 1996, and other charges. 32 Costs included in the fiscal year 2001 charges are summarized as follows:
RESERVES RESERVES TOTAL MARCH 31, ADDITIONAL DECEMBER 31, CHARGES 2001 CHARGES PAYMENTS WRITE-OFFS 2001 ------- --------- ---------- -------- ---------- ------------ (IN MILLIONS) Property, plant & equipment -- write-downs to net realizable value to be disposed of and related shut-down costs and other asset write-downs.......... $ 81.7 $24.1 $2.2 $ (2.1) $(15.2) $ 9.0 Inventory write-down......... 14.2 0.4 0.5 -- (0.9) -- Environmental liabilities.... 11.8 11.8 0.1 (0.8) -- 11.1 Severance costs.............. 7.8 2.6 -- (0.7) (0.8)(1) 1.1 Adverse jury verdict......... 14.8 14.8 -- -- -- 14.8 Equity investment write-downs: Russian transportation company................. 17.0 -- -- -- -- -- Other equity investments... 20.5 -- -- -- -- -- ------ ----- ---- ------ ------ ----- Total equity investment write-downs........... 37.5 -- -- -- -- -- Other........................ 5.5 3.7 -- (0.9) (0.2) 2.6 ------ ----- ---- ------ ------ ----- $173.3 $57.4 $2.8 $ (4.5) $(17.1) $38.6 ====== ===== ==== ====== ====== =====
- --------------- (1) Reversal Classification of the charges by segment are shown below:
RAILCAR LEASING & CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE RAILCAR PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL ------- ------------ ------ ---------- ---------- --------- ------ (IN MILLIONS) Cost of revenues.................... $73.7 $13.7 $4.4 $0.7 $-- $32.8 $125.3 Selling, engineering & administrative.................. 6.7 -- -- -- -- 8.9 15.6 ----- ----- ---- ---- -- ----- ------ Charged to operating profit......... 80.4 13.7 4.4 0.7 -- 41.7 140.9 Other (income) expense.............. -- -- -- -- -- -- 32.4 ----- ----- ---- ---- -- ----- ------ Total charges..................... $80.4 $13.7 $4.4 $0.7 $-- $41.7 $173.3 ===== ===== ==== ==== == ===== ======
The Company estimated the fair market value of properties no longer in use or held for sale based on the location and condition of the properties, the fair market value of similar properties in the area, and the experience of the Company in the selling of similar properties in the past. NOTE 4. ACQUISITIONS AND DIVESTITURES On October 26, 2001, Trinity completed a merger transaction with privately owned Thrall Car Manufacturing Company (Thrall). The results of Thrall's operations have been included in the consolidated financial statements since that date. Thrall is a leading railcar manufacturer, with operations in both the United States and Europe. This merger combines Trinity's strength in the tank car segment, Thrall's strength in auto rack manufacturing, and the Company's research and development expertise across the entire spectrum of railcars. Trinity expects to reduce costs through improvements in supply chain performance, greater plant efficiency, the development of dedicated production lines, and more flexible production and delivery options. The aggregate purchase price was $372.5 million including $165.5 million of cash, a working capital adjustment per the merger agreement of $18.4 million, transaction fees of $5.2 million, and common stock valued at $183.4 million. In addition, Trinity under certain circumstances has agreed to make additional payments, not to exceed $45 million over five years, based on a formula related to annual railcars industry production levels. 33 The value of the 7.15 million common shares issued was determined based on the average market price of Trinity's common shares over the period including two days before and after the terms of the merger were agreed to and announced. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in millions).
OCTOBER 26, 2001 ---------------- Current assets......................... $ 86.2 Property, plant, and equipment......... 37.8 Intangible assets -- patents........... 2.9 Goodwill............................... 336.6 ------ Total assets acquired................ 463.5 Current liabilities.................... 91.0 ------ Net assets acquired.................... $372.5 ======
The $336.6 million of goodwill was assigned to the Rail group and that amount is expected to be deductible for tax purposes. The following unaudited pro forma consolidated results of operations are presented below as if the merger with Thrall had been made at the beginning of the periods presented. The pro forma consolidated results of operations include adjustments to give effect to interest expense on acquisition debt and certain other adjustments, together with related income tax effects. The unaudited pro forma information is not necessarily indicative of the results of operations that would have occurred had the merger been made at the beginning of the periods presented or the future results of the combined operations.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, 2001 2001 ----------------- ---------- Revenues................. $1,544.1 $2,562.6 Net loss................. (50.1) (65.9) Loss per share: Basic.................. $ (1.13) $ ( 1.47) Diluted................ $ (1.13) $ ( 1.47)
Results for the nine months ended December 31, 2001 include after-tax charges of $50.4 million ($1.30 per share) related to restructuring the Rail Group in connection with the Thrall merger and the down cycle in the railcar industry and other matters. Results for the fiscal year ended March 31, 2001 included after-tax charges of $110.9 million ($2.96 per share) primarily related to the restructuring of Trinity's railcar operations, investment and asset write-downs, litigation reserves and other charges. On November 9, 2001, Trinity purchased 100% of the outstanding ownership interests of Transport Capital LLC, a privately held asset management and advisory services company serving the rail transportation industry owned by a group of individuals. The aggregate purchase price was $2.1 million including $1.3 million of cash and 34 thousand shares of common stock held in treasury valued at $0.8 million. Goodwill amounted to $1.8 million, and none of that amount is expected to be deductible for tax purposes. Goodwill was assigned to Railcar Leasing and Management Services group. The Company made certain acquisitions during fiscal years 2001 and 2000 accounted for by the purchase method. The aggregate purchase price for these acquisitions was $30.6 million and $87.4 million, respectively. Goodwill of $14.5 million and $9.3 million was recorded on the 2001 and 2000 acquisitions, respectively. The acquired operations have been included in the consolidated financial statements from the effective dates of the acquisitions. Proforma results would not have been materially different from actual results for any year presented. During fiscal year 2001, the Company made the decision to discontinue the operations of TEMCO, which produced concrete mixers, concrete batch plants and component parts for concrete related industries. Certain assets associated with this business were sold in March 2001. NOTE 5. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, MARCH 31, 2001 2001 ------------ --------- (IN MILLIONS) Land........................... $ 51.5 $ 51.9 Buildings and improvements..... 286.4 280.5 Machinery...................... 539.5 538.4 Equipment on lease............. 536.4 627.9 Construction in progress....... 21.1 35.4 -------- -------- $1,434.9 $1,534.1 ======== ========
Equipment on lease consists primarily of railcars leased by third parties. The Company enters into lease contracts with third parties with terms generally ranging between one and fifteen years, wherein equipment manufactured by Trinity is leased for a specified type of service over the term 34 of the contract. The Company enters primarily into operating leases. Future minimum rental revenues on leases in each fiscal year are (in millions): 2002 -- $44.5; 2003 -- $37.0; 2004 -- $33.7; 2005 -- $30.5; 2006 -- $21.9; and $160.9 thereafter. Equipment on lease with a net book value of $343.7 million is pledged as collateral for long-term debt. The Company leases certain equipment under operating leases. Future minimum rent expense on these leases in each fiscal year are (in millions): 2002 -- $10.1; 2003 -- $9.6; 2004 -- $7.8; 2005 -- $6.6; 2006 -- $6.6; and $10.0 thereafter. NOTE 6. GOODWILL The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective April 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment annually or more frequently if certain indicators arise. The Company has completed the impairment test required upon adoption of SFAS No. 142 and determined there is no impairment to its recorded goodwill balances. Goodwill by segment is as follows (in millions):
DECEMBER 31, MARCH 31, 2001 2001 ------------ --------- Rail........................... $416.5 $79.9 Construction Products.......... 5.2 5.2 Industrial Products............ 1.6 1.6 Railcar Leasing and Management Services..................... 1.8 -- ------ ----- 425.1 86.7 Accumulated amortization....... (9.4) (9.4) ------ ----- $415.7 $77.3 ====== =====
Had the Company been accounting for its goodwill under SFAS No. 142 for fiscal 2001 and 2000, the Company's net income (loss) and earning (loss) per share would have been as follows (in millions except per share amounts):
YEARS ENDED MARCH 31, --------------- 2001 2000 ------ ------ Reported net income (loss)............. $(74.4) $165.5 Add back goodwill amortization, net of tax.................................. 2.5 1.8 ------ ------ Adjusted net income (loss)............. $(71.9) $167.3 ====== ====== Basic earnings (loss) per share: Reported net income (loss)............. $(1.98) $ 4.17 Goodwill amortization, net of tax...... .07 .05 ------ ------ Adjusted net income (loss)............. $(1.91) $ 4.22 ====== ====== Diluted earnings (loss) per share: Reported net income (loss)............. $(1.98) $ 4.15 Goodwill amortization, net of tax...... .07 .05 ------ ------ Adjusted net income (loss)............. $(1.91) $ 4.20 ====== ======
NOTE 7. DEPOSIT AGREEMENT The Company entered into a deposit agreement with Altos Hornos de Mexico, SA de C.V. ("AHMSA") which provides for funds to be deposited with AHMSA which are then used along with other funds from the Company to purchase steel from AHMSA. As of December 31, 2001, total funds on deposit including interest due amounted to approximately $45.8 million. Since May 1999 AHMSA has been operating under a judicial declaration of suspension of payments, which under applicable Mexican law, allows companies in Mexico to (1) seek a debt restructuring agreement with their creditors in an orderly fashion; (2) continue their operations; and (3) avoid declaration of bankruptcy and liquidation of assets. Should AHMSA not be able to operate under the declaration of suspension of payments because of its financial condition, AHMSA's creditors have no access to the funds on deposit and all funds on deposit with AHMSA under Mexican law should be returned to the Company. Trinity recovered $10.4 million of this deposit through inventory purchases in the nine months ended December 31, 2001. The timing of future collections of the deposit balance will depend on the rate of steel purchases. 35 NOTE 8. DEBT
DECEMBER 31, MARCH 31, 2001 2001 ------------ --------- (IN MILLIONS) Notes payable.................. $ -- $ 33.8 ====== ====== Revolving bank facility........ $288.0 $460.0 6.0-9.25 percent industrial development revenue bonds payable in varying amounts through 2005................. 1.0 1.3 3.0-8.0 percent promissory notes, generally payable annually through 2015........ 4.0 4.2 6.96-9.44 percent equipment trust certificates to institutional investors generally payable in semi-annual installments of varying amounts through 2003......................... 10.5 34.3 7.755 percent equipment trust certificates to institutional investors generally payable in semi-annual installments of varying amounts through 2009......................... 170.0 -- 11.3 percent notes payable monthly through 2003......... 2.8 4.2 ------ ------ $476.3 $504.0 ====== ======
During the nine months ended December 31, 2001, the Company completed a committed revolving bank facility for $450 million. Amounts borrowed under the facility bear interest at LIBOR plus 0.95% or other alternative rates at the Company's option (3.09% at December 31, 2001) and can be converted to a one-year term in June 2002. The agreement requires maintenance of ratios related to interest coverage, leverage, and minimum net worth and restricts the amount of dividend payments. Accounts receivable and inventory are pledged as collateral for this facility. At December 31, 2001, $95.4 million was available under the facility. Proceeds from the facility were used to repay outstanding short-term debt as of March 31, 2001. Such amounts have been classified as long-term in the consolidated financial statements as of December 31, 2001 and March 31, 2001. Debt covenant ratios related to interest coverage and leverage could be exceeded in fiscal 2002. Based on discussions with its lead banks, the Company expects to renegotiate or replace existing debt agreements including changes to debt covenants and, if necessary, to take other actions designed to prevent exceeding debt covenant limitations. On February 15, 2002, Trinity Industries Leasing Company ("TILC") sold $170,000,000 of 2002-1 Pass Through Certificates with interest at 7.755%, commencing on August 15, 2002 and due semiannually thereafter. Equipment notes issued by TILC for the benefit of the holders of the Pass Through Certificate are collateralized by interest in certain railcars owned by TILC and the leases pursuant to which such railcars are leased to customers. The equipment notes, including the obligations to make payments of principal and interest thereon are direct obligations of TILC and are fully and unconditionally guaranteed by Trinity Industries, Inc. as guarantor. The proceeds of $170 million from the issuance of the equipment notes were used to repay outstanding indebtedness of Trinity as of December 31, 2001 and therefore such amounts are shown as long-term debt in the accompanying consolidated financial statements. The fair value of non-traded, fixed-rate outstanding debt, estimated using discounted cash flow analysis, approximates its carrying value. Principal payments due during the next five years are 2002 -- $11.5; 2003 -- $290.7; 2004 - -- $0.3; 2005 -- $40.2; 2006 -- $10.3; and $123.3 thereafter. As of December 31, 2001, the Company had $81.2 million in outstanding letters of credit. NOTE 9. SALE/LEASEBACK FINANCING During the nine months ended December 31, 2001, the Company completed an off balance sheet financing arrangement for $199.0 million in railcars. Trinity sold the railcars to an independent trust. The trust financed the purchase of the railcars with $151.3 million in debt and $47.7 million in equity provided by large independent financial institutions. The equity investor in the trust has the risk of ownership of the assets in the trust except for the $6.5 million of cash collateral discussed herein. Trinity has made no guarantees with respect to amounts at risk. An independent trustee for the trust has the authority for the appointment of the railcar fleet manager. The debt is repayable by the trust over 19 years. Trinity, through a newly formed, wholly owned, qualified subsidiary, leased the cars from the trust and subleased the railcars to independent third party customers. Future operating lease obligations of the Company's subsidiary under the lease agreement are as follows (in millions): 2002 -- $17.0; 2003 -- $16.8; 2004 -- $17.1; 2005 -- $16.3; 2006 -- $15.8; and $225.5 thereafter. Future minimum rental revenues from subleased railcars as of December 31, 2001 are as follows (in millions); 36 2002 -- $19.5; 2003 -- $18.2; 2004 -- $16.8; 2005 -- $14.1; 2006 -- $12.8 and $76.9 thereafter. Under the terms of the operating lease agreement, Trinity has the option to purchase the railcars from the trust at the end of sixteen years at a predetermined, fixed price. Trinity also has an option to purchase the railcars at the end of the lease agreement at the then fair market value of the railcars. At the expiration of the operating lease agreement, Trinity has no further obligation or ownership interest in the assets of the trust. Included in the Company's accompanying consolidated balance sheet are cash and railcars totaling $28.4 million which are pledged as collateral for the duration of the lease obligations to the trust and an additional $6.5 million of cash which is pledged as collateral for the equity investor's investment. Trinity, under the terms of a servicing and remarketing agreement, will endeavor, consistent with customary commercial practice as would be used by a prudent person, to maintain railcars under lease for the benefit of the trust. Trinity also receives management fees under the terms of the agreement. Certain ratios must be maintained in order for excess cash flow, as defined, from the leases to third parties, to be available to Trinity. The sale of the railcars by Trinity to the trust was accounted for as a sale/leaseback transaction. No revenue or profit was recorded at the time of the transaction and all profit was deferred and is being amortized over the term of the operating lease. Neither the assets of the trust, amounts due by the trust under the terms of debt to the financial institutions, or equity of the trust are reflected on the consolidated balance sheet of Trinity. NOTE 10. OTHER, NET Other (income) expense consists of the following items (in millions):
NINE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, ------------- 2001 2001 2000 ------------ ----- ----- Gain on sale of property, plant and equipment...... $(1.0) $(8.8) $(2.3) Foreign exchange transactions............. 1.5 (0.6) 0.6 Investment write-downs..... 1.9 36.2 -- Loss on equity investments.............. 1.8 2.4 -- Other...................... 0.7 (1.0) (0.6) ----- ----- ----- Other, net............... $ 4.9 $28.2 $(2.3) ===== ===== =====
NOTE 11. INCOME TAXES The components of the provision (benefit) for income taxes are:
NINE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, -------------- 2001 2001 2000 ------------ ------ ----- Current: Federal................. $ 4.6 $ 2.5 $78.5 State................... (0.5) 1.1 5.2 Foreign................. (0.8) 0.2 0.7 ----- ------ ----- 3.3 3.8 84.4 Deferred.................. (9.1) (45.7) 13.0 ----- ------ ----- Provision (benefit)....... $(5.8) $(41.9) $97.4 ===== ====== =====
Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are:
DECEMBER 31, MARCH 31, 2001 2001 ------------ --------- Deferred tax liabilities: Depreciation................. $99.3 $97.4 Deductions related to inventory of foreign operations................. 15.7 -- Other foreign deferred liabilities................ 2.6 11.4 ----- ----- 117.6 108.8 ----- ----- Deferred tax assets: Pensions and other benefits................... 42.9 43.1 Accounts receivable, inventory, and other asset valuation accounts......... 62.4 48.0 Foreign net operating loss carryforwards.............. 8.2 6.3 Other foreign deferred assets..................... 8.4 -- Other........................ 0.8 4.3 ----- ----- Total deferred tax assets.... 122.7 101.7 Valuation allowance.......... (3.1) -- ----- ----- Deferred tax assets net of valuation allowance........ 119.6 101.7 ----- ----- Net deferred tax (assets) liabilities.................. $(2.0) $ 7.1 ===== =====
The Company has established a valuation allowance for net foreign operating loss carry forwards due to uncertainty regarding the realizability of these foreign losses. These net operating losses expire between 2006 and 2010. The provision (benefit) for income taxes results in effective tax rates different from the statutory rates. The following is a reconciliation between the 37 statutory U.S. federal income tax rate and the Company's effective income tax rate:
NINE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, ----------- 2001 2001 2000 ------------ ---- ---- Statutory rate............... 35.0% 35.0% 35.0% State taxes.................. 0.8 1.4 1.3 Valuation allowance.......... (7.6) -- -- Foreign rate differential.... (5.0) -- -- Unutilized prior year tax credits.................... (3.3) -- -- Other (net).................. (5.6) (0.4) 0.8 ---- ---- ---- Effective tax rate........... 14.3% 36.0% 37.1% ==== ==== ====
For the nine months ended December 31, 2001 and in fiscal 2001 and 2000, income taxes of ($3.9), $11.7, and $85.2, respectively, were paid net of refunds received. Income (loss) before income taxes for the nine months ended December 31, 2001 and for fiscal 2001 and 2000, was ($23.4), ($124.8) and $252.9, respectively, for U.S. operations, and ($17.1), $8.5 and $10.0, respectively, for foreign operations. The Company has not has provided U.S. deferred income taxes on the undistributed earnings of its foreign subsidiaries based on the determination that such earnings will be indefinitely reinvested. Undistributed earnings of the Company's foreign subsidiaries were $19.7 as of December 31, 2001. NOTE 12. EMPLOYEE RETIREMENT PLANS The Company sponsors defined benefit pension and defined contribution profit sharing plans which provide income and death benefits for eligible employees.
NINE MONTHS YEAR ENDED ENDED MARCH 31 DECEMBER 31, ----------------- 2001 2001 2000 ------------- ------- ------- (IN MILLIONS EXCEPT PERCENT DATA) ACTUARIAL ASSUMPTIONS Obligation discount rate................... 7.50% 7.75% 8.25% Compensation increase rate................... 4.75% 4.75% 4.75% Long-term rate of return on plan assets......... 9% 9% 9% EXPENSE COMPONENTS Service cost............. $ 8.2 $ 10.1 $ 13.5 Interest................. 10.7 13.3 12.9 Expected return on assets................. (11.4) (15.5) (14.3) Amortization and deferral............... 0.1 (0.7) (0.1) Profit sharing........... 3.3 5.5 4.2 ------ ------ ------ Net expense.............. $ 10.9 $ 12.7 $ 16.2 ====== ====== ====== BENEFIT OBLIGATIONS Beginning of year........ $188.6 $164.0 $163.2 Service cost............. 8.2 10.1 13.5 Interest................. 10.7 13.3 12.9 Benefits paid............ (6.2) (5.4) (5.0) Actuarial (gain) loss.... (6.0) 6.6 (20.6) ------ ------ ------ End of year.............. $195.3 $188.6 $164.0 ====== ====== ====== Under funded plans....... $182.2 $179.6 $ 6.1 ====== ====== ====== Over funded plans........ $ 13.1 $ 9.0 $157.9 ====== ====== ====== PLANS' ASSETS Beginning of year........ $168.8 $169.1 $160.0 Actual return on assets................. 6.3 (8.8) 11.4 Employer contributions... 7.5 13.9 2.7 Benefits paid............ (6.2) (5.4) (5.0) ------ ------ ------ End of year.............. $176.4 $168.8 $169.1 ====== ====== ====== Under funded plans....... $159.3 $158.5 $ -- ====== ====== ====== Over funded plans........ $ 17.1 $ 10.3 $169.1 ====== ====== ====== CONSOLIDATED BALANCE SHEET COMPONENTS Funded status............ $ 19.0 $ 19.9 $ (5.1) Unamortized transition obligation............. 0.9 1.1 1.4 Unrecognized prior service cost........... (0.8) (0.9) (1.1) Unrecognized gain (loss)................. (16.5) (17.6) 14.4 ------ ------ ------ Net obligation........... $ 2.6 $ 2.5 $ 9.6 ====== ====== ====== Accrued.................. $ 12.4 $ 10.0 $ 14.5 Prepaid.................. 9.8 7.5 4.9 ------ ------ ------ Net accrued.............. $ 2.6 $ 2.5 $ 9.6 ====== ====== ======
38 NOTE 13. STOCK OPTION PLAN The Company's 1998 Stock Option and Incentive Plan provides for awarding 3,800,000 shares of common stock plus shares covered by forfeited, expired and canceled options granted under prior plans with a maximum of 1,000,000 shares being available for issuance as restricted stock or in satisfaction of performance or other awards. At December 31, 2001, a total of 1,595,503 shares were available for issuance. The plan provides for the granting of: nonqualified and incentive stock options having maximum ten-year terms to purchase common stock at its market value on the award date; stock appreciation rights based on common stock fair market values with settlement in common stock or cash; restricted stock; and performance awards with settlement in common stock or cash on achievement of specific business objectives. Under previous plans, nonqualified and incentive stock options and restricted shares were granted at their fair market values. One grant provided for granting reload options for the remaining term of the original grant at the common stock market value on the date shares already owned by the optionee are surrendered in payment of the option exercise. In connection with the Thrall acquisition, certain employees were granted a total of 160,000 options to purchase common stock at its market price on the date of the grant. These stock options, which were approved by the Board of Directors of the Company, were not granted under the Company's Stock Option and Incentive Plan.
NINE MONTHS ENDED DECEMBER 31, YEAR ENDED MARCH 31 -------------------- ------------------------------------------- 2001 2001 2000 -------------------- -------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- -------- --------- -------- --------- -------- Outstanding beginning of year....................... 3,065,920 $29.26 2,526,836 $30.33 2,059,983 $29.81 Granted............................................. 1,043,252 20.23 865,200 22.96 636,306 30.06 Exercised........................................... (93,285) 21.85 (186,248) 13.25 (147,309) 21.02 Cancelled........................................... (95,065) 26.49 (139,868) 30.87 (22,144) 36.32 --------- --------- --------- Outstanding end of year............................. 3,920,822 27.10 3,065,920 29.26 2,526,836 30.33 ========= ====== ========= ====== ========= ====== Exercisable......................................... 2,265,996 $29.44 1,589,616 $30.79 1,319,168 $28.32 ========= ====== ========= ====== ========= ======
DECEMBER 31, 2001 -------------------------------------------------------------- OUTSTANDING OPTIONS --------------------------------------- WEIGHTED AVERAGE EXERCISABLE OPTIONS --------------------------- -------------------- REMAINING WEIGHTED CONTRACTUAL LIFE EXERCISE AVERAGE EXERCISE PRICE RANGE SHARES (YEARS) PRICE SHARES PRICE - -------------------- --------- ---------------- -------- --------- -------- $15.94 - $21.25........................................... 1,004,246 7.45 $18.89 270,597 $18.72 22.28 - 23.91........................................... 966,659 6.38 23.17 515,762 23.33 24.67 - 24.67........................................... 160,000 9.82 24.67 160,000 24.67 25.11 - 32.25........................................... 1,072,299 5.59 27.86 732,986 27.74 33.00 - 53.81........................................... 717,618 5.79 43.29 586,651 43.19 --------- ---- ------ --------- ------ $15.94 - $53.81........................................... 3,920,822 6.47 $27.10 2,265,996 $29.44 ========= ==== ====== ========= ======
The Company has elected to apply the accounting provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and its interpretations and, accordingly, no compensation cost has been recorded for stock options. The effect of computing compensation cost in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," and the weighted average fair value of options granted during the nine months ended December 31, 2001 and fiscal year 2001 and 2000 using the Black-Scholes option 39 pricing method are shown in the accompanying table.
NINE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, --------------- 2001 2001 2000 ------------ ------ ------ Estimated fair value per share of options granted................ $ 5.99 $ 7.56 $ 9.10 Pro forma: Net income (loss) (in millions)............ $(39.7) $(78.7) $162.7 Per diluted share...... $(1.03) $(2.10) $ 4.06 Black-Scholes assumptions: Expected option life (years).............. 6.8 6.8 5.7 Risk-free interest rate................. 4.8% 4.5% 6.1% Dividend yield......... 3.7% 3.1% 3.1% Common stock volatility........... 0.354 0.328 0.328
The value of the restricted shares at the date of grant is amortized to expense ratably over the restriction period.
NINE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, ------------------ 2001 2001 2000 ------------ ------- -------- Shares awarded........ 284,100 -- 50,000 Shares cancelled...... (6,000) (14,000) -- Share restriction removed............. (10,000) -- -- Outstanding........... 385,600 117,500 131,500 Grant date fair value per share........... $ 23.04 -- $ 27.94
NOTE 14. STOCKHOLDERS' EQUITY The Company has adopted a Stockholder's Rights Plan to replace its existing plan which expired April 27, 1999. On March 11, 1999, the Board of Directors of the Company declared a dividend distribution of one right for each outstanding share of the Company's common stock, $1.00 par value, to stockholders of record at the close of business on April 27, 1999. Each right entitles the registered holder to purchase from the Company one one-hundredth (1/100) of a share of Series A Preferred Stock at a purchase price of $200.00 per one one-hundredth (1/100) of a share, subject to adjustment. The rights are not exercisable or detachable from the common stock until ten business days after a person or group acquires beneficial ownership of twelve percent or more of the Company's common stock or if a person or group commences a tender or exchange offer upon consummation of which that person or group would beneficially own twelve percent or more of the common stock. The Company will generally be entitled to redeem the rights at $0.01 per right at any time until the first public announcement that a twelve- percent position has been acquired. If any person or group becomes a beneficial owner of twelve percent or more of the Company's common stock, each right not owned by that person or related parties enables its holder to purchase, at the right's purchase price, shares of the Company's common stock having a calculated value of twice the purchase price of the right. In connection with the acquisition of Thrall, the Company adopted an amendment to the Rights Plan which generally permits the former stockholders of Thrall and its affiliates to beneficially own in excess of twelve percent of the Company's common stock without triggering the Plan as described above provided such persons hold the stock in compliance with a stockholders' agreement entered into in connection with the acquisition. The Company has authorized and unissued 1.5 million shares of no par value voting preferred stock. NOTE 15. CONTINGENCIES In May of 2001, a judgement in the amount of $14.8 million was entered against the Company in a lawsuit brought for an alleged breach of contract involving the proposed production of a composite component for a refrigerated railcar for the Company. The amount of the judgement was accrued by the Company in fiscal 2001. The Company intends to appeal this judgement. The Company is subject to federal, state, local and foreign laws and regulations relating to the environment and to work places. The Company believes that it is currently in substantial compliance with such laws and the regulations promulgated thereunder. The Company is involved in various proceedings relating to environmental matters. The Company has provided reserves amounting to $11.6 million to cover probable and estimable liabilities of the Company with respect to such investigations and cleanup activities, taking into account currently available information and the Company's contractual rights of indemnification. However, estimates of future response costs are necessarily imprecise. Accordingly, there can be no assurance that the Company will not become involved in future litigation or other proceedings or, if the Company were found to be responsible or liable in any 40 litigation or proceeding, that such costs would not be material to the Company. The Company is involved in various other claims and lawsuits incidental to its business. In the opinion of management, their claims and suits in the aggregate will not have a material adverse effect on the Company's consolidated financial statements. NOTE 16. SUBSEQUENT EVENT On March 6, 2002, Trinity privately placed a total of 1.5 million unregistered shares of its common stock for net proceeds of $31.5 million. Trinity is obligated to register these shares. NOTE 17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS THREE MONTHS THREE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 2001 2001 2001 2001 ------------ ------------- ------------ ------------ (IN MILLIONS EXCEPT PER SHARE DATA) Nine months ended December 31, 2001: Revenues.................... $467.6 $372.9 $507.3 $1,347.8 Operating profit (loss)(1)................. $ 22.6 18.8 (57.8) (16.4) Net income (loss)(1)........ $ 9.6 7.9 (52.2) (34.7) Net income (loss) per common share(1): Basic.................. $ 0.26 0.21 (1.23) (0.90) Diluted................ $ 0.26 0.21 (1.23) (0.90)
THREE MONTHS THREE MONTHS THREE MONTHS NINE MONTHS THREE MONTHS ENDED ENDED ENDED ENDED ENDED JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, MARCH 31, 2000 2000 2000 2000 2001 ------------ ------------- ------------ ------------ ------------ Year ended March 31, 2001: Revenues.................. $533.7 $550.7 $401.2 $1,485.6 $418.7 Operating profit (loss)(2).............. $ 37.5 (14.9) (30.5) (7.9) (58.2) Net income (loss)(3)...... $ 20.9 (13.2) (42.4) (34.7) (39.7) Net income (loss) per common share(3): Basic.................. $ 0.55 (0.35) (1.14) (0.92) (1.08) Diluted................ $ 0.55 (0.35) (1.14) (0.92) (1.08)
- --------------- (1) See notes to consolidated financial statements for a discussion of unusual charges for the three months ended December 31, 2001. (2) Unusual charges charged to operating profit (loss) and recorded in the Company's second, third, and fourth quarters of fiscal 2001 were $48.9 million, $36.2 million, and $55.8 million, respectively. (3) After tax unusual charges recorded in the Company's second, third, and fourth quarters of fiscal 2001 were $33.2 million ($0.88 per share), $42.0 million ($1.13 per share), and $35.7 million ($0.97 per share), respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None 41 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. Information regarding the directors of the Company is incorporated by reference to the information set forth under the caption "Nominees" in the Company's proxy statement for the Annual Meeting of Stockholders to be held on May 13, 2002. Information regarding compliance with Section 16(a) of the Securities and Exchange Act of 1934 is incorporated by reference to the information set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's proxy statement for the Annual Meeting of Stockholders to be held on May 13, 2002. ITEM 11. EXECUTIVE COMPENSATION Information regarding compensation of executive officers and directors is incorporated by reference to the information set forth under the captions "Compensation for Directors" and "Executive Compensation" in the Company's proxy statement for the Annual Meeting of Stockholders to be held on May 13, 2002. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's proxy statement for the Annual Meeting of Stockholders to be held on May 13, 2002, under the caption "Security Ownership of Certain Beneficial Owners and Management." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding certain relationships and related transactions with director nominees is incorporated by reference to the information set forth under the captions "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions" in the Company's proxy statement for the Annual Meeting of Stockholders to be held on May 13, 2002. 42 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements. See Item 8. (b) Financial Statement Schedules. For the nine months ended December 31, 2001 and the two years ended March 31, 2001 and 2000 II -- Allowance for Doubtful Accounts (c) Reports on Form 8-K Trinity filed a Current Report on Form 8-K dated October 29, 2001, amended by Form 8-K/A filed on December 28, 2001, reporting, under Item 2, the closing of the transactions pursuant to the agreement and plan of merger with Thrall Car Manufacturing Company. Pursuant to the Form 8-K/A: (i) under Item 7, financial statements were filed for Thrall Car Manufacturing Company as of December 31, 2000 and December 31, 1999, and pro forma financial statements were filed for the nine month period ended September 30, 2001 and for the nine month period ended September 30, 2000; (ii) under Item 5(a), Trinity reported it expected charges related to restructuring the railcar group in connection with the merger to be in the range of $50 to $65 million, or $0.75 to $0.97 per share; and (iii) under Item 5(b), Trinity reported the grant of a valid first and prior lien on all of Trinity's account's receivable and inventory to JP Morgan Chase Bank, as Collateral Agent, under the terms of its credit agreements. Trinity filed a Current Report on Form 8-K dated February 19, 2002, reporting, under Item 5, the completion of a $170 million private placement of secured debt securities. Pursuant to the Form 8-K: (i) under Item 7, a Pass Through Trust Agreement and Trust Indenture and Security Agreements were filed. Trinity filed a Current Report on Form 8-K dated March 6, 2002, reporting the private placement of 1.5 million shares of its unregistered common stock for gross proceeds of $31.5 million. Trinity filed a Current Report on Form 8-K dated March 12, 2002, reporting, under Item 5, operating results for the three months and nine months ended December 31, 2001. Pursuant to Form 8-K: (i) under Item 7, the news release dated February 27, 2002 was filed. (c) Exhibits See Index to Exhibits 43 EXHIBIT (23) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-Effective Amendment No. 3 to the Registration Statement (Form S-8, No. 2-64813), Post-Effective Amendment No. 1 to the Registration Statement (Form S-8, No. 33-10937), Registration Statement (Form S-8, No. 33-35514), Registration Statement (Form S-8, No. 33-73026), Registration Statement (Form S-8, No. 333-77735), Registration Statement (Form S-8, No. 333-91067), of Trinity Industries, Inc. and in the related Prospectuses of our reports dated March 13, 2001 with respect to the consolidated financial statements and schedules of Trinity Industries, Inc. included in this Annual Report (Form 10-K) for the nine months ended December 31, 2001. ERNST & YOUNG LLP Dallas, Texas March 19, 2001 44 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Trinity Industries, Inc. We have audited the consolidated financial statements of Trinity Industries, Inc. as of December 31, 2001 and March 31, 2001, and for the nine months ended December 31, 2001 and for each of the two years in the period ended March 31, 2001, and have issued our report thereon dated March 13, 2002. Our audits also included the financial statement schedules of Trinity Industries, Inc. listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Dallas, Texas March 13, 2002 45 SCHEDULE II TRINITY INDUSTRIES, INC. ALLOWANCE FOR DOUBTFUL ACCOUNTS NINE MONTHS ENDED DECEMBER 31, 2001 AND YEARS ENDED MARCH 31, 2001 AND 2000 (IN MILLIONS)
ADDITIONS BALANCE AT CHARGED TO ACCOUNTS BALANCE BEGINNING COSTS AND CHARGED AT END OF PERIOD EXPENSES OFF OF PERIOD ---------- ---------- -------- --------- Nine Months Ended December 31, 2001.................. $4.8 $10.1 $5.4 $9.5 ==== ===== ==== ==== Year Ended March 31, 2001............................ $1.7 $ 5.1 $2.0 $4.8 ==== ===== ==== ==== Year Ended March 31, 2000............................ $1.9 $ 0.7 $0.9 $1.7 ==== ===== ==== ====
46 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. TRINITY INDUSTRIES, INC. By /s/ JOHN L. ADAMS Registrant -------------------------------------------------- John L. Adams Executive Vice President March 19, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of the Company and in the capacities and on the dates indicated: Directors: Directors (continued) /s/ DAVID W. BIEGLER /s/ DIANA NATALICIO - ----------------------------------------- --------------------------------------------------- David W. Biegler Diana Natalicio Director Director March 19, 2002 March 19, 2002 /s/ W. RAY WALLACE - ----------------------------------------- --------------------------------------------------- Craig J. Duchossois W. Ray Wallace Director Director March 19, 2002 /s/ RONALD J. GAFFORD - ----------------------------------------- Principal Executive Officer: Ronald J. Gafford Director /s/ TIMOTHY R. WALLACE March 19, 2002 --------------------------------------------------- Timothy R. Wallace /s/ BARRY J. GALT Chairman, President, - ----------------------------------------- Chief Executive Officer and Barry J. Galt Director Director March 19, 2002 March 19, 2002 Principal Financial Officer: /s/ CLIFFORD J. GRUM - ----------------------------------------- /s/ JIM S. IVY Clifford J. Grum --------------------------------------------------- Director Jim S. Ivy March 19, 2002 Vice President March 19, 2002 /s/ JESS T. HAY - ----------------------------------------- Principal Accounting Officer Jess T. Hay Director /s/ CHARLES MICHEL March 19, 2002 --------------------------------------------------- Charles Michel Controller March 19, 2002
TRINITY INDUSTRIES, INC. INDEX TO EXHIBITS (ITEM 14(A))
NO. DESCRIPTION - --- ----------- (3.1) Certificate of Incorporation of Trinity Industries, Inc., as amended. (3.2) By-Laws of Trinity Industries, Inc. (4.1) Certificate of Incorporation of Trinity Industries, Inc., as amended (filed as Exhibit 3.1 above). (4.2) By-Laws of Trinity Industries, Inc. (filed as Exhibit 3.2 above). (4.3) Specimen Common Stock Certificate of Trinity Industries, Inc. (incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the fiscal year ended March 31, 1999). (4.4) Rights Agreement dated March 11, 1999 (incorporated by reference to our Form 8-A filed April 2, 1999). (4.5) Amendment No. 1 to the Rights Agreement dated as of August 12, 2001, amending the Rights Agreement dated as of March 11, 1999 by and between Trinity Industries, Inc. and the Bank of New York, as Rights Agent (incorporated by reference to Exhibit 2 to our Form 8-A/A filed August 22, 2001). (4.6) Amendment No. 2 to the Rights Agreement dated as of October 26, 2001, amending the Rights Agreement dated as of March 11, 1999 by and between Trinity Industries, Inc. and the Bank of New York, as Rights Agent, as amended by Amendment No. 1 to the Rights Agreement, dated August 13, 2001 (incorporated by reference to Exhibit 4 to our Form 8-A/A filed October 31, 2001). (4.7) Registration Rights Agreement dated as of October 26, 2001 by and between Trinity Industries, Inc. and Thrall Car Management, Inc. (filed as an exhibit to Exhibit 10.19 below). (4.8) Registration Rights Agreement dated as of March 6, 2002 by and between Trinity Industries, Inc. and Acqua Wellington Private Placement Fund, Ltd. (incorporated by reference to Exhibit 4.7 to our Form 8-K filed March 6, 2002). (4.9) Registration Rights Agreement dated as of March 6, 2002 by and between Trinity Industries, Inc. and Acqua Wellington Opportunity I Limited (incorporated by reference to Exhibit 4.8 to our Form 8-K filed March 6, 2002). (10.1) Fixed Charges Coverage Agreement dated as of January 15, 1980, between Trinity Industries, Inc. and Trinity Industries Leasing Company (incorporated by reference to Exhibit 10.1 to Registration Statement No. 2-70378 filed January 29, 1981). (10.2) Tax Allocation Agreement dated as of January 22, 1980 between Trinity Industries, Inc. and its subsidiaries (including Trinity Industries Leasing Company) (incorporated by reference to Exhibit 10.2 to Registration Statement No. 2-70378 filed January 29, 1981). (10.3.1) Form of Amended and Restated Executive Severance Agreement, dated November 7, 2000, entered into between Trinity Industries, Inc. and Chief Executive Officer, each of the four most highly paid executive officers other than the Chief Executive Officer who were serving as executive officers at the end of the last completed fiscal year, one other executive officer, and three executive officers of subsidiaries of Trinity Industries, Inc. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2000).* (10.3.2) Form of Amended and Restated Executive Severance Agreement dated November 7, 2000, entered into between Trinity Industries, Inc. and six executive officers and thirteen subsidiary and divisional officers of Trinity Industries, Inc. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2000).* (10.4) Trinity Industries, Inc., Stock Option Plan with Stock Appreciation Rights (incorporated by reference to Registration Statement No. 2-64813 filed July 5, 1979, as amended by Post-Effective Amendment No. 1 dated July 1, 1980, Post-Effective Amendment No. 2 dated August 31, 1984, and Post-Effective Amendment No. 3 dated July 13, 1990).*
NO. DESCRIPTION - --- ----------- (10.5) Directors' Retirement Plan adopted December 11, 1986, as amended by Amendment No. 1 dated September 10, 1998 (incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K for the fiscal year ended March 31, 1999).* (10.6) 1989 Stock Option Plan with Stock Appreciation Rights (incorporated by reference to Registration Statement No. 33-35514 filed June 20, 1990).* (10.7) 1993 Stock Option and Incentive Plan (incorporated by reference to Registration Statement No. 33-73026 filed December 15, 1993).* (10.8.1) Supplemental Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates as restated effective January 1, 2000 (incorporated by reference to Exhibit 10.8 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2000).* (10.8.2) Amendment dated March 8, 2001 to the Supplemental Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates (incorporated by reference to Exhibit 10.8.2 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2001).* (10.9) Supplemental Profit Sharing and Deferred Director Fee Trust dated March 31, 1999 (incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the fiscal year ended March 31, 1999).* (10.10) Supplemental Retirement Plan dated April 1, 1995, as amended by Amendment No. 1 dated September 14, 1995 and Amendment No. 2 dated May 6, 1997 (incorporated by reference to Exhibit 10.11 to our Annual Report on Form 10-K for the fiscal year ended March 31, 1999).* (10.11) Deferred Plan for Director Fees dated July 17, 1996, as amended by Amendment No. 1 dated September 10, 1998 (incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K for the fiscal year ended March 31, 1999).* (10.11.1) Amendment No. 2 to Defined Plan for Director Fees, dated December 13, 2001.* (10.12) Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to Registration Statement No. 333-77735 filed May 4, 1999).* (10.12.1) Amendment No. 1 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan.* (10.12.2) Amendment No. 2 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to 10.12.2 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001).* (10.13) Form of Deferred Compensation Plan and Agreement as amended and restated entered into between Trinity Industries, Inc. and certain officers of Trinity Industries, Inc. or its subsidiaries.* (10.14) Consulting agreement between the Company and W. R. Wallace effective January 1, 1999 (incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2000).* (10.15) Trinity Industries, Inc. Short-Term Management Incentive Plan (incorporated by reference to Exhibit A to our proxy statement dated June 19, 2000).* (10.16) Equipment Lease Agreement (TRL 1 2001-1A) dated as of May 17, 2001 between TRLI-1A Railcar Statutory Trust, lessor, and Trinity Rail Leasing I L.P., lessee (incorporated by reference to Exhibit 10.16 to our Form 10-K for the fiscal year ended March 31, 2001). (10.16.1) Participation Agreement (TRL 1 2001-1A) dated as of May 17, 2001 among Trinity Rail Leasing I L.P., lessee, et. al. (10.16.2) Equipment Lease Agreement (TRL 1 2001-1B) dated as of July 12, 2001 between TRL 1 2001-1B Railcar Statutory Trust, lessor, and Trinity Rail Leasing I L.P., lessee. (10.16.3) Participation Agreement (TRL 1 2001-1B) dated as of May 17, 2001 among Trinity Rail Leasing I L.P., lessee, et. al. (10.16.4) Equipment Lease Agreement (TRL 1 2001-1C) dated as of December 28, 2001 between TRL 1 2001-1C Railcar Statutory Trust, lessor, and Trinity Rail Leasing 1 L.P., lessee. (10.16.5) Participation Agreement (TRL 1 2001-1C) dated as of December 28, 2001 among Trinity Rail Leasing I L.P., lessee, et. al.
NO. DESCRIPTION - --- ----------- (10.17) Credit Agreement dated as of June 8, 2001 among Trinity Industries, Inc, as Borrower, and The Chase Manhattan Bank, as Administrative Agent, et. al. (incorporated by reference to Exhibit 10.17 to our Form 10-K for the fiscal year ended March 31, 2001). (10.17.1) First Amendment to Credit Agreement dated October 15, 2001 (incorporated by reference to Exhibit 10.17.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001). (10.17.2) Second Amendment to Credit Agreement dated December 10, 2001. (10.17.3) Third Amendment to Credit Agreement dated February 8, 2002. (10.18) Term Credit Agreement dated October 15, 2001 among Trinity Industries, Inc., as borrower, and The Chase Manhattan Bank, as lender and as administrative agent, et. al. (incorporated by reference to Exhibit 10.18 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001). (10.18.1) First Amendment to Term Credit Agreement dated December 10, 2001. (10.18.2) Second Amend to Term Credit Agreement dated February 8, 2002. (10.19) Agreement and Plan of Merger dated as of August 13, 2001 by and among Trinity Industries, Inc., TCMC Acquisition Corp., Thrall Car Manufacturing Company and Thrall Car Management Company, Inc. together with the form of Stockholder's Agreement and Registration Rights Agreement attached thereto as exhibits (incorporated by reference to Exhibit 2.1 to our Form 8-K dated August 15, 2001). (21) Listing of subsidiaries of Trinity Industries, Inc. (23) Consent of Independent Auditors. (Contained on page 44 of this document)
- --------------- * Management contracts and compensatory plan arrangements. NOTICE: A copy of Exhibits omitted from the reproduction will be furnished upon written request to Neil Shoop, Treasurer, Trinity Industries, Inc., P.O. Box 568887, Dallas, Texas 75356-8887. We may impose a reasonable fee for our expense in connection with providing the above-referenced Exhibits. EX-3.1 3 d94851ex3-1.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.1 PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE ---------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "TRINITY INDUSTRIES, INC.", FILED IN THIS OFFICE ON THE EIGHTEENTH DAY OF DECEMBER, A.D. 1987, AT 10 O'CLOCK A.M. /s/ EDWARD J. FREEL ----------------------------------- Edward J. Freel, Secretary of State [SEAL] 2098029 8100 AUTHENTICATION: 0779754 001549195 DATE: 11-08-00 [STAMP] CERTIFICATE TO FIRST AMENDMENT TO CERTIFICATE OF INCORPORATION OF TRINITY INDUSTRIES, INC. Pursuant to the provisions of Section 242 of the General Corporation Law of Delaware, the undersigned hereby certify that the following amendment to the Certificate of Incorporation of TRINITY INDUSTRIES, INC. (the "Company") has been duly adopted in accordance with the provisions of Section 242, to-wit: Article XI is added to the Certificate of Incorporation of the Company to read in its entirety as follows: ARTICLE XI No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of the foregoing provisions of this Article XI by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, the undersigned have executed this document as of December 15th, 1987. TRINITY INDUSTRIES, INC. By: /s/ F. DEAN PHELPS, JR. ------------------------------------- F. Dean Phelps, Jr. Vice President ATTEST: /s/ J. J. FRENCH, JR. - ------------------------------- J. J. French, Jr. Secretary PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE ---------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "TRINITY INDUSTRIES, INC.", FILED IN THIS OFFICE ON THE SIXTH DAY OF AUGUST, A.D. 1993, AT 1:30 O'CLOCK P.M. /s/ EDWARD J. FREEL ----------------------------------- Edward J. Freel, Secretary of State [SEAL] 2098029 8100 AUTHENTICATION: 0779755 001549195 DATE: 11-08-00 [STAMP] SECOND AMENDMENT TO CERTIFICATE OF INCORPORATION OF TRINITY INDUSTRIES, INC. Pursuant to the provisions of Section 242 of the General Corporation Law of Delaware, the undersigned hereby certify the following amendment to the Certificate of Incorporation of TRINITY INDUSTRIES, INC. (the "Company") has been duly adopted in accordance with the provisions of Sections 242, to-wit: Article IV of the Company's Certificate of Incorporation is amended to increase the authorized number of shares of stock that the Company shall have authority to issue from Forty One Million Five Hundred Thousand (41,500,000) shares to One Hundred One Million Five Hundred Thousand (101,500,000) shares and the authorized number of shares of Common Stock from Forty Million (40,000,000) shares to One Hundred Million (100,000,000) shares by substituting the following in lieu of the existing Article IV of the Certificate of Incorporation so that Article IV as amended shall read in its entirety as follows: "ARTICLE IV. Authorized Capital Stock The total number of shares of stock which the corporation shall have authority to issue is One Hundred and One Million Five Hundred Thousand (101,500,000) shares, of which One Million Five Hundred Thousand (1,500,000) shares shall be voting Preferred Stock without par value and One Hundred Million (100,000,000) shares shall be Common Stock with a par value of One Dollar ($1.00) per share. The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof in respect of the shares of Preferred Stock and Common Stock of the corporation and of the authority expressly granted hereby to the Board of Directors of the corporation to fix by resolution or resolutions any of such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof that may be desired but which shall not be fixed by this Certificate of Incorporation. A. Preferred Stock. The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof in respect of the shares of Preferred Stock. 1. Voting Rights of Preferred Stock. In addition to such voting rights as may from time to time be required by the laws of Delaware, the holders of Preferred Stock shall vote at such times as holders of Common Stock may vote and in a like manner, one vote for each share of stock held, and all shares of the corporation shall be voted as a single class, except where specifically required by law to vote separately. 2. Provisions Regarding Issuance. The Preferred Stock may be issued from time to time in one or more series and in such amounts and for such consideration as may be determined by the Board of Directors. The designations, powers, preferences, and relative participating, optional, conversion and other special rights, and the qualifications, limitations or restrictions thereof, of the Preferred Stock, and as between the series of the Preferred Stock, shall be as are fixed herein and, to the extent not fixed herein, shall be such, not inconsistent with the provisions of this Article IV, as may be fixed by the Board of Directors, authority so to do being hereby expressly granted, and stated in a resolution or resolutions adopted by the Board of Directors providing for the issue of such series (herein called "Directors' Resolution"). The Directors' Resolution as to any series shall (a) designate the series, (b) fix the dividend rate of such series, the payment dates for dividends on shares of such series and, if the Board of Directors deems it advisable to cause dividends to be cumulative, the date or dates, or the method of determining the date or dates, from which dividends on shares of such series shall be cumulative, (c) fix the amount or amounts payable on shares of such series upon voluntary liquidation, dissolution or winding up, (d) state the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed at the option of the corporation; and such Directors' Resolution may, in a manner not inconsistent with the provisions of this Article IV, (i) limit the number of shares of such series which may be issued, (ii) provide for a sinking fund for the purchase or redemption of shares of such series and determine the terms and conditions governing the operation of any such fund, (iii) impose conditions or restrictions upon the creation of indebtedness or upon -2- the issue of any additional stock (including additional shares of such series or of any other series or of any other class) ranking on a parity with or prior to the shares of such series as to dividends or distribution of assets on liquidation, dissolution or winding up, (iv) impose conditions or restrictions upon the payment of dividends upon, or the making of other distributions to, or the redemption or acquisition of, shares of such series, or shares of junior stock theretofore issued, or any shares of any class of stock thereafter to be issued, or any shares of Preferred Stock theretofore issued ranking inferior to such series (as to dividends or distribution of assets on liquidation, dissolution or winding up) to the extent that the terms of such shares theretofore issued do not expressly prohibit the imposition of such conditions or restrictions, or any shares of Preferred Stock theretofore issued ranking prior to or on a parity with such series (as to dividends or distribution of assets on liquidation, dissolution or winding up) to the extent that the terms of such shares theretofore issued expressly permit the imposition of such conditions or restrictions, (v) grant rights of conversion or exchange of shares of such series into or for shares of junior stock, and (vi) grant such other special rights as shall not be inconsistent with the provisions of this Article IV. The term "junior stock," as used in this Article IV, shall mean shares of capital stock of the corporation ranking junior to Preferred Stock as to dividends and distribution of assets on liquidation, dissolution or winding up. 3. General Provisions. Subject to such further conditions or restrictions as may be imposed in any Directors' Resolution, so long as any shares of the Preferred Stock are outstanding, in no event shall any dividends whatsoever, whether in cash, stock or otherwise, be paid or declared, or any distribution be made, on any junior stock, nor shall any shares of junior stock (other than junior stock acquired in exchange for or out of the proceeds of the issue of other junior stock or out of contributions to the capital of the corporation) be purchased, redeemed, retired or otherwise acquired for a valuable consideration by the corporation: (1) unless all dividends on the Preferred Stock for all past dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart, and the full dividend thereon for the then current dividend period shall have been paid or declared, and -3- (2) unless, as to each series of Preferred Stock for which a sinking fund shall have been provided in the Directors' Resolution providing for the issuance of such series, the corporation shall have set aside the sum or sums required to be set aside by such Directors' Resolution, to be applied in the manner specified therein. Subject to such conditions or restrictions as may be imposed in any Directors' Resolution, the corporation at the option of the Board of Directors may redeem in whole or in part the Preferred Stock of such series which by its terms is redeemable, at the time or times and on the terms and conditions fixed by the Directors' Resolution as to such series in accordance with the terms applicable to such Preferred Stock. Any moneys set aside by the corporation and unclaimed at the end of six years from the date fixed for redemption shall revert to the general funds of the corporation. So long as any shares of the Preferred Stock are outstanding, the corporation shall not amend, alter or repeal any of the provisions of this Article IV so as to affect adversely the rights, powers or preferences of the Preferred Stock or of the holders thereof, nor shall any consent or vote otherwise effective under said Article be effective with respect to the rights, powers or preferences of such Preferred Stock or be binding upon the holders of such Preferred Stock, without the consent of the holders of at least two-thirds (2/3) of the number of all outstanding shares of the Preferred Stock (and such further consent of that proportion of the holders of the shares of any one or more particular series, if any, as may be required by the Directors' Resolution or Resolutions providing for the issuance of such one or more particular series), given in person or by proxy, by vote at a meeting called for that purpose. So long as shares of a particular series of Preferred Stock are outstanding, the corporation shall not amend, alter or repeal any provision of the Directors' Resolution providing for the issuance of such series so as to affect adversely the rights, powers or preferences of the shares of such series or of the holders thereof, without the consent of the holders of at lease two-thirds (2/3) of the number of outstanding shares of said series, given in person or by proxy, by vote at a meeting called for that purpose. -4- In the event of any liquidation, dissolution or winding up of the corporation, then, before any distribution or payment shall be made to the holder of any junior stock, the holders of the Preferred Stock of each series shall be entitled to be paid, in the event of a voluntary or involuntary liquidation, dissolution or winding up, such preferential amounts as may be fixed for such series in the Directors' Resolution providing for the issuance thereof. After such payment shall have been made in full to the holders of the Preferred Stock, the remaining assets and funds of the corporation shall be distributed among the holders of junior stock according to their respective rights. In the event that the assets of the corporation available for distribution to holders of Preferred Stock shall not be sufficient to make the payments herein required to be made in full, such assets shall be distributed to the holders of the respective shares of Preferred Stock in accordance with such priorities, if any, as between the various series of Preferred Stock as may be specified in any Directors' Resolution. Preferred Stock redeemed or otherwise retired by the corporation assumes the status of authorized but unissued Preferred Stock and may thereafter, subject to the provisions of any Directors' Resolution providing for the issue of any particular series of Preferred Stock, be reissued in the same manner as authorized but unissued Preferred Stock. B. Common Stock. 1. Dividends. Subject to the prior rights and preferences of the Preferred Stock, and subject to the provisions and on the conditions set forth in the foregoing paragraph A of this Article IV, or in any Directors' Resolution providing for the issue of a series of Preferred Stock, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time out of any funds legally available therefor. 2. Voting. Except as otherwise required by law, each share of Common Stock shall have one vote, in person or by proxy, for each share thereof held, and all shares of the corporation, including shares of Preferred Stock shall be voted as a single class except where specifically required by law to vote separately. -5- 3. Distribution. After payment shall have been made in full to the holders of the Preferred Stock in the event of any liquidation, dissolution or winding up of the affairs of the corporation, the remaining assets and funds of the corporation shall be distributed among the holders of the Common Stock according to their respective shares. C. Pre-emptive Rights. No holder of any stock of the corporation shall be entitled as a matter of right to purchase or subscribe for any part of any stock of the corporation, authorized by this Article IV, or of any additional stock of any class to be issued by reason of any increase of the authorized stock of the corporation, or of any bonds, certificates of indebtedness, debentures or other securities convertible into stock of the corporation, but any stock authorized by this Article IV or any such additional authorized issue of new stock or of securities convertible into stock may be issued and disposed of by the Board of Directors to such persons, firms, corporations or associations for such consideration and upon such terms and in such manner as the Board of Directors may in their discretion determine without offering any thereof on the same terms or on any terms to the stockholders then of record or to any class of stockholders. D. Miscellaneous. The corporation shall be entitled to treat the person in whose name any share, right or option is registered as the owner thereof for all purposes and shall not he bound to recognize any equitable or other claim to or interest in such share, right or option on the part of any other person, whether or not the corporation shall have notice thereof, save as may be expressly provided by the laws of the State of Delaware. A Director shall be fully protected in relying in good faith upon the books of account of the corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities and/or net profits of the corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid. Without action by the stockholders, the shares of stock may be issued by the corporation from time to time for such consideration (not less than the par value thereof if such stock has a par value) as may be fixed from time to time by the Board of Directors, and any and -6- CERTIFICATE OF INCORPORATION OF TRINITY INDUSTRIES, INC. ARTICLE I. Name The name of the corporation is Trinity Industries, Inc. ARTICLE II. Registered Office and Agent The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III. Purpose The purposes for which the corporation is organized are as follows: 1. To design and manufacture products of every description fabricated in the various grades of ferrous and non-ferrous metals and their alloys, and to buy, sell and otherwise deal therein. 2. To construct, build, manufacture, maintain, overhaul, repair and erect structures of every kind and description manufactured of various grades of ferrous and non-ferrous metals and their alloys, and to contract for the construction and erection of such structures. 3. To manufacture, buy, sell, procure, distribute, market, exchange, import, export and in any other manner deal in or deal with (as principal, agent or otherwise) steel pressure vessels, refinery equipment, oil field supplies, poles and other products fabricated of various grades of ferrous and non-ferrous metals and their alloys, as well as materials, parts, instruments, devices and any other equipment, tools, parts, components and supplies. 4. To acquire by purchase, lease or otherwise erect, maintain, operate, lease, mortgage and otherwise deal in and deal with buildings, warehouses, storehouses, manufacturing plants, factories, machine shops and any other structures and equipment necessary, useful or desirable for the conduct of the business of the corporation. 5. To manufacture, purchase or otherwise acquire and to hold, own, mortgage or otherwise lien, pledge, lease, sell, assign, exchange, transfer or in any manner dispose of, and to invest, deal and trade in and with goods, wares and merchandise and personal property of any and every class or description within or without the State of Delaware. 6. To acquire the good will, rights and property and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation; to pay for the same in cash, the stock of the corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole -2- or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. 7. To purchase or otherwise acquire, apply for, register, hold, use, sell or in any manner dispose of, and to grant licenses or other rights in, and in any manner deal with, patents, inventions, improvements, processes, formulas, trademarks, trade names, rights and licenses secured under letters patent, copyrights or otherwise. 8. To enter into, make and perform contracts of every kind for any lawful purpose, with any person, firm, association or corporation, town, city, county, body politic, state, territory, government or colony or dependency thereof. 9. To render general and special services and advice, and to do all things as may be necessary or convenient in carrying out any or all of the foregoing purposes. 10. To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 11. The objects and purposes specified herein shall be regarded as independent objects and purposes and, except where otherwise expressed, shall in no way be limited nor restricted by reference to or inference from the terms of any other clause or paragraph of this Certificate of Incorporation. 12. The foregoing shall be construed both as objects and powers, and the enumeration thereof shall not be held to limit or -3- restrict in any manner the general powers conferred on the corporation by the laws of the State of Delaware. ARTICLE IV. Authorized Capital Stock The total number of shares of stock which the corporation shall have authority to issue is Forty-One Million Five Hundred Thousand (41,500,000) shares, of which One Million Five Hundred Thousand (1,500,000) shares shall be voting Preferred Stock without par value and Forty Million (40,000,000) shares shall be Common Stock with a par value of One Dollar ($1.00) per share. The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof in respect of the shares of Preferred Stock and Common Stock of the corporation and of the authority expressly granted hereby to the Board of Directors of the corporation to fix by resolution or resolutions any of such destinations and powers, preferences and rights, and qualifications, limitations and restrictions thereof that may be desired but which shall not be fixed by this Certificate of Incorporation. A. Preferred Stock. The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof in respect of the shares of Preferred Stock. -4- 1. Voting Rights of Preferred Stock. In addition to such voting rights as may from time to time be required by the laws of Delaware, the holders of Preferred Stock shall vote at such times as holders of Common Stock may vote and in a like manner, one vote for each share of stock held, and all shares of the corporation shall be voted as a single class, except where specifically required by law to vote separately. 2. Provisions Regarding Issuance. The Preferred Stock may be issued from time to time in one or more series and in such amounts and for such consideration as may be determined by the Board of Directors. The designations, powers, preferences, and relative participating, optional, conversion and other special rights, and the qualifications, limitations or restrictions thereof, of the Preferred Stock, and as between the series of the Preferred Stock, shall be as are fixed herein and, to the extent not fixed herein, shall be such, not inconsistent with the provisions of this Article IV, as may be fixed by the Board of Directors, authority so to do being hereby expressly granted, and stated in a resolution or resolutions adopted by the Board of Directors providing for the issue of such series (herein called "Directors' Resolution"). The Directors' Resolution as to any series shall (a) designate the series, (b) fix the dividend rate of such series, the payment dates for dividends on shares of such series and, if the Board of Directors deems it advisable to cause dividends to be cumulative, the date or dates, or the method of determining the date or dates, from which dividends on shares of such series shall be cumulative, (c) fix the amount or amounts -5- payable on shares of such series upon voluntary liquidation, dissolution or winding up, (d) state the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed at the option of the corporation; and such Directors' Resolution may, in a manner not inconsistent with the provisions of this Article IV, (i) limit the number of shares of such series which may be issued, (ii) provide for a sinking fund for the purchase or redemption of shares of such series and determine the terms and conditions governing the operation of any such fund, (iii) impose conditions or restrictions upon the creation of indebtedness or upon the issue of any additional stock (including additional shares of such series or of any other series or of any other class) ranking on a parity with or prior to the shares of such series as to dividends or distribution of assets on liquidation, dissolution or winding up, (iv) impose conditions or restrictions upon the payment of dividends upon, or the making of other distributions to, or the redemption or acquisition of, shares of such series, or shares of junior stock theretofore issued, or any shares of any class of stock thereafter to be issued, or any shares of Preferred Stock theretofore issued ranking inferior to such series (as to dividends or distribution of assets on liquidation, dissolution or winding up) to the extent that the terms of such shares theretofore issued do not expressly prohibit the imposition of such conditions or restrictions, or any shares of Preferred Stock theretofore issued ranking prior to or on a parity with such series (as to dividends or distribution of -6- assets on liquidation, dissolution or winding up) to the extent that the terms of such shares theretofore issued expressly permit the imposition of such conditions or restrictions, (v) grant rights of conversion or exchange of shares of such series into or for shares of junior stock, and (vi) grant such other special rights as shall not be inconsistent with the provisions of this Article IV. The term "junior stock," as used in this Article IV, shall mean shares of capital stock of the corporation ranking junior to Preferred Stock as to dividends and distribution of assets on liquidation, dissolution or winding up. 3. General Provisions. Subject to such further conditions or restrictions as may be imposed in any Directors' Resolution, so long as any shares of the Preferred Stock are outstanding, in no event shall any dividends whatsoever, whether in cash, stock or otherwise, be paid or declared, or any distribution be made, on any junior stock, nor shall any shares of junior stock (other than junior stock acquired in exchange for or out of the proceeds of the issue of other junior stock or out of contributions to the capital of the corporation) be purchased, redeemed, retired or otherwise acquired for a valuable consideration by the corporation: (1) unless all dividends on the Preferred Stock for all past dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart, and the full dividend thereon for the then current dividend period shall have been paid or declared, and -7- (2) unless, as to each series of Preferred Stock for which a sinking fund shall have been provided in the Directors' Resolution providing for the issuance of such series, the corporation shall have set aside the sum or sums required to be set aside by such Directors' Resolution, to be applied in the manner specified therein. Subject to such conditions or restrictions as may be imposed in any Directors' Resolution, the corporation at the option of the Board of Directors may redeem in whole or in part the Preferred Stock of such series which by its terms is redeemable, at the time or times and on the terms and conditions fixed by the Directors' Resolution as to such series in accordance with the terms applicable to such Preferred Stock. Any moneys set aside by the corporation and unclaimed at the end of six years from the date fixed for redemption shall revert to the general funds of the corporation. So long as any shares of the Preferred Stock are outstanding, the corporation shall not amend, alter or repeal any of the provisions of this Article IV so as to affect adversely the rights, powers or preferences of the Preferred Stock or of the holders thereof, nor shall any consent or vote otherwise effective under said Article be effective with respect to the rights, powers or preferences of such Preferred Stock or be binding upon the holders of such Preferred Stock, without the consent of the holders of at least two-thirds (2/3) of the number of all outstanding shares of the Preferred Stock (and such further consent of that proportion of the holders of the shares of any one -8- or more particular series, if any, as may be required by the Directors' Resolution or Resolutions providing for the issuance of such one or more particular series), given in person or by proxy, by vote at a meeting called for that purpose. So long as shares of a particular series of Preferred Stock are outstanding, the corporation shall not amend, alter or repeal any provision of the Directors' Resolution providing for the issuance of such series so as to affect adversely the rights, powers or preferences of the shares of such series or of the holders thereof, without the consent of the holders of at least two-thirds (2/3) of the number of outstanding shares of said series, given in person or by proxy, by vote at a meeting called for that purpose. In the event of any liquidation, dissolution or winding up of the corporation, then, before any distribution or payment shall be made to the holder of any junior stock, the holders of the Preferred Stock of each series shall be entitled to be paid, in the event of a voluntary or involuntary liquidation, dissolution or winding up, such preferential amounts as may be fixed for such series in the Directors' Resolution providing for the issuance thereof. After such payment shall have been made in full to the holders of the Preferred Stock, the remaining assets and funds of the corporation shall be distributed among the holders of junior stock according to their respective rights. In the event that the assets of the corporation available for distribution to holders of Preferred Stock shall not be sufficient -9- to make the payments herein required to be made in full, such assets shall be distributed to the holders of the respective shares of Preferred Stock in accordance with such priorities, if any, as between the various series of Preferred Stock as may be specified in any Directors' Resolution. Preferred Stock redeemed or otherwise retired by the corporation assumes the status of authorized but unissued Preferred Stock and may thereafter, subject to the provisions of any Directors' Resolution providing for the issue of any particular series of Preferred Stock, be reissued in the same manner as authorized but unissued Preferred Stock. B. Common Stock. 1. Dividends. Subject to the prior rights and preferences of the Preferred Stock, and subject to the provisions and on the conditions set forth in the foregoing paragraph A of this Article IV, or in any Directors' Resolution providing for the issue of a series of Preferred Stock, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time out of any funds legally available therefor. 2. Voting. Except as otherwise required by law, each share of Common Stock shall have one vote, in person or by proxy, for each share thereof held, and all shares of the corporation, including shares of Preferred Stock shall be voted as a single class except where specifically required by law to vote separately. -10- 3. Distribution. After payment shall have been made in full to the holders of the Preferred Stock in the event of any liquidation, dissolution or winding up of the affairs of the corporation, the remaining assets and funds of the corporation shall be distributed among the holders of the Common Stock according to their respective shares. C. Pre-emptive Rights. No holder of any stock of the corporation shall be entitled as a matter of right to purchase or subscribe for any part of any stock of the corporation, authorized by this Article IV, or of any additional stock of any class to be issued by reason of any increase of the authorized stock of the corporation, or of any bonds, certificates of indebtedness, debentures or other securities convertible into stock of the corporation, but any stock authorized by this Article IV or any such additional authorized issue of new stock or of securities convertible into stock may be issued and disposed of by the Board of Directors to such persons, firms, corporations or associations for such consideration and upon such terms and in such manner as the Board of Directors may in their discretion determine without offering any thereof on the same terms or on any terms to the stockholders then of record or to any class of stockholders. D. Miscellaneous. The corporation shall be entitled to treat the person in whose name any share, right or option is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such share, right or option on the part of any other person, -11- whether or not the corporation shall have notice thereof, save as may be expressly provided by the laws of the State of Delaware. A Director shall be fully protected in relying in good faith upon the books of account of the corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities and/or net profits of the corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid. Without action by the stockholders, the shares of stock may be issued by the corporation from time to time for such consideration (not less than the par value thereof if such stock has a par value) as may be fixed from time to time by the Board of Directors, and any and all such shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid stock and not liable to any further call or assessment thereon, and the holder of such shares shall not be liable for any further call or assessment thereon, or for any other payment thereof. ARTICLE V. Sole Incorporator The name and mailing address of the sole incorporator is: J. J. French, Jr. 3600 RepublicBank Dallas Tower Dallas, Texas 75201-3989 -12- ARTICLE VI. Directors The number of Directors constituting the initial Board of Directors is seven (7); however, hereafter the Bylaws of the corporation shall fix the number at not less than five (5), nor more than twelve (12). The name and mailing address of each initial Director who is to serve as a Director until the first annual meeting of the stockholders or until a successor is elected and qualified are as follows:
Name Address ---- ------- W. Ray Wallace P.O. Box 10587 Dallas, Texas 75207 Alfred J. Gamble P.O. Box 310 Montgomery, Alabama 36195-2201 Dean P. Guerin 2001 Bryan Tower, 23rd floor Dallas, Texas 75201 Jess T. Hay 2001 Bryan Tower, Suite 3600 Dallas, Texas 75201 Edmund M. Hoffman 1999 Bryan Street, Suite 3300 Dallas, Texas 75201 Ray J. Pulley P.O. Box 576 Brownsboro, Texas 75756 Thomas A. Rose, Jr. 403 South Akard Dallas, Texas 75202
ARTICLE VII. Duration The corporation is to have perpetual existence. -13- ARTICLE VIII. Powers of the Board of Directors In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the corporation is expressly authorized: 1. To make, alter, amend and repeal the Bylaws; 2. To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to alter or abolish any such reserve; 3. To authorize and cause to be executed mortgages and liens upon the property and franchises of the corporation; and 4. To designate, by resolution passed by a majority of the whole Board, three or more directors to constitute an Executive Committee, which committee, unless its authority shall be otherwise expressly limited by such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the corporation except where action of the Board of Directors is specified by statute or other applicable law; provided, the designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. To the extent that any of the foregoing powers conflict with any applicable statute of the State of Delaware now or hereafter in effect, such statute, to the extent of such conflict, shall be controlling. -14- ARTICLE IX. Amendments The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by law, and all rights conferred upon officers, directors, and stockholders herein are granted subject to this reservation. ARTICLE X. Compromise or Arrangement with Creditors Whenever a compromise or arrangement is proposed between the corporation and its creditors or any class of them and/or between the corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or -15- class of stockholders of the corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the corporation, as the case may be, and also on the corporation. THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly I have hereunto set my hand this 1st day of August, 1986. /s/ J. J. FRENCH, JR. -------------------------------- J. J. French, Jr. -16- THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) BEFORE ME, the undersigned authority, on this day personally appeared J. J. French, Jr., known to me to be the person whose name is subscribed to the foregoing instrument, and being by me first duly sworn, declared to me that the statements therein contained are true and correct and that he executed the same as his act and deed for purposes and consideration therein expressed. GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 1st day of August, 1986. /s/ KELLY SMITH -------------------------------- Notary Public in and for The State of Texas [SEAL] My Commission Expires: 1-24-89 KELLY SMITH - --------------------------- -------------------------------- Printed Name of Notary -17- all such shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid stock and not liable to any further call or assessment thereon, and the holder of such shares shall not be liable for any further call or assessment thereon, or for any other payment thereof." IN WITNESS WHEREOF, the undersigned have executed this document as of August 5, 1993. TRINITY INDUSTRIES, INC. By: /s/ F. DEAN PHELPS, JR. ------------------------------------ F. Dean Phelps, Jr. Vice President ATTEST: /s/ J. J. FRENCH, JR. - --------------------------------------- J. J. French, Jr., Secretary -7- PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "TRINITY INDUSTRIES, INC.", FILED IN THIS OFFICE ON THE FOURTH DAY OF AUGUST, A.D. 1986, AT 3 O'CLOCK P.M. /S/ EDWARD J. FREEL [SEAL] ----------------------------------- Edward J. Freel, Secretary of State 2098029 8100 AUTHENTICATION: 0779753 001549195 DATE: 11-08-00 EX-3.2 4 d94851ex3-2.txt BY-LAWS EXHIBIT 3.2 As Amended Effective December 1, 2001 BYLAWS OF TRINITY INDUSTRIES, INC. ARTICLE I. Offices Section 1. The registered office shall be located in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places within or without the State of Delaware as the Board of Directors may from time to time determine, or as the business of the corporation may require. ARTICLE II. Meetings of Stockholders Section 1. Meetings of the stockholders for any purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. The annual meeting of stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At such meeting, the stockholders entitled to vote thereat shall elect by a plurality vote a Board of Directors. Nominations for election to the Board of Directors shall be made at such meeting only by or at the direction of the Board of Directors, by a nominating committee or person appointed by the Board of Directors, or by a stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of (i) the sixtieth day prior to such annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made. For purposes of these Bylaws, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class and number of shares of capital stock of the corporation which are 2 beneficially owned by the stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as director of the corporation. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. At each annual meeting of the stockholders, only such business shall be conducted as shall have properly been brought before the meeting. To be properly before the meeting, the business to be conducted must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors, or otherwise properly brought before the meeting by a stockholder entitled to vote at the meeting. In addition to any other applicable requirements, for business to be properly brought before the meeting by a stockholder, the stockholder must have 3 given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of (i) the sixtieth day prior to such annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made. A stockholder's notice to the Secretary of the corporation shall set forth as to each matter that the stockholder proposes to bring before the annual meeting, (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Notwithstanding the foregoing provisions of this Section 2, a stockholder seeking to have a proposal included in the corporation's proxy statement shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended (including, but not limited to, Rule 14a-8 or its successor provision). Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2; provided, 4 however, that nothing in this Section 2 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with the procedures set forth in this Section 2. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business sought to be so conducted was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 3. Special meetings of the stockholders may be called by the chief executive officer or a majority of the Board of Directors. Section 4. Written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each stockholder of record entitled to vote at such meeting. Section 5. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. Section 6. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at meetings of stockholders except as otherwise provided by any applicable statute. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the presiding officer at the meeting or the stockholders present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such 5 adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. In addition, the presiding officer at any meeting of stockholders shall have the power to adjourn the meeting at the request of the Board of Directors if the Board of Directors determines that adjournment is necessary or appropriate to enable stockholders to consider fully information which the Board of Directors determines has not been made sufficiently or timely available to stockholders or to otherwise exercise effectively their voting rights. Section 7. Except as provided in Section 2 hereof with respect to the election of the Board of Directors, at a meeting at which a quorum is present, the vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall be the act of the stockholders' meeting, unless the vote of a greater number is required by law or the Certificate of Incorporation. Section 8. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class are limited or denied by the Certificate of Incorporation. Section 9. At any meeting of the stockholders, every stockholder having the right to vote may vote either in person, or by proxy appointed by an instrument in writing as to a particular meeting and any adjournment or adjournments thereof subscribed by such stockholder or by his duly authorized attorney-in-fact. A proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise provided by law. Section 10. The officer or agent having charge of the stock transfer books shall make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address 6 of and number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the corporation, and shall be subject to inspection by any stockholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer book or to vote at any such meeting of stockholders. Section 11. Notwithstanding any inconsistent provision which may be contained in these Bylaws, in order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date upon which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the corporation having custody of the book in which 7 proceedings of stockholders' meeting are recorded, to the attention of the Secretary of the corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. ARTICLE III. Directors Section 1. The number of directors of the corporation shall be ten (10). The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified; provided, any director may be removed at any time, with or without cause, by the holders of a majority of the shares entitled to vote, represented in person or by proxy, at any duly constituted meeting of stockholders called for the purpose of removing any such director or directors. Directors need not be residents of the State of Delaware or stockholders of the corporation. Section 2. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any newly created directorship(s) resulting from an increase in the authorized number of directors elected by all stockholders entitled to vote as a single class shall be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum of the proposed Board of Directors. Section 3. The business and affairs of the corporation shall be managed by its Board of 8 Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute, the Certificate of Incorporation, or these Bylaws directed or required to be exercised and done by the stockholders. Section 4. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Delaware. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time and place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board of Directors may be called by the Secretary on the written request of two directors. Section 7. Written notice of regular meetings of the Board of Directors shall not be required. Special meetings of the Board of Directors may be called upon twenty-four (24) hours' notice to each director, or such shorter period of time as the person calling the meeting deems appropriate in the circumstances, either personally or by mail, telephone or telegram. Neither the business to be transacted at, nor the purposes of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such special meeting. 9 Section 8. A majority of the directors shall constitute a quorum for the transaction of business, and the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate three or more directors to constitute an executive committee, which committee, unless its authority shall be otherwise expressly limited by such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the corporation except where action of the Board of Directors is specified by statute. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the Board when required. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. ARTICLE IV. Notices Section 1. Except as otherwise provided in these Bylaws, notices to directors and stockholders shall be in writing, and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. If mailed, such notice shall be deemed to be given when deposited in the United States mail with postage thereon prepaid. Notice to directors may also be given by telegram. 10 Section 2. Whenever any notice is required to be given to any stockholder or director under the provisions of the statutes, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Section 3. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE V. Officers Section 1. The executive officers of the corporation shall consist of a President, one or more Vice Presidents, a Secretary and a Treasurer and may include a Chairman of the Board, one or more Senior Vice Presidents and one or more Executive Vice Presidents, each of whom shall be elected by the Board of Directors. Section 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose a President, one or more Vice Presidents, a Secretary and a Treasurer, none of whom need be a member of the Board, and may appoint one of their number Chairman of the Board. Section 3. Such other officers and assistant officers and agents as may be deemed necessary may be appointed by the chief executive officer of the corporation, including a Chairman, a President, and one or more Vice Presidents of the respective Divisions. The President or the Vice Presidents of the Division who, in the order of their seniority, unless otherwise determined by the chief executive officer of the corporation, shall perform the duties of the Chairman or President, as the case may be, of the Division in the absence or disability of the Chairman or President, as the 11 case may be, of that Division. Each President or Vice President, as the case may be, of a Division shall perform such other duties and have such other powers as the chief executive officer of the corporation or the Chairman or President, as the case may be, of that Division shall prescribe. Division officers shall hold office until their respective successors shall have been chosen and shall have qualified. Any Division officer appointed by the chief executive officer may be removed by the chief executive officer whenever, in his judgment, the best interests of the corporation will be served thereby. Any vacancy occurring in any office of a Division by death, resignation, removal or otherwise shall be filled by the chief executive officer of the corporation. Section 4. The salaries of all executive officers of the corporation shall be fixed by the Board of Directors or by a committee of one or more directors, the members of which shall be selected by the Board of Directors and which, unless its authority shall be otherwise limited by resolution of the Board of Directors, shall have the power to fix the salaries of all executive officers of the corporation. Section 5. The executive officers of the corporation shall hold office until their respective successors shall have been chosen and shall have qualified. Any officer or agent or member of the executive committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever, in its judgment, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any vacancy occurring in any executive office of the corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. Section 6. The Board of Directors may designate whether the Chairman of the Board, if such an officer shall have been appointed, or the President, shall be the chief executive officer of the corporation. The officer so designated as the chief executive officer shall preside at all meetings 12 of the stockholders and the Board of Directors, and shall have such other powers and duties as usually pertain to such office or as may be delegated by the Board of Directors. The President shall have such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. Unless the Board of Directors shall otherwise delegate such duties, the chief executive officer shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 7. The chief executive officer or his designee shall have the authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. Section 8. The Vice Presidents, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. The Vice Presidents shall also have the authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors or the chief executive officer of the corporation shall prescribe. Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose and shall perform 13 like duties for the standing committees, when requested. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation, and, when authorized by the Board of Directors or directed by the President or any Vice President, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or any Assistant Secretary. Section 10. The Assistant Secretaries, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 11. The Treasurer shall be the financial officer of the corporation. He shall have the custody of the corporate funds and securities and shall deposit all monies and other valuable effects in the name and to the credit of the corporation in such depositaries as may be designated from time to time by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer. He shall also perform such other duties as may be assigned to him by the Board of Directors. Section 12. If required by the Board of Directors, the Treasurer shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, 14 money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 13. The Assistant Treasurers, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI. Indemnification of Directors and Officers Section 1. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the 15 best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 3. Notwithstanding the other provisions of this Article, to the extent that a director, officer or Division officer of the corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' 16 fees) actually and reasonably incurred by him or on his behalf in connection therewith. Section 4. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be paid by the corporation unless a determination is made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director, officer, employee or agent is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Section 5. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director, officer or Division officer in his capacity as a director, officer or Division officer (and not in any other capacity in which service was or is rendered by such person while a director, officer or Division officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director, officer or Division officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director, officer or Division officer is not entitled to be indemnified by the corporation as authorized in this Article. The Board of Directors may, in the manner set forth above, and upon approval of such director, officer or Division officer of the corporation, authorize the corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the corporation is a party to such action, suit or proceeding. 17 Section 6. Any indemnification under Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within 60 days, upon the written request of the director, officer or Division officer. The right to indemnification or advances as granted by this Article shall be enforceable by the director, officer or Division officer in any court of competent jurisdiction, if the corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such persons' costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article where the required undertaking, if any, has been received by the corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 7. The indemnification and advancement of costs, charges and expenses provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of costs, charges and expenses may be entitled under any law 18 (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the corporation, and shall continue as to a person who has ceased to be a director, officer or Division officer as to actions taken while he was such a director, officer or Division officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the corporation and each director, officer or Division officer of the corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer or Division officer or the obligations of the corporation arising hereunder. Section 8. In addition to the specific indemnification provided for herein, the corporation shall indemnify each person who is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provisions in effect on the date hereof, or (ii) by the corporation's Certificate of Incorporation as in effect on the date hereof. The corporation shall also advance expenses to any of the foregoing individuals to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provision in effect on the date hereof, or (ii) by the corporation's Certificate of Incorporation as in effect on the date hereof. 19 Section 9. Notwithstanding the foregoing, the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article. Section 10. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director, officer or Division officer of the corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE VII. Certificates for Shares Section 1. The corporation shall deliver certificates representing all shares to which stockholders are entitled; and such certificates shall be signed by the President or a Vice President, and the Secretary or an Assistant Secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. No certificate shall be issued for any share until the consideration therefor has been fully paid. Each certificate representing shares shall state upon the face thereof that the corporation is organized under the laws of the State of Delaware, the name of 20 the person to whom issued, the number and class and the designation of the series, if any, which such certificate represents, and the par value of each share represented by such certificate or a statement that the shares are without par value. Section 2. The signatures of the President or Vice President, and the Secretary or Assistant Secretary, upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of the issuance. Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. 21 Section 5. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty (60) days, and, in case of a meeting of stockholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of a dividend, or in order to make a determination of stockholders for any other proper purpose, the close of business on the day next preceding the day on which notice of the meeting of stockholders is given shall be the record date with respect to such meeting, and the close of business on the day on which the Board of Directors adopts a resolution declaring a dividend or with respect to any other proper purpose, as the case may be, shall be the record date for the determination of stockholders with respect thereto. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired. 22 Section 6. The corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE VIII. General Provisions Section 1. The Board of Directors may declare and the corporation may pay dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of its Certificate of Incorporation. Section 2. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any purpose or purposes, and may abolish any such reserve in the same manner. Section 3. The Board of Directors must, when requested by the holders of at least one-third of the outstanding shares of the corporation, present written reports of the business and financial affairs of the corporation. Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate as provided in these Bylaws. Section 5. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. Section 6. The corporate seal shall have inscribed thereon the name of the corporation and may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 23 ARTICLE IX. Amendments These Bylaws may be altered, amended or repealed at any regular or special meeting of, or by the unanimous written consent of, the Board of Directors. 24 EX-10.11.1 5 d94851ex10-11_1.txt AMENDMENT NO. 2 TO DEFINED PLAN FOR DIRECTOR FEES EXHIBIT 10.11.1 AMENDMENT NO. 2 TO THE TRINITY INDUSTRIES, INC. DEFERRED PLAN FOR DIRECTOR FEES Pursuant to the provisions of Article VII thereof, the Trinity Industries, Inc. Deferred Plan for Director Fees (the "Plan") is hereby amended effective as of December 13, 2001 in the following respect only: FIRST: Section (e) of Article 1 of the Plan is hereby amended by restatement in its entirety to read as follows: (e) "Annual Period" means the calendar year. SECOND: The third paragraph of the first paragraph of Article II of the Plan is amended by restatement in its entirety to read as follows: Sums credited to the Account will accrue an interest equivalent from the date they are credited at a rate equal to the annual LIBOR rate plus 6 points, as of the first business day following each Adjustment Date. IN WITNESS WHEREOF, this Amendment has been executed this 13th day of December, 2001. TRINITY INDUSTRIES, INC. By /s/ ILLEGIBLE ------------------------------- Title: EX-10.12.1 6 d94851ex10-12_1.txt AMENDMENT NO. 1 TO 1998 STOCK OPTION PLAN EXHIBIT 10.12.1 AMENDMENT NO.1 TO 1998 STOCK OPTION AND INCENTIVE PLAN The Trinity Industries, Inc. 1998 Stock Option and Incentive Plan, as amended from time to time (the "Plan"), is hereby amended by this Amendment No. 1, effective as of December 9, 1999. Any term which is not defined below shall have the meaning set forth for such term in the Plan. 1. Section 11 of the Plan is hereby amended and restated as follows: Non-transferability of Stock Options. A stock option shall not be transferable otherwise than by will or the laws of descent and distribution, and a stock option may be exercised, during the lifetime of the Optionee, only by the Optionee; provided, however, a Non-qualified Stock Option may be transferred to one or more members of the immediate family of the Optionee, to a trust for the benefit of one or more members of the immediate family of the Optionee, to a partnership, the sole partners of which are the Optionee and members of the immediate family of the Optionee, or a foundation in which the Optionee controls the management of the assets. Upon any transfer, a stock option will remain subject to all the provisions of this Plan and the option agreement, including the provisions regarding termination of rights with respect to the stock option upon termination of the Optionee's employment, and the transferee shall have all of the rights of and be subject to all of the obligations and limitations applicable to the Optionee with respect to the stock option, except that the transferee may further transfer the stock option only to a person or entity that the Optionee is permitted to transfer the stock option. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of a stock option contrary to the provisions hereof, or the levy of any execution, attachment, or similar process upon a stock option shall be null and void and without effect. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by a duly authorized officer of the Company as of the day and year first above written. TRINITY INDUSTRIES, INC. BY: /s/ ILLEGIBLE ----------------------------- EX-10.13 7 d94851ex10-13.txt FORM OF DEFERRED COMPENSATION PLAN AND AGREEMENT EXHIBIT 10.13 AMENDED AND RESTATED DEFERRED COMPENSATION PLAN AND AGREEMENT AS OF DECEMBER 12, 2001 THIS PLAN AND AGREEMENT made and entered into as of the 12th day of December 2001, between TRINITY INDUSTRIES, INC., a Delaware Corporation with its principle office at 2525 Stemmons Freeway, Dallas, Texas 75207 (hereinafter called the "Company") and _______________, an individual (hereinafter called "Officer"); WITNESSETH: WHEREAS, Officer is in the employ of the Company and serves in a capacity which will develop and expand the business of the Company; and WHEREAS, in recognition of Officer's valued services as an employee and officer of the Company, and as an inducement to Officer to continue to serve the Company in the future, the Company desires to provide certain benefits for Officer and his designated beneficiary through a plan of deferred compensation, as hereinafter set forth; and WHEREAS, Officer is willing to remain in the employ of the Company and to have the Company defer a portion of his annual compensation in order to provide such benefits, as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the terms, conditions and covenants hereinafter set forth, The Company and Officer hereby agree as follows: 1. Deferred Compensation Account. The Company shall establish an account on the books of the Company in the name of Officer to which will be accrued deferred compensation in an amount equal to ten percent (10%) of Officer's combined annual base salary and incentive compensation, payable in the manner and subject to the conditions hereinafter set forth. Base salary is defined as that amount specifically approved by the Company as base salary and excludes other payments such as car allowance, insurance reimbursements, etc. Incentive compensation shall mean all amounts earned under a specific plan for a given year whether payable currently or over a period of future years. Credits to such account will accrue annually, at the rate of ten per cent (10%) of Officers combined annual base salary and incentive compensation, commencing with the Officer's hire date, _______________ and, subject to the annual review of this Plan by the Human Resources Committee of the Board of Directors of the Company, continuing in like matter for each of the Company's fiscal years thereafter for so long as Officer shall continue his active, full-time employment with the Company. 2. Administration of Account. The Company shall have the right to segregate from the other general assets of the Company the sums which accrue monthly hereunder as deferred compensation. Officer's deferred compensation account shall be credited with interest at the prime rate as published by Chase Bank of Texas, N.A. or its successor until January 1, 2002, at which time Officer's deferred compensation account shall be credited with interest at the LIBOR rate plus 6 points as published by the Wall Street Journal. Neither Officer or his designated beneficiary shall at any time have any interest in accrued sums which are so segregated and/or invested and reinvested, and such funds, as they are from time to time constituted, shall at all times remain assets of the Company subject to the claims of the general creditors of the Company. 3. Payment of Deferred Compensation. Subject to the conditions hereinafter set forth, the deferred compensation accrued hereunder and shown to Officer's credit on the books of the Company shall be payable upon the termination of the active, full-time employment of Officer for any reason whatsoever, and shall be paid in such form as Officer may elect from the following two alternatives: (i) Payment may be made in annual periodic payments for specified number of years, not fewer than 1 nor in excess of 20, with the first payment to be made one (1) year and one (1) day from the date in which Officer's termination occurs and subsequent payments to be made on the same date of each succeeding year, where the payment made during each year shall be in an amount equal to a fraction of the amount shown to Officer's credit on the books of the Company as of the last day of the month preceding the month in which the payment is made, and where such fraction for each payment shall be one (1) divided by the number of payments remaining (including the current payment). Notwithstanding the preceding, at any time prior to receipt of all remaining installments under this paragraph, Officer (of Officer's beneficiary in the event of Officer's death) may elect a lump sum payment in an amount equal to the total amount remaining shown to Officer's credit on the books of the Company as of the last day of the month preceding the month in which the election is made, minus a forfeiture amount equal to 10% of such total amount. (ii) Complete payment may be made in a lump sum paid on the first day of the month following the date of Officer's termination of employment. Officer's election pursuant to this paragraph must be made as of the effective date of this Amendment and Restatement and, except as provided below, shall be irrevocable. In the absence of an election, payment shall be made in the form of annual periodic payments over a period of 20 years. Officer may change his or her distribution election once during any calendar year with the new election to be effective only in the event that the date of Officer's termination of employment with the Company is at least 12 months after the date of the new election. All payments shall be paid to Officer if living, or if not living, to his designated beneficiary or, upon failure to make such designation or if the designated beneficiary shall predecease Officer, to Officer's estate. Notwithstanding the foregoing, in the event that Officer's termination of employment with the Company occurs on or within two years after a "Change in Control" of the Company, the amount to the credit of Officer will be distributed to Officer either in a lump sum or in annual installments not exceeding five (5) years, whichever is elected by Officer as of the effective date of this Agreement. In the absence of an election, payment shall be made in a lump sum within 2 five days of termination following a "Change in Control." Officer may change this election at any time with the new election to be effective only in the event that the termination of employment with the Company is at least 12 months after the date of the new election. If installment payments are elected, the method of distribution shall be similar to the method described for installment payments under the preceding paragraph. For purposes hereof, a "Change in Control" of the Company shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 30% or more of the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (III) below; or (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date of the Agreement, constitute the Board of Directors of the Company and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board of Directors of the Company or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date of the Agreement, or whose appointment, election or nomination for election was previously so approved or recommended; or (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its affiliates of a 3 business) representing 30% or more of the combined voting power of the Company's then outstanding securities; or (IV) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such date. For purposes hereof: "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 4. Conditions. The payment of deferred compensation to Officer, as hereinabove provided, shall be subject to the following conditions, the breach of either of which shall cause the forfeiture of all rights in and to any and all amounts of deferred compensation remaining unpaid upon the date of any such breach: a. Commencing with the date of termination of the active, full-time employment of Officer and continuing until all payments hereunder have been made in full, Officer shall not, directly or indirectly, become or serve as an officer, employee, owner or partner of any business which competes in a material manner with the Company, without prior written consent of the Company. b. Commencing with the date of termination of the active, full-time employment of Officer and continuing until all payments hereunder have been made in full, Officer shall be available for consultation in respect of matters pertaining to the business and financial affairs of the Company, upon the request of the Company and at 4 such reasonable and convenient times and places and for such compensation therefor as may be mutually agreed upon. Notwithstanding the foregoing, the conditions set forth in a. and b. above shall be of no force and effect from and after the occurrence of a Change in Control (as defined above). 5. Death. In the event of Officer's death prior to the receipt of any or all of the installments of deferred compensation, such installments as are then unpaid shall be paid to the beneficiary or beneficiaries designated in writing and filed with the Secretary, of the Company by Officer during his lifetime or, upon failure to make such designation or if such designee or designees shall have predeceased Officer, then to Officer's estate. Officer shall have the right to change the beneficiary designation from time to time by instrument in writing delivered to the Secretary of the Company. 6. Nonassignability. Officer during his lifetime, and his designated beneficiary or beneficiaries, after his death, shall not be entitled to commute, encumber, sell or otherwise dispose of his or their rights to receive the deferred compensation provided for herein, and the right thereto shall be nonassignable and nontransferable and shall not be subject to execution, attachment or similar process. 7. Participation in Other Plans. Nothing herein contained shall in any manner modify, impair or effect the existing or future rights or interests of Officer to receive any employee benefits to which he is or would otherwise be entitled, or as a participant in the present or any future incentive bonus plan, stock option plan or pension or profit sharing plan of the Company. 8. Benefit. This Agreement shall be binding upon and inure to the benefit of any successor of the Company, including any person, firm, corporation or other entity which, by merger, consolidation, purchase or otherwise, acquires all or substantially all of the assets or business of the Company. 9. Amendment or Termination. This Agreement may be amended or terminated in whole or in part by mutual written agreement of the parties hereto. 10. Election. Officer hereby elects, pursuant to paragraph 3 hereof, to receive payment hereunder after termination not following a "Change in Control" as follows: [ ] in annual installments (choose from 1 to 20) over a period of __________ years, or [ ] in a lump sum Officer hereby elects, pursuant to paragraph 3 hereof, to receive payment hereunder after termination within two years following a "Change in Control" as follows: 5 [ ] in annual installments (choose from 1-5) over a period of _________ years, or [ ] in a lump sum IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first hereinabove written. TRINITY INDUSTRIES, INC. By: -------------------------- ----------------------------- Officer 6 EX-10.16.1 8 d94851ex10-16_1.txt PARTICIPATION AGREEMENT (TRL 1 2001-1A) EXHIBIT 10.16.1 PARTICIPATION AGREEMENT (TRLI 2001-1A) Dated as of May 17, 2001 among TRINITY RAIL LEASING I L.P., as Lessee, TRINITY RAIL MANAGEMENT, INC., TRINITY INDUSTRIES LEASING COMPANY, as Manager, TRLI 2001-1A RAILCAR STATUTORY TRUST, BY STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as Owner Trustee, TRIMARAN LEASING, L.P., as Owner Participant and LASALLE BANK NATIONAL ASSOCIATION, as Indenture Trustee and Pass Through Trustee Tank Cars, Covered Hopper Cars and Box Cars Participation Agreement (TRLI 2001-1A) TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT.....................................................................4 SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS....................................4 Section 2.1 Sale and Purchase of Equipment................................................4 Section 2.2 Participation in Equipment Cost...............................................4 Section 2.3 Closing Date; Procedure for Participation.....................................5 Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions....................................................................6 Section 2.5 Expenses......................................................................7 Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and Verification.........................10 Section 2.7 Postponement of Closing Date.................................................13 SECTION 3. REPRESENTATIONS AND WARRANTIES...............................................15 Section 3.1 Representations and Warranties of the Trust Company..........................15 Section 3.2 Representations and Warranties of the Lessee.................................18 Section 3.3 Representations and Warranties of the Indenture Trustee......................24 Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest, Equipment Note and Pass Through Certificates.......................25 Section 3.5 Representations and Warranties of the Owner Participant......................27 Section 3.6 Representations and Warranties of TILC.......................................29 Section 3.7 Representations and Warranties of TRMI.......................................34 Section 3.8 Representations and Warranties of the Pass Through Trustee...................36 Section 3.9 Opinion Acknowledgment.......................................................38 SECTION 4. CLOSING CONDITIONS...........................................................38 Section 4.1 Conditions Precedent to Investment by Each Participant.......................38 Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant..................................................................46 Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant..................................................................47 Section 4.4 Conditions Precedent to the Obligation of TILC and the Lessee................48 SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE....................................49 SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE......................................................51
Participation Agreement (TRLI 2001-1A) i
Page ---- Section 6.1 Restrictions on Transfer of Beneficial Interest..............................51 Section 6.2 Lessor's Liens Attributable to the Owner Participant.........................55 Section 6.3 Lessor's Liens Attributable to Trust Company.................................55 Section 6.4 Liens Created by the Indenture Trustee and the Loan Participant..............55 Section 6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee......................................................................56 Section 6.6 Amendments to Operative Agreements That Are Not Lessee Agreements...................................................................57 Section 6.7 Certain Representations, Warranties and Covenants............................57 Section 6.8 Covenants of the Manager.....................................................57 Section 6.9 Lessee's Purchase in Certain Circumstances...................................57 Section 6.10 Owner Participant as Affiliate of Lessee.....................................59 Section 6.11 Records; U.S. Income Tax Information.........................................60 SECTION 7. LESSEE'S INDEMNITIES.........................................................60 Section 7.1 General Tax Indemnity........................................................60 Section 7.2 General Indemnification......................................................70 Section 7.3 Indemnification by TILC......................................................76 Section 7.4 Indemnification by TRMI......................................................81 SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT............................................86 SECTION 9. SUCCESSOR INDENTURE TRUSTEE..................................................86 SECTION 10. MISCELLANEOUS................................................................86 Section 10.1 Consents.....................................................................86 Section 10.2 Refinancing..................................................................86 Section 10.3 Amendments and Waivers.......................................................89 Section 10.4 Notices......................................................................89 Section 10.5 Survival.....................................................................92 Section 10.6 No Guarantee of Residual Value or Debt.......................................92 Section 10.7 Successors and Assigns.......................................................92 Section 10.8 Business Day.................................................................92 SECTION 10.9 GOVERNING LAW................................................................92 Section 10.10 Severability.................................................................93 Section 10.11 Counterparts.................................................................93 Section 10.12 Headings and Table of Content................................................93 Section 10.13 Limitations of Liability.....................................................93 Section 10.14 Maintenance of Non-Recourse Debt.............................................94 Section 10.15 Ownership of and Rights in Units.............................................95 Section 10.16 No Petition..................................................................95 Section 10.17 Consent To Jurisdiction......................................................96 SECTION 10.18 WAIVER OF JURY TRIAL.........................................................96
Participation Agreement (TRLI 2001-1A) ii EXHIBITS AND SCHEDULES Exhibit A-1 - Form of Certificate of Insurance Broker Confirming Insurance Coverage (Primary Liability) Exhibit A-2 - Form of Certificate of Insurance Broker Confirming Insurance Coverage (Excess Liability) Exhibit B-1 - Insurance Requirements as to Public Liability Insurance Exhibit B-2 - Insurance Requirements as to Physical Damage Insurance Exhibit C - Form of Transfer Agreement Exhibit D - Form of Notice of Assignment of Sublease Exhibit E-1 - Form of Skadden, Arps, Slate, Meagher & Flom (Illinois) Opinion Exhibit E-2 - Form of Trinity Rail Leasing I L.P., Trinity Industries Leasing Company and Trinity Rail Management, Inc. Opinion Exhibit E-3 - Form of Bingham Dana LLP Opinion Exhibit E-4 - Form of Winston & Strawn Opinion Exhibit E-5 - Form of Philip Morris Capital Corporation Legal Department Opinion Exhibit E-6 - Form of Opinion of in-house counsel for the Indenture Trustee Exhibit E-7 - Form of Alvord & Alvord Opinion Exhibit E-8 - Form of McCarthy Tetrault Opinion Exhibit E-9 - Form of Andrews & Kurth L.L.P. Opinion Exhibit E-10 - Form of Opinion of in-house counsel for the Pass Through Trustee Exhibit E-11 - Form of Morris, James, Hitchens & Williams Opinion Exhibit F - Form of Officer's Solvency Certificate Schedule 1 - Description of Equipment, Designation of Basic Groups, Designation of Functional Groups and Equipment Cost Schedule 1-A - Description of Pledged Equipment Schedule 1-B - List of Existing Subleases and Existing Pledged Equipment Leases Schedule 2 - Commitment Percentage and Payment Information for Participants Schedule 3-A - Schedule of Basic Rent Payments Schedule 3-B - Basic Rent Allocation Schedule Schedule 4-A - Schedule of Stipulated Loss Value and Termination Value Schedule 4-B - Termination Amount Schedule Schedule 5 - Terms of Equipment Note Schedule 6 - Purchase Information Schedule 3.2(m) - Written Information Provided by Trinity Rail Leasing I L.P., Trinity Industries Leasing Company and Trinity Rail Management, Inc.
Participation Agreement (TRLI 2001-1A) iii PARTICIPATION AGREEMENT (TRLI 2001-1A) This PARTICIPATION AGREEMENT (TRLI 2001-1A), dated as of May 17, 2001 (this "Agreement"), is by and among (i) Trinity Rail Leasing I L.P., a Texas limited partnership (together with its permitted successors and assigns, the "Lessee"), (ii) Trinity Rail Management, Inc., a Delaware corporation ("TRMI"), (iii) Trinity Industries Leasing Company, a Delaware corporation ("TILC"), (iv) TRLI 2001-1A Railcar Statutory Trust, a Connecticut statutory trust, by State Street Bank and Trust Company of Connecticut, National Association, a national banking association, ("Trust Company"), not in its individual capacity except as expressly provided herein but solely as trustee (together with its permitted successors and assigns, the "Owner Trustee") under the Trust Agreement (such term and other defined terms used herein shall have the meanings assigned thereto in Section 1 below), (v) Trimaran Leasing, L.P., a Delaware limited partnership (together with its permitted successors and assigns, the "Owner Participant") and (vi) LaSalle Bank National Association, a national banking association, not in its individual capacity except as expressly provided herein but solely as pass through trustee under the Pass Through Trust Agreement (in such capacity, together with its permitted successors and assigns, the "Pass Through Trustee" or the "Loan Participant"), and as trustee under the Indenture (in such capacity, together with its permitted successors and assigns, the "Indenture Trustee"). The Owner Participant and the Loan Participant are sometimes hereinafter referred to collectively as the "Participants." WITNESSETH: WHEREAS, on or prior to the date hereof, the Owner Participant and the Trust Company have entered into the Trust Agreement pursuant to which the Owner Trustee has agreed, among other things, to hold the Trust Estate for the benefit of the Owner Participant thereunder on the terms specified in the Trust Agreement, subject, however, to the Lien created under the Indenture and, subject to the terms and conditions hereof, to purchase on the Closing Date the Equipment described in Schedule 1 hereto from the Lessee and concurrently therewith to lease such Equipment to the Lessee; WHEREAS, on or prior to the date hereof and pursuant to the Pass Through Trust Agreement a grantor trust was created to facilitate the financing contemplated hereby; WHEREAS, on the Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture, pursuant to which the Owner Trustee will agree, among other things, to borrow from the Loan Participant the loan in connection with the financing of the Total Equipment Cost and to issue to the Loan Participant the Equipment Note as evidence of such loan; Participation Agreement (TRLI 2001-1A) WHEREAS, TILC will, on the Closing Date, pursuant to the Transfer and Assignment Agreement (i) sell to the Partnership all of TILC's right, title and interest in and to the Equipment described on Schedule 1 hereto and (ii) assign and transfer to the Partnership all of TILC's right, title and interest in and to any Existing Equipment Subleases; WHEREAS, TILC will, on the Closing Date, pursuant to the Pledged Equipment Transfer and Assignment Agreement (i) sell to the Partnership all of TILC's right, title and interest in and to the Pledged Equipment and (ii) assign and transfer to the Partnership all of TILC's right, title and interest in and to any Existing Pledged Equipment Leases; WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, and the Owner Trustee will, among other things and subject to the terms and conditions of the Operative Agreements, (i) purchase the Equipment described in Schedule 1 hereto from the Lessee and accept delivery from the Lessee of the Bill of Sale evidencing the purchase and transfer of title of each Unit to the Owner Trustee, (ii) own the Equipment described in Schedule 1 hereto as provided in the Operative Agreements, (iii) accept pursuant to the Assignment the assignment and transfer from the Lessee of all Lessee's right, title and interest in and to the Existing Equipment Subleases and (iv) execute and deliver the Lease, pursuant to which, subject to the terms and conditions set forth therein, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, each Unit to be delivered on the Closing Date, such lease to be evidenced by the execution and delivery of the Lease Supplement covering such Units, and to assign the Existing Equipment Subleases to the Lessee, such assignment to be evidenced by the execution and delivery of the Assignment covering such Existing Equipment Subleases; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, TILC, TRMI, the Owner Trustee, the Indenture Trustee and the Collateral Agent have entered into the Collateral Agency Agreement, pursuant to which the Lessee will agree, among other things, to grant to the Collateral Agent for the security and the benefit of the Owner Trustee a security interest in the Collateral to secure the performance by the Lessee of its obligations under the Lease; WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, and the Owner Trustee will, among other things and subject to the terms and conditions of the Operative Agreements, grant to the Indenture Trustee for the security and the benefit of the holder of the Equipment Note a security interest in the Indenture Estate; Participation Agreement (TRLI 2001-1A) 2 WHEREAS, concurrently with the execution and delivery of this Agreement, Lessee, Trinity and the Owner Participant (or an Affiliate of the Owner Participant) will enter into the Tax Indemnity Agreement; WHEREAS, the proceeds from the sale of the Equipment Note to the Loan Participant will be applied, together with the equity contribution made by the Owner Participant pursuant to this Agreement, to effect the purchase of the Equipment described on Schedule 1 hereto by the Owner Trustee from the Lessee as contemplated hereby; WHEREAS, prior to the Closing Date, the Partners made capital contributions to the Lessee in accordance with the Partnership Agreement and on the Closing Date the proceeds of such capital contributions will be applied (i) to effect the purchase of the Pledged Equipment by the Lessee from TILC as contemplated hereby and (ii) to fund certain reserve accounts of the Lessee as contemplated hereby and by the Collateral Agency Agreement and the Indemnity Agreement; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee and TILC have entered into the Management Agreement, pursuant to which TILC will provide management services with respect to the Equipment and the Pledged Equipment; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee and TILC have entered into the Insurance Agreement, pursuant to which TILC will provide services to the Lessee in connection with obtaining, managing and maintaining insurance with respect to the Equipment and the Pledged Equipment required under the Operative Agreements; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, the General Partner, the Limited Partner and TRMI have entered into the Administrative Services Agreement, pursuant to which TRMI will provide certain administrative services with respect to the Partnership, the General Partner and the Limited Partner; and WHEREAS, concurrently with the execution and delivery of this Agreement, Trinity Industries, Inc. has issued the Trinity Guaranty in favor of the beneficiaries named therein, pursuant to which Trinity Industries, Inc. will guarantee performance of the obligations of TILC and TRMI under the Operative Agreements to which TILC or TRMI is a party, respectively. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: Participation Agreement (TRLI 2001-1A) 3 SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT. Unless otherwise defined herein or unless the context shall otherwise require, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Appendix A to the Equipment Lease Agreement (TRLI 2001-1A), dated as of May 17, 2001, between the Owner Trustee and the Lessee. Unless otherwise indicated, all references herein to Sections, Schedules and Exhibits refer to Sections, Schedules and Exhibits of this Agreement. SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS. Section 2.1 Sale and Purchase of Equipment. Subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Lessee agrees to sell to the Owner Trustee, and the Owner Trustee agrees to purchase from the Lessee, on the Closing Date and immediately following consummation of the transactions described in the third and fourth recital clauses above, the Equipment described in Schedule 1, and, in connection therewith, the Owner Trustee agrees to pay to the Lessee the cost for each Unit as specified in Schedule 1. On the Closing Date, the Lessee shall deliver each Unit described on Schedule 1 to the Owner Trustee, and the Owner Trustee shall accept such delivery. Section 2.2 Participation in Equipment Cost. (a) Equity Participation. On the Closing Date, subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Owner Participant agrees to participate in the payment of the Total Equipment Cost for the Units delivered on the Closing Date by making an equity investment in the beneficial ownership of such Units in the amount equal to the product of the Total Equipment Cost for such Units delivered on the Closing Date and the percentage set forth opposite the Owner Participant's name in Schedule 2 (the "Owner Participant's Commitment"). The aggregate amount of the Owner Participant's Commitment plus the aggregate amount of Transaction Costs payable by the Owner Participant shall not exceed the sum of (x) the Owner Participant's Commitment and (y) 3% of the Total Equipment Cost. The Owner Participant's Commitment shall be paid to the Indenture Trustee to be held (but not as part of the Indenture Estate) and applied on behalf of the Owner Trustee toward payment of the Total Equipment Cost as provided in Section 2.3. (b) Debt Participation. On the Closing Date, subject to the terms and conditions hereof and on the basis of the representations and warranties set forth Participation Agreement (TRLI 2001-1A) 4 herein, the Loan Participant agrees to participate in the payment of the Total Equipment Cost for the Units delivered on the Closing Date by making a secured loan, not from its own funds but solely from funds available to it for such purposes under the Pass Through Trust Agreement, to be evidenced by the Equipment Note, to the Owner Trustee in the amount equal to the product of the Total Equipment Cost for the Units delivered on the Closing Date and the percentage set forth opposite the Loan Participant's name in Schedule 2 (the "Loan Participant's Commitment"). The Equipment Note shall bear interest at the Debt Rate. Section 2.3 Closing Date; Procedure for Participation. (a) Notice of Closing Date. Not later than three Business Days' prior to the Closing Date (or such lesser notice as may be agreed upon by the Lessee, the Owner Participant and the Loan Participant), the Lessee shall give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Loan Participant a notice (a "Notice of Delivery") by facsimile or other form of telecommunication or telephone (to be promptly confirmed in writing) of the Closing Date, which Notice of Delivery shall specify in reasonable detail the number and type of Units to be delivered on such date, the Total Equipment Cost of such Units, and the respective amounts of the Owner Participant's Commitment and the Loan Participant's Commitment required to be paid with respect to the Units. Prior to 11:00 a.m., Chicago time, on the Closing Date, subject to the satisfaction (or waiver) of the respective conditions specified in Section 4, the Owner Participant shall make the amount of the Owner Participant's Commitment required to be paid on the Closing Date available to the Indenture Trustee, and immediately prior to the delivery and acceptance of the Units as specified in Section 2.3(b), the Loan Participant shall make the amount of the Loan Participant's Commitment for the Total Equipment Cost required to be paid on the Closing Date available to the Indenture Trustee, in either case, by transferring or delivering such amounts, in funds immediately available on the Closing Date, to the Indenture Trustee, either directly to, or for deposit in, the Indenture Trustee's account at LaSalle Bank National Association, ABA No. 071000505, Att.: Kristine Schossow, Corporate Trust Services Division, Trust TRLI 2001-1A, Account 608775300. The making available by the Owner Participant of the amount of the Owner Participant's Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Owner Participant and the Owner Trustee. The making available by the Loan Participant of the amount of the Loan Participant's Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Loan Participant and the Indenture Trustee. (b) Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place on or before 2:00 p.m., Chicago time, on the Closing Date at the offices of Skadden, Arps, Slate, Meagher & Flom (Illinois), or at such Participation Agreement (TRLI 2001-1A) 5 other place or time as the parties hereto shall agree. Upon receipt by the Indenture Trustee on the Closing Date of the full amount of the Owner Participant's Commitment and the Loan Participant's Commitment in respect of the Units delivered on the Closing Date, TILC shall pursuant to the Transfer and Assignment Agreement deliver the Units described on Schedule 1 hereto to the Lessee by delivery of the TILC Bill of Sale and shall make an assignment of the Existing Equipment Subleases to the Lessee by delivery of the TILC Assignment, and immediately thereafter, (i) the Indenture Trustee, on behalf of the Owner Trustee, shall, subject to the conditions set forth in Sections 4.1, 4.2 and 4.3 having been fulfilled to the satisfaction of the Participants or waived by the Participants, pay to the Lessee from the funds then held by it, in immediately available funds, an amount equal to the Total Equipment Cost for the Units delivered on the Closing Date, (ii) the Lessee shall pay to TILC pursuant to the Transfer and Assignment Agreement an amount equal to the Total Equipment Cost for the Units delivered on the Closing Date, (iii) the Lessee shall deliver the Units described on Schedule 1 hereto by delivery of the Bill of Sale, (iv) the Owner Trustee shall, pursuant to the Lease, lease and deliver the Units listed on Schedule 1 hereto to the Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of the Units described on Schedule 1 hereto under the Lease, such lease, delivery and acceptance of such Units under the Lease shall be conclusively evidenced by the execution and delivery by the Lessee and the Owner Trustee of the Lease Supplement covering the Equipment so delivered as described in Schedule 1 and (v) the Owner Trustee shall execute and deliver the Equipment Note relating to such Lease Supplement to the Loan Participant. Concurrently with the transactions described immediately above, TILC shall pursuant to the Pledged Equipment Transfer and Assignment Agreement sell the Pledged Units described on Schedule 1-A hereto to the Lessee by delivery of the Pledged Equipment Bill of Sale and shall make an assignment of the Existing Pledged Equipment Leases to the Lessee by delivery of the TILC Pledged Equipment Assignment. Each of the Lessee, the Owner Participant, the Owner Trustee, TILC, the Loan Participant and the Indenture Trustee hereby agrees to take all actions required to be taken by it in connection with the Closing as contemplated by this Section 2.3(b). Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions. (a) The Owner Participant agrees that the making available to the Indenture Trustee of the amount of the Owner Participant's Commitment for the Units delivered on the Closing Date in accordance with the terms of this Section 2 shall constitute, without further act, authorization and direction by the Owner Participant to the Owner Trustee, subject, on the Closing Date, to the conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the satisfaction of the Owner Participant or waived by the Owner Participant, to take the actions specified in Section 2.04 of the Trust Agreement with respect to the Units on the Closing Date. Participation Agreement (TRLI 2001-1A) 6 (b) The Owner Participant agrees that the authorization by the Owner Participant or its counsel to the Indenture Trustee to release to the Lessee the Owner Participant's Commitment with respect to the Units delivered on the Closing Date shall constitute, without further act, notice and confirmation that all conditions to closing set forth in Sections 4.1 and 4.3 were either met to the satisfaction of the Owner Participant or, if not so met, were waived by the Owner Participant. (c) The Loan Participant agrees that the authorization by the Loan Participant or its counsel to the Indenture Trustee to release to the Lessee the Loan Participant's Commitment with respect to the Units delivered on the Closing Date shall constitute, without further act, notice and confirmation that all conditions to closing set forth in Sections 4.1 and 4.2 were either met to the satisfaction of the Loan Participant or, if not so met, were waived by the Loan Participant. Section 2.5 Expenses. (a) If the Owner Participant shall have made its investment provided for in Section 2.2 and the transactions contemplated by this Agreement are consummated, either the Owner Participant will promptly pay, or the Owner Trustee will promptly pay, with funds the Owner Participant hereby agrees to pay (which, together with the Owner Participant's Commitment, shall not exceed the amount set forth in the second sentence of Section 2.2(a)) to the Owner Trustee, the following (collectively referred to as the "Transaction Costs") if evidenced by an invoice delivered to the Owner Participant within four (4) months after the Closing Date and approved by the Lessee and the Owner Participant (such approval not to be unreasonably withheld or delayed): (i) the cost of reproducing, printing and filing the Operative Agreements, the Equipment Note, the Pass Through Documents and all amendments and supplements to the foregoing, including all costs and fees in connection with the initial filing and recording of the Lease, the Indenture and any other document required to be filed or recorded pursuant to the provisions hereof or of any other Operative Agreement and the fees and expenses of the Rating Agency in connection with the rating of the Pass Through Certificates; (ii) the reasonable out-of-pocket expenses of the Owner Participant and the reasonable fees of Winston & Strawn, special counsel for the Owner Participant, plus disbursements, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; Participation Agreement (TRLI 2001-1A) 7 (iii) the initial fees and reasonable out-of-pocket expenses of the Collateral Agent and the reasonable fees and expenses of Andrews & Kurth L.L.P., special counsel for the Collateral Agent, for their services rendered in connection with the negotiation, execution and delivery of the Operative Agreements; (iv) the reasonable fees and expenses of Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel for TILC, the Lessee and TRMI, for their services rendered in connection with the preparation of documentation, negotiation, execution and delivery of this Agreement and the other Operative Agreements; (v) the reasonable fees and expenses of Vinson & Elkins L.L.P., special counsel for the Initial Purchasers, for their services rendered in connection with the preparation of documentation, negotiation, execution and delivery of the Pass Through Documents, this Agreement and the other Operative Agreements; (vi) the reasonable fees and expenses of (x) Alvord & Alvord, special STB counsel and (y) McCarthy Tetrault, special Canadian rail counsel; (vii) the reasonable fees and expenses of Bingham Dana LLP, special counsel for the Owner Trustee, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; (viii) the reasonable fees and expenses of Schwartz, Cooper, Greenberger & Krauss, special counsel for the Indenture Trustee and the Pass Through Trustee, for their services rendered in connection with the negotiation, execution and delivery of the Pass Through Documents, this Agreement and the other Operative Agreements; (ix) the reasonable fees and expenses payable to the Arrangers for their services rendered as advisor to the Lessee; (x) the initial fees and reasonable out-of-pocket expenses of the Owner Trustee; (xi) the initial fees and reasonable out-of-pocket expenses of the Indenture Trustee; Participation Agreement (TRLI 2001-1A) 8 (xii) the initial fees and reasonable out-of-pocket expenses of the Pass Through Trustee; (xiii) the reasonable fees of Rail Solutions, Inc. (which fees shall in no event exceed $22,000 in the aggregate in respect of the amounts payable hereunder), plus disbursements, for their services rendered in connection with delivering the Appraisal required by Section 4.3(a) and for other consulting services; (xiv) [intentionally omitted]; (xv) the costs incurred in connection with any adjustment pursuant to Section 2.6(a); and (xvi) all costs and fees in connection with the qualification of the Pass Through Certificates under federal or state securities laws or Blue Sky laws in accordance with the provisions of the Certificate Purchase Agreement. Except as expressly provided above, Transaction Costs shall not include internal costs and expenses such as salaries and overhead of whatsoever kind or nature of, or costs incurred by, parties to this Agreement pursuant to arrangements with third parties for services (other than those expressly referred to above). (b) Upon the consummation of the transactions contemplated by this Agreement, the Lessee agrees to be responsible for, and will pay when due as Supplemental Rent: (i) the reasonable expenses (including reasonable legal fees and expenses) of the Owner Trustee, the Indenture Trustee and the Participants incurred subsequent to the delivery of the Equipment on the Closing Date, in connection with any supplements, amendments, modifications, alterations, waivers or consents (whether or not consummated) of any of the Operative Agreements which are either (1) requested by the Lessee or (2) required by any applicable law or regulation (other than laws or regulations solely relating to the business of the Lessor, the Indenture Trustee, the Trust Company, the Pass Through Trustee, the Initial Purchasers, the Collateral Agent or any Participant) or (3) entered into in connection with, or as a result of, a Lease Default or (4) required pursuant to the terms of the Operative Agreements (including such reasonable expenses incurred in connection with any adjustment pursuant to Section 2.6), (ii) the ongoing fees of the Owner Trustee under the Trust Agreement; (iii) the ongoing fees of the Indenture Trustee under the Operative Agreements, (iv) the ongoing fees of the Collateral Agent under the Collateral Agency Agreement and (v) the ongoing fees of the Pass Through Trustee under the Pass Through Trust Agreement; provided that following the occurrence of the "Closing Date" under the Other Participation Agreement, the fees referred to in Participation Agreement (TRLI 2001-1A) 9 clauses (iv) and (v) immediately above shall be allocated between the transactions contemplated hereby and the transactions contemplated by the Other Participation Agreement on a pro rata basis based on the aggregate commitments of the Participants hereunder as compared with the aggregate commitments of the participants under the Other Participation Agreement. (c) If the transactions contemplated hereby are not consummated as a result of a default by the Owner Participant in its obligations to consummate the transactions contemplated hereby, the Owner Participant shall pay those Transaction Costs referred to in Sections 2.5(a)(ii) and (xiii) above and the Lessee shall pay the remainder. If the transactions contemplated hereby are not consummated due to any other reason, the Lessee shall pay all Transaction Costs. (d) Notwithstanding the foregoing provisions of this Section 2.5, the Lessee shall have no liability for (i) any costs or expenses relating to any voluntary transfer of the Owner Participant's interest in the Equipment pursuant to Section 6.1 other than during the continuance of a Lease Event of Default and no such costs or expenses shall constitute Transaction Costs, (ii) any costs or expenses relating to any voluntary transfer of any Loan Participant's interest in the Equipment Note and (iii) any costs or expenses relating to any voluntary transfer of any Certificateholder's interest in the Pass Through Certificates, and in each case no such costs or expenses shall constitute Transaction Costs. (e) To the extent Transaction Costs exceed 3% of the Total Equipment Cost, Lessee shall pay the Transaction Costs specified in Sections 2.5(a) (iv) and (ix) above up to an amount equal to the amount of such excess. Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and Verification. (a) Calculation of Adjustments. In the event that (A) the Closing Date is other than May 17, 2001, (B) the actual interest rate on the Equipment Note is different from the Debt Rate or the amortization of the Equipment Note is different from that set forth on Schedule 5, (C) a refinancing contemplated by Section 10.2 occurs, (D) the actual aggregate Equipment Cost or composition of the Units is different from that set forth on Schedule 1, (E) the actual aggregate amount of Transaction Costs paid pursuant to Section 2.5(a) is other than an amount equal to 3% of the Total Equipment Cost, (F) there is any change in, or cost relating to a revision in, the structure of the transaction contemplated hereby as required by the Rating Agency, or (G) there is any change in the Code or in the regulations promulgated thereunder or other official administrative pronouncement, which change is proposed, enacted or effective after the execution of this Agreement and prior to the Closing Date (provided that the Owner Participant or the Lessee, as the Participation Agreement (TRLI 2001-1A) 10 case may be, shall have provided notice to the other prior to the Closing Date), and which change alters or eliminates any tax assumption used in calculating Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, Early Purchase Price, then, in each such case, the Owner Participant shall recalculate the payments or amounts, as the case may be, of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price, (i) to preserve the Net Economic Return that the Owner Participant would have realized had such event not occurred, and (ii) to minimize to the greatest extent possible, consistent with the foregoing clause (i), the present value (discounted monthly at an interest rate per annum equal to the Debt Rate) of the sum of the payments of Basic Rent to the Early Purchase Date and the Early Purchase Price; provided, however, that in no event shall the Early Purchase Price be less than the expected fair market value of the Equipment on the Early Purchase Date and the Basic Term Expiration Date, respectively, as determined by the Appraisal. Any such recalculation performed due to the occurrence of any one or more of the events described in clause (A), (B), (D), (E), (F) or (G) above shall be made prior to the Closing Date. In performing any such recalculation and in determining the Owner Participant's Net Economic Return, the Owner Participant shall utilize the same methods and assumptions originally used in making the computations of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, Early Purchase Price initially set forth in Schedules 3-A, 3-B, 4-A, 4-B and 6 (other than those assumptions changed as a result of any of the events described in clauses (A) through (G) of the preceding sentence necessitating such recalculation; it being agreed that such recalculation shall reflect solely any changes of assumptions or facts resulting directly from the event or events necessitating such recalculation). Such adjustments shall comply (to the extent the original structure complied) with Section 467 of the Code and the requirements of Sections 4.02(5), 4.07(1) and (2) of Revenue Procedure 2001-28 calculated, except in the case of a refinancing pursuant to Section 10.2, without taking into account any change after the Closing Date in or to Section 467 of the Code (and any regulations thereunder). (b) Confirmation and Verification. Upon completion of any recalculation described in Section 2.6(a), a duly authorized officer of the Owner Participant shall provide a certificate to the Lessee either (x) stating that the amounts of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price as are then set forth in Schedules 3-A, 3-B, 4-A, 4-B and 6 do not require change, or (y) setting forth such adjustments to the amounts of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts or Early Purchase Price as have been calculated by the Owner Participant in accordance with Section 2.6(a). Such certificate shall describe in reasonable detail the basis for any such adjustments, and any such adjustment and corresponding adjustments to the Stipulated Loss Values, Termination Values and Early Purchase Price will be computed on a basis Participation Agreement (TRLI 2001-1A) 11 consistent with that used by the Owner Participant in the original calculation of Basic Rent. Any such adjustment shall be deemed approved upon notice of such approval by the Lessee to the Owner Participant or on the thirty-first (31st) day following delivery of such certificate by the Owner Participant to the Lessee unless the Lessee, prior to such day, requests verification pursuant to the following sentence, and shall become effective, in the case of adjustments made pursuant to clause (A), (B), (D), (E), (F) or (G) of the first sentence of Section 2.6(a), as of the earlier of (i) the first Rent Payment Date and (ii) the date the Lessee approves or has been deemed to have approved such adjustment, and, in the case of an adjustment made pursuant to clause (C) of the first sentence of Section 2.6(a), as of the date of the refinancing. If the Lessee shall so request, the recalculation of any such adjustments described in this Section 2.6 shall be verified by a nationally recognized firm of independent accountants selected by the Owner Participant and reasonably acceptable to the Lessee, and any such recalculation of such adjustment as so verified shall be binding on the Lessee and the Owner Participant. Such accounting firm shall be requested to make its determination within 30 days. The Owner Participant shall provide to a representative of such accounting firm, on a confidential basis, such information as it may reasonably require, including the original assumptions used by the Owner Participant and the methods used by the Owner Participant in the original calculation of, and any recalculation of, Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price and such other information as is necessary to determine whether the computation is accurate and in conformity with the provisions of this Agreement, provided that in no event shall the Owner Participant have any obligation to provide the Lessee with any such information; and provided, further, that the Owner Participant shall have no obligation to disclose to the Lessee, such accounting firm or any other Person, or to permit the Lessee, such accounting firm or any other Person, to examine any federal, state or local income tax returns of the Owner Participant, or books or accounting records related thereto, for any taxable year. Subject to the immediately following sentence, the costs of such verification shall be borne by the Lessee. If such accounting firm's verification shall result in a decrease in the net present value (expressed as a percentage of Total Equipment Cost, discounted monthly at a rate per annum equal to the Debt Rate) of the sum of the Basic Rent to the Early Purchase Date and the Early Purchase Price, calculated as of the Closing Date, as compared to the net present value of the sum of the Basic Rent to the Early Purchase Date and the Early Purchase Price, proposed by the Owner Participant, by more than the greater of (i) ten basis points or (ii) 5% of the proposed adjustment, then the Owner Participant agrees to reimburse the Lessee for any amounts paid for such verification. Any revised adjustment resulting from such verification shall become effective on the next Rent Payment Date after such verification has been concluded (except that, in the case of an adjustment pursuant to clause (C) of the first sentence of Section 2.6(c), such adjustment shall be effective as of the date of the refinancing), and shall Participation Agreement (TRLI 2001-1A) 12 take into account any underpayment or overpayment, together with interest thereon at the Debt Rate, resulting from an earlier effectiveness of the original adjustment. (c) Compliance. Notwithstanding the foregoing, any adjustment made to the payments of Basic Rent, Stipulated Loss Amounts, Termination Amounts or Early Purchase Price, pursuant to the foregoing, shall comply with the following requirements: (i) each installment of Basic Rent, as so adjusted, under any circumstances and in any event, will be in an amount at least sufficient for the Owner Trustee to pay in full as of the due date of such installment any payment of principal of and interest on the Equipment Note required to be paid on the due date of such installment of Basic Rent in accordance with the Scheduled Amortization, and (ii) Stipulated Loss Amount, Termination Amount and Early Purchase Price, as so adjusted, under any circumstances and in any event, will be an amount which, together with any other amounts required to be paid by the Lessee under the Lease in connection with an Event of Loss or a termination of the Lease, as the case may be, will be at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal of and all unpaid interest on the Equipment Note in accordance with the Scheduled Amortization accrued to the date on which Stipulated Loss Amount, Termination Amount or Early Purchase Price, as the case may be, is paid in accordance with the terms of the Lease. (d) Invoices. All invoices in respect of Transaction Costs to the extent not delivered on the Closing Date shall be directed to the Owner Participant at the address set forth in Section 10.4, with a copy to the Lessee. Section 2.7 Postponement of Closing Date. (a) If for any reason whatsoever the Closing is not consummated on the Closing Date provided for pursuant to Section 2.3 (the "Scheduled Closing Date"), the Closing shall be deemed postponed to the next Business Day or to such other Business Day on or prior to August 31, 2001 as the Lessee shall specify by facsimile or telephonic (confirmed in writing) notice to the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Initial Purchasers, in which case the Participants will keep their funds available, provided that the notice of postponement shall be received by each party no later than 4:30 p.m., Chicago time, on the originally scheduled Closing Date, and the term "Closing Date" as used in this Agreement shall mean the postponed "Closing Date." (b) If the closing fails to occur on the Scheduled Closing Date, the Indenture Trustee shall promptly return to each Participant that makes funds available to it in accordance with this Section 2 such funds, together with interest or income earned thereon. Participation Agreement (TRLI 2001-1A) 13 (c) If the Closing fails to occur on the Scheduled Closing Date and funds are not returned to each Participant that made funds available by the Indenture Trustee as provided by Section 2.7(b) above, the Indenture Trustee shall, if so instructed by the Lessee in the facsimile or telephonic (confirmed in writing) notice from the Lessee (which notice shall specify the Specified Investments to be purchased), use reasonable best efforts to invest, at the risk of the Lessee (except as provided below with respect to the Indenture Trustee's gross negligence or willful misconduct), the funds received by the Indenture Trustee from the Participants in Specified Investments in accordance with the Lessee's instructions. Any such Specified Investments purchased by the Indenture Trustee upon instructions from the Lessee shall be held in trust by the Indenture Trustee (but not as part of the Indenture Estate under the Indenture) for the benefit of the Participants that provided such funds. In order to obtain funds for the payment of the Equipment Cost for the Units on the Closing Date or to return funds to the Participants pursuant to Section 2.7(b), the Indenture Trustee is authorized to sell any Specified Investments purchased as aforesaid. The Indenture Trustee shall not be liable for failure to invest such funds or for any losses incurred on such investments except for losses resulting from its own willful misconduct or gross negligence. (d) If the Closing fails to occur on the Scheduled Closing Date, unless the Indenture Trustee returns all funds to the Participants by 2:00 p.m., Chicago time, on the Scheduled Closing Date, the Lessee shall reimburse each Participant that has made funds available pursuant to this Section 2 for the loss of the use of its funds an amount equal to the excess, if any, of (x) interest on such funds at the Debt Rate for the period from and including the Scheduled Closing Date to but excluding the actual Closing Date or, if earlier, the day on which such Participant's funds are returned if such return is made by 2:00 p.m., Chicago time (or to but excluding the next following Business Day if such return is not made by such time); provided that with respect to the Owner Participant such period shall in any case be at least one day, unless the Owner Participant shall have received, prior to 12:00 noon (Chicago time) on the Business Day preceding the Scheduled Closing Date, a notice of postponement of the Scheduled Closing Date pursuant to Section 2.7(a), over (y) any amount paid to such Participant in respect of interest or income earned by the Indenture Trustee on such funds pursuant to Section 2.7(c) above. (e) If the Closing fails to occur on the Scheduled Closing Date, the Lessee shall, on the Closing Date or on the date funds are required to be returned to the Participants pursuant to Section 2.7(b) above, reimburse the Indenture Trustee, for the benefit of the Participants that provided funds which are invested by the Indenture Trustee pursuant to this Section 2.7 for any losses incurred on such investments (except with respect to any Participant, if the Closing failed to occur as a result of default by such Participant, or with respect to the Owner Participant, as result of default of the Owner Trustee (acting pursuant to instructions from the Participation Agreement (TRLI 2001-1A) 14 Owner Participant)). All income and profits on the investment of such funds shall be for the respective accounts of such Participants, and the Indenture Trustee shall not be liable for failure to invest such funds or for any losses incurred on such investments, except for its willful misconduct or gross negligence. (f) Notwithstanding the provisions of Section 2.7(a), the Participants shall not be under any obligation to make their respective commitments available beyond 2:00 p.m. (Chicago time) on August 31, 2001. SECTION 3. REPRESENTATIONS AND WARRANTIES. Section 3.1 Representations and Warranties of the Trust Company. Trust Company, in its individual capacity (except with respect to clauses (c), (k) and (m) (to the extent applicable to Trust Company in its capacity as Owner Trustee) below) and as Owner Trustee with respect to clauses (c), (f) and (k) (to the extent applicable to Trust Company in its capacity as Owner Trustee) below, represents and warrants to each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee, notwithstanding the provisions of Section 10.13 or any similar provision in any other Operative Agreement, that, as of the date hereof: (a) Trust Company (i) is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States of America, (ii) has the full corporate power, authority and legal right under the laws of the State of Connecticut and the United States pertaining to its banking, trust and fiduciary powers to carry on its business as now conducted and execute, deliver and perform its obligations hereunder and under the Trust Agreement and (iii) assuming due authorization, execution and delivery of the Trust Agreement by the Owner Participant, has full power and authority, as Owner Trustee and/or, to the extent expressly provided herein or therein, in its individual capacity, to execute, deliver and perform its obligations under each of the Owner Trustee Agreements; (b) (i) Trust Company has duly authorized, executed and delivered the Trust Agreement, (ii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, Trust Company in its trustee capacity and, to the extent expressly provided therein, in its individual capacity, has, or on or prior to the Closing Date will have, duly authorized, executed and delivered each of the other Owner Trustee Agreements and, as of the Closing Date, the Equipment Note, the Lease Supplement and the Indenture Supplement to be delivered on the Closing Date, (iii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust is a Connecticut statutory trust duly organized and validly existing in good standing under the laws of the State of Connecticut and (iv) the Trust Agreement constitutes a legal, valid and binding obligation of Trust Company enforceable against it in accordance with the terms Participation Agreement (TRLI 2001-1A) 15 thereof except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, each of the Owner Trustee Agreements (other than the Trust Agreement) to which it is a party constitutes, or when entered into will constitute, a legal, valid and binding obligation of the Owner Trustee, enforceable against it in accordance with the terms thereof, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity; (d) neither the execution and delivery by Trust Company or Owner Trustee, as the case may be, of the Owner Trustee Agreements or the Equipment Note to be delivered on the Closing Date, nor the consummation by Trust Company or Owner Trustee, as the case may be, of any of the transactions contemplated hereby or thereby, nor the compliance by Trust Company or Owner Trustee, as the case may be, with any of the terms and provisions hereof and thereof, (i) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it in its individual capacity, or (ii) violates or will violate its articles of association or bylaws, or contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, any indenture, mortgage, chattel mortgage, deed of trust, conditional sale contract, bank loan or credit agreement, license or other agreement or instrument to which Trust Company is a party or by which it or any of its properties may be bound or affected, or contravenes or will contravene any law, governmental rule or regulation of the United States of America or the State of Connecticut governing the banking, trust or fiduciary powers of Trust Company, or any judgment or order applicable to or binding on it; (e) there are no Taxes payable by Trust Company or the Owner Trustee, imposed by the State of Connecticut or any political subdivision thereof in connection with the execution and delivery by Trust Company of the Trust Agreement, and, as Trust Company or Owner Trustee, as the case may be, of this Agreement, the other Owner Trustee Agreements (other than the Trust Agreement) or the Equipment Note to be delivered on the Closing Date solely because Trust Company is a national banking association with its principal place of business in Connecticut and performs certain of its duties as Owner Trustee in the State of Connecticut; and there are no Taxes payable by Trust Company or the Owner Trustee, as the case may be, imposed by the State of Connecticut or any political subdivision thereof in connection with the acquisition of its interest in the Equipment (other than franchise or other taxes based on or measured by any fees or Participation Agreement (TRLI 2001-1A) 16 compensation received by Trust Company or the Owner Trustee for services rendered in connection with the transactions contemplated hereby) solely because Trust Company is a national banking association with its principal place of business in Connecticut and performs certain of its duties as Owner Trustee in the State of Connecticut; (f) there are no pending or, to its knowledge, threatened actions or proceedings against Trust Company or the Owner Trustee, before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of Trust Company or the Owner Trustee, as the case may be, to perform its obligations under the Trust Agreement, the other Owner Trustee Agreements or the Equipment Note to be delivered on the Closing Date; (g) both its chief executive office, and the place where its records concerning the Equipment and all its interest in, to and under all documents relating to the Trust Estate, are located in Hartford, Connecticut, and Trust Company agrees to give the Owner Participant, the Indenture Trustee and the Lessee written notice within 30 days following any relocation of said chief executive office or said place from its present location; (h) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut state or local governmental authority or agency or any United States federal governmental authority or agency regulating the banking or trust powers of Trust Company is required for the execution and delivery of, or the carrying out by, Trust Company or the Owner Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust Agreement or of any of the transactions contemplated by any of the other Owner Trustee Agreements, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken; (i) on the Closing Date, the Owner Trustee's right, title and interest in and to the Equipment delivered on the Closing Date shall be free and clear of any Lessor's Lien attributable to Trust Company; (j) proceeds received by the Owner Trustee from the Owner Participant pursuant to the Trust Agreement will be administered by it in accordance with Article III of the Trust Agreement; (k) the Owner Trustee shall receive from the Lessee such title as was conveyed to it by the Lessee, subject to the rights of the Owner Trustee and the Lessee under the Lease and the Lien created pursuant to the Indenture and the Participation Agreement (TRLI 2001-1A) 17 Indenture Supplement in respect of the Equipment delivered on the Closing Date, and there will be no Lessor's Liens attributable to the Owner Trustee on the Equipment or any interest therein or on the Trust Estate; (l) to its knowledge, no Indenture Default has occurred and is continuing; and (m) the Owner Trustee is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by the Owner Trustee for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.1(m) with such meanings. Section 3.2 Representations and Warranties of the Lessee. The Lessee represents and warrants to the Owner Trustee, the Indenture Trustee and the Participants, as of the date hereof: (a) as to organization, powers and partnership organizational documents: (i) the Lessee is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Texas, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to enter into and perform its obligations under the Lessee Agreements, is a special purpose limited partnership organized to enter into the transactions contemplated by this Agreement, the other Operative Agreements to which it is a party and the Pass Through Documents to which it is a party, has the limited partnership power and authority to sell the Equipment described on Schedule 1 hereto to the Owner Trustee, to pledge the Pledged Equipment to the Collateral Agent, to assign the Existing Equipment Subleases and the Existing Pledged Equipment Leases as contemplated by this Agreement and to carry on its business as now conducted, has the requisite limited partnership power and authority to execute, deliver and perform its obligations under the Lessee Agreements and has conducted no business or operations prior to the date hereof (other than those associated with its organization and capitalization or as contemplated by the Operative Agreements), (ii) the General Partner is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware Participation Agreement (TRLI 2001-1A) 18 and has the power and authority to execute, deliver and perform its obligations under the Partnership Agreement and each other organizational document of the Partnership to which the General Partner is a party, (iii) the Limited Partner is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to execute, deliver and perform its obligations under the Partnership Agreement and each other organizational document of the Partnership to which the Limited Partner is a party, (iv) the General Partner and the Limited Partner are the only partners of the Partnership; (v) the execution, delivery and performance by each Partner of the Partnership Agreement and each other organizational document of the Partnership to which such Partner is a party (A) have been duly authorized by all requisite limited liability company or member action of such Partner and (B) did not and do not (x) violate (i) any provision of law, statute, rule or regulation, or of the certificate of formation or limited liability company agreement or other constitutive documents of such Partner, (ii) any order of any governmental authority or (iii) any provision of any indenture, agreement or other instrument to which such Partner is a party or by which it or any of its property is or may be bound, (y) conflict with, result in a breach of or constitute (alone or with notice, or lapse of time or both) a default under any such indenture, agreement or other instrument or (z) result in the creation or imposition of any Lien upon any property or assets of such Partner, (vi) each of the Partnership Agreement and each other organizational document of the Partnership has been duly executed and delivered by each party thereto and constitutes a legal, valid and binding obligation of each such party enforceable against such party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (b) each of the Lessee Agreements and the Pass Through Documents to which the Lessee is a party have been duly authorized by all necessary limited partnership action of the Lessee and, if required, limited liability company action of each Partner, this Agreement has been duly executed and delivered (and in the case of the other Lessee Agreements, such other Lessee Agreements will on the Closing Date have been duly executed and delivered) by the General Partner in its capacity as the general partner of the Lessee, and constitutes (and in the case of the other Lessee Agreements, such other Lessee Agreements will on the Closing Date constitute) the legal, valid and binding obligations of the Lessee (assuming the due Participation Agreement (TRLI 2001-1A) 19 authorization, execution and delivery by each other party thereto), enforceable against the Lessee in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by the Lessee of each Lessee Agreement and each Pass Through Document to which Lessee is a party and compliance by the Lessee with all of the provisions thereof do not and will not contravene any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on the Lessee or any of its properties, or contravene the provisions of, or constitute a default by the Lessee under, or result in the creation of any Lien (except for Permitted Liens) upon the property of the Lessee under its organizational documents or any indenture, mortgage, contract or other agreement or instrument to which the Lessee is a party or by which the Lessee or any of its properties may be bound or affected; (d) there are no proceedings pending or, to the knowledge of the Lessee, threatened against the Lessee or any Partner in any court or before any governmental authority or arbitration board or tribunal. The Lessee and each Partner are not subject to any order of any court or governmental authority or arbitration board or tribunal; (e) the unaudited balance sheet of the Lessee as at the Closing Date fairly presents, in conformity with generally accepted accounting principles applied on a pro forma basis, the pro forma financial position of the Lessee as of such date; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebtedness of the Lessee or any governmental authority on the part of the Lessee is required in the United States or Canada in connection with the execution and delivery by the Lessee of the Lessee Agreements or in order for the Lessee to perform its obligations thereunder in accordance with the terms thereof, other than (i) notices required to be filed with the STB and the Registrar General of Canada as described in Section 3.2(g), which notices shall have been filed on the Closing Date, (ii) as may be required under existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing Date in connection with the operation and maintenance of the Equipment, the Pledged Equipment and the Subleases and the Pledged Equipment Leases in accordance with the Operative Agreements which are routine in nature and are not normally applied for prior to the time they are required, and which the Lessee has no reason to believe will not be timely obtained, (iii) as may be required under the Operative Agreements in connection with any refinancing of the Equipment Notes, (iv) as may be required Participation Agreement (TRLI 2001-1A) 20 under the Operative Agreements in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Equipment or the Pledged Equipment and (v) filing and recording to perfect the Liens under the Indenture and the Collateral Agency Agreement as required thereunder; (g) the Lease, the Lease Supplement, the Indenture and the Indenture Supplement (each in respect of the Units delivered on the Closing Date), the Collateral Agency Agreement (or a memorandum with respect to any or all of such documents), the Pledged Equipment Bill of Sale, the TILC Bill of Sale, the Bill of Sale, the TILC Assignment, the TILC Pledged Equipment Assignment and the Assignment will on or before the Closing Date be duly filed with the STB pursuant to 49 U.S.C. Section 11301 and deposited with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act, and such filing with the STB pursuant to 49 U.S.C. Section 11301 and such deposit with the Registrar General of Canada will under the laws of the United States and Canada perfect the Owner Trustee's, the Indenture Trustee's and the Collateral Agent's rights in such Operative Agreements and in the Units described on Schedule 1 hereto and the Pledged Units and no other filing, recording or deposit with, or giving of notice to any other U.S. federal, state or local government or Canadian national or provincial government or agency thereof, or any other action, is necessary in order to protect the rights of the Owner Trustee, the Indenture Trustee and the Collateral Agent in such Operative Agreements or in such Units in the United States, any state thereof or the District of Columbia or Canada or any province thereof; (h) the Equipment described on Schedule 1 hereto is covered by the insurance required by Section 12 of the Lease and the Pledged Equipment is covered by the insurance required by Section 6.4 of the Collateral Agency Agreement, and all premiums due prior to the Closing Date in respect of such insurance shall have been paid in full and such insurance is in full force and effect; (i) no Lease Default has occurred and is continuing and, to the knowledge of the Lessee, no Event of Loss, Pledged Unit Event of Loss or event which, with the giving of notice, the passage of time or both, would constitute an Event of Loss or a Pledged Unit Event of Loss, has occurred; (j) neither the Lessee nor any Partner is an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (k) the acquisition by the Owner Participant of the Beneficial Interest for its own account will not constitute a prohibited transaction within the meaning of Section 4975(c)(1)(A) through (D) of the Code or Section 406(a)(1)(A) through (D) of ERISA. The representation made by the Lessee in the preceding Participation Agreement (TRLI 2001-1A) 21 clause is made in reliance upon and subject to the accuracy of the representation of the Owner Participant in Section 3.5(h) and the accuracy of the representation of the Initial Purchasers set forth in Section 4(e) of the Certificate Purchase Agreement; (l) on the Closing Date, (i) the Lessee shall have and shall pursuant to the Bill of Sale relating to the Equipment described on Schedule 1 hereto convey to the Owner Trustee, all legal and beneficial title to such Equipment free and clear of all Liens (other than Permitted Liens of the type described in clause (iii) below with respect to the Existing Equipment Subleases and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (ii) TILC shall have and shall pursuant to the Pledged Equipment Bill of Sale relating to the Pledged Equipment convey to the Partnership, all legal and beneficial title to such Pledged Equipment free and clear of all Liens (other than Permitted Liens of the type described in clause (iii) below with respect to Existing Pledged Equipment Leases and clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (iii) the Lessee shall have, and the Assignment to be delivered on the Closing Date shall assign to the Owner Trustee, all legal and beneficial title to the Existing Equipment Subleases, and the Lessee shall have all legal and beneficial title to the Existing Pledged Equipment Leases, free and clear of all Liens (other than in each case Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; and (iv) all of the Units delivered on the Closing Date are subject to Sublease by Sublessees under the Existing Equipment Subleases and all of the Pledged Units delivered on the Closing Date under the Existing Pledged Equipment Leases are subject to lease by Pledged Equipment Lessees on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; (m) the written information provided by the Lessee or on behalf of the Lessee to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto does not contain any untrue statement of a material fact and does not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The assumptions and related financial information relating to the proposed business and operations of the Lessee and the Partnership Fleet which are contained in the information on Schedule 3.2(m) have been prepared in good faith based upon information that the Lessee deems fair and reasonable, and there are no statements or conclusions therein which are based on or include information known to the Lessee to be misleading in any material respect or which fail to take into account material information known to the Lessee regarding the matters stated therein. Certain information contained in the information on Schedule 3.2(m) (e.g. statistical information relating to renewal and remarketing of railcars, potential increases in Participation Agreement (TRLI 2001-1A) 22 absolute or nominal railcar lease rates, anticipated utilization, and maintenance costs) is based on the historical experience of TILC. Subject to the foregoing, there can be no assurance that past experience will be indicative of future performance with respect to these or other operating and marketing factors set forth in the information on Schedule 3.2(m); (n) the Lessee and the Partners are not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by the Lessee or any Partner for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.2(n) with such meanings; (o) the Lessee is not in violation of any term of any of its organizational documents or any other agreement or instrument to which it is a party or by which it may be bound. The Lessee is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject and the Lessee has obtained all required licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (p) on the Closing Date, all sales, use or transfer taxes, if any, due and payable upon the purchase of the Equipment described on Schedule 1 hereto by the Lessee from TILC and by the Owner Trustee from the Lessee and upon the lease thereof by the Owner Trustee to the Lessee and, if applicable, upon the assignment of the Existing Equipment Subleases from TILC to the Lessee and by the Lessee to the Owner Trustee and upon the purchase of the Pledged Equipment by the Lessee from TILC and, if applicable, upon the assignment of the Existing Pledged Equipment Leases from TILC to the Lessee, will have been paid or such transactions will then be exempt from any such taxes, and the Lessee will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations. No taxes, fees or other charges in connection with the execution and delivery of the Operative Agreements or the issuance and sale of the Equipment Note to be delivered on the Closing Date are payable; (q) no broker's or finder's or placement fee or commission will be payable with respect to the transactions contemplated by the Operative Agreements as a result of any action by the Lessee, except for the fees of the Arrangers, which shall be included in Transaction Costs as provided in this Agreement, and the Lessee agrees that it will hold the Participants, the Indenture Trustee, the Pass Through Participation Agreement (TRLI 2001-1A) 23 Trustee and the Owner Trustee harmless from any claim, demand or liability for broker's or finder's or placement fees or commission alleged to have been incurred as a result of any action by the Lessee in connection with this transaction; (r) (i) each Unit delivered on the Closing Date, taken as a whole, and each major component thereof, complies in all material respects with all applicable laws and regulations, conforms with the specifications for such Unit contained in the Appraisal referred to in Section 4.3(a) hereof (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to the Lessee) and is substantially complete such that it is ready and available to operate in commercial service and otherwise perform the function for which it was designed; and the railcar identification marks shown on Schedule 1 are the marks presently used on the Units of Equipment set forth on Schedule 1 and (ii) each Pledged Unit, taken as a whole, and each major component thereof, complies in all material respects with all applicable laws and regulations, conforms with the specifications for such Pledged Unit contained in the Appraisal referred to in Section 4.3(a) hereof (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to the Lessee) and is substantially complete such that it is ready and available to operate in commercial service and otherwise perform the function for which it was designed; and the railcar identification marks shown on Schedule 1-A are the marks presently used on the Pledged Units; and (s) neither the Lessee nor any Partner is subject to regulation as a "holding company," an "affiliate" of a "holding company," or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 3.3 Representations and Warranties of the Indenture Trustee. The Indenture Trustee represents and warrants to the Owner Participant, the Owner Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Indenture Trustee is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States and has the full corporate power, authority and legal right under the laws of the State of Illinois and the United States pertaining to its banking, trust and fiduciary powers to execute, deliver and perform its obligations under each of the Indenture Trustee Agreements; (b) the execution, delivery and performance by the Indenture Trustee of each of the Indenture Trustee Agreements have been duly authorized by the Indenture Trustee and will not violate any applicable federal or Illinois law governing its banking or trust powers or its charter documents or bylaws or the Participation Agreement (TRLI 2001-1A) 24 provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or any of its properties may be bound or affected; (c) this Agreement has been duly executed and delivered and constitutes, and each of the other Indenture Trustee Agreements, when executed and delivered, will constitute (assuming the due authorization, execution and delivery by each other party thereto) the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (d) there are no proceedings pending or, to the knowledge of the Indenture Trustee, threatened, and to the knowledge of the Indenture Trustee there is no existing basis for any such proceedings, against or affecting the Indenture Trustee in or before any court or before any governmental authority or arbitration board or tribunal which, individually or in the aggregate, if adversely determined, might impair the ability of the Indenture Trustee to perform its obligations under the Indenture Trustee Agreements; (e) no authorization or approval or other action by, and no notice to or filing with, any stockholder, trustee or holder of indebtedness or any federal or Illinois state governmental authority or regulatory body governing the Indenture Trustee in its trust capacity, is required for the due execution, delivery and performance by the Indenture Trustee of the Indenture Trustee Agreements, except as have been previously obtained, given or taken; (f) the Indenture Trustee is not in default under any of the Indenture Trustee Agreements; and (g) neither the Indenture Trustee, nor any Person authorized to act on behalf of the Indenture Trustee, has directly or indirectly offered any interest in the Trust Estate or the Equipment Note or any security similar to either thereof related to this transaction for sale to, or solicited offers to buy any of the same from, or otherwise approached or negotiated with respect to any of the same with, any Person other than the Pass Through Trustee and the Initial Purchasers. Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest, Equipment Note and Pass Through Certificates. (a) Owner Trustee and Trust Company. Each of the Owner Trustee and the Trust Company represents and warrants to the Lessee, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Owner Participant that, as of Participation Agreement (TRLI 2001-1A) 25 the date hereof and as of the Closing Date, except as expressly provided in the Operative Agreements, neither the Owner Trustee, nor the Trust Company nor any Person authorized or employed by the Owner Trustee or the Trust Company as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (b) Lessee. The Lessee represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither the Lessee nor any Person authorized or employed by the Lessee as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (c) TRMI. TRMI represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither TRMI nor any Person authorized or employed by TRMI as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (d) TILC. TILC represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither TILC nor any Person authorized or employed by TILC as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. Participation Agreement (TRLI 2001-1A) 26 (e) Owner Participant. The Owner Participant represents and warrants to the Owner Trustee, the Indenture Trustee, TILC, TRMI, the Lessee and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither the Owner Participant nor any Person authorized or employed by the Owner Participant as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (f) Pass Through Trustee. The Pass Through Trustee represents and warrants to the Owner Trustee, the Indenture Trustee, TILC, TRMI, the Lessee and the Owner Participant that, as of the date hereof and as of the Closing Date, neither the Pass Through Trustee nor any Person authorized or employed by the Pass Through Trustee as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (g) Future Actions. Each of the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee and the Pass Through Trustee agrees, as to its own actions only, severally but not jointly, that neither the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee nor the Pass Through Trustee nor anyone acting on behalf of the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee or the Pass Through Trustee will offer the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or any similar interest for issue or sale to any prospective purchaser, or solicit any offer to acquire any of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof so as to cause Section 5 of the Securities Act to apply to the issuance and sale of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof. Section 3.5 Representations and Warranties of the Owner Participant. The Owner Participant represents and warrants to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee that, as of the date hereof: Participation Agreement (TRLI 2001-1A) 27 (a) the Owner Participant is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has full limited partnership power and authority to carry on its business as now conducted; (b) the Owner Participant has the requisite limited partnership power and authority to execute, deliver and perform its obligations under the Owner Participant Agreements, and the execution, delivery and performance by it thereof do not and will not contravene any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on the Owner Participant or any of its properties, or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than such as are created by the Operative Agreements) upon the Equipment under, its Certificate of Limited Partnership, limited partnership agreement or any indenture, mortgage, contract or other agreement or instrument to which the Owner Participant is a party or by which it or any of its properties may be bound or affected; (c) the Owner Participant Agreements have been duly authorized by all necessary actions on the part of the Owner Participant and its general partner, do not require any approval not already obtained of the partners of the Owner Participant or any approval or consent not already obtained of any trustee or holders of indebtedness or obligations of the Owner Participant, have been, or on or before the Closing Date will be, duly executed and delivered by the general partner of the Owner Participant in its capacity as general partner of the Owner Participant and (assuming the due authorization, execution and delivery by each other party thereto) constitute, or will constitute, the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity; (d) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery or performance by the Owner Participant of the Trust Agreement, the Tax Indemnity Agreement or this Agreement; (e) the Trust Estate is free and clear of any Lessor's Lien attributable to the Owner Participant; (f) there are no pending or, to the Owner Participant's knowledge, threatened actions or proceedings against the Owner Participant before any court or administrative agency which would materially adversely affect the Owner Participation Agreement (TRLI 2001-1A) 28 Participant's ability to perform its obligations under the Trust Agreement, the Tax Indemnity Agreement or this Agreement; (g) as of the Closing Date, the Owner Participant is purchasing the Beneficial Interest to be acquired by it for its own account with no present intention of distributing such Beneficial Interest or any part thereof in any manner which would violate the Securities Act, but without prejudice, however, to the right of the Owner Participant at all times to sell or otherwise dispose of all or any part of such Beneficial Interest in compliance with the Securities Act and any state securities or "blue sky" laws; provided, however, that subject to the provisions of Section 6.1, the disposition of the Beneficial Interest shall at all times be within the Owner Participant's control. The Owner Participant acknowledges that its Beneficial Interest has not been registered under the Securities Act, and that neither the Owner Participant, the Owner Trustee, Trust Company, the Lessee, TRMI nor TILC contemplates filing, or is legally required to file, any such registration statement. Notwithstanding the foregoing, the Owner Participant makes no representation that the Beneficial Interest is a "security" within the meaning of such term under the Securities Act; (h) with respect to the source of the amount to be invested by the Owner Participant pursuant to Section 2.2, no part of such amount constitutes assets of any employee benefit plan subject to Title I of ERISA or Section 4975 of the Code; and (i) no broker's or finder's or placement fee or commission will be payable with respect to the transactions contemplated by the Operative Agreements as a result of any action by the Owner Participant, and the Owner Participant agrees that it will hold TILC, TRMI, the Lessee, the Indenture Trustee, the Loan Participant and the Owner Trustee harmless from any claim, demand or liability for broker's or finder's or placement fees or commission alleged to have been incurred as a result of any action by the Owner Participant in connection with this transaction. Section 3.6 Representations and Warranties of TILC. TILC represents and warrants to each of the Owner Trustee, the Indenture Trustee and the Participants, as of the date hereof: (a) TILC is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TILC Agreements, has the power and authority to carry on its business as now conducted, and has the Participation Agreement (TRLI 2001-1A) 29 requisite power and authority to execute, deliver and perform its obligations under the TILC Agreements; (b) the TILC Agreements have been duly authorized by all necessary corporate action, executed and delivered by TILC, and (assuming the due authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of TILC, enforceable against TILC in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by TILC of each TILC Agreement and compliance by TILC with all of the provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on TILC or any of its properties, or (ii) the provisions of, or constitute a default by TILC under, its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or other agreement or instrument to which TILC is a party or by which TILC or any of its properties may be bound or affected except, with respect to clause (iii), where such contravention would not materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business; (d) there are no proceedings pending or, to the knowledge of TILC, threatened against TILC in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business; (e) TILC is not in violation of any term of any charter instrument or bylaw or any other material agreement or instrument to which it is a party or by which it may be bound except where such violation would not materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business. TILC is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TILC to perform its obligations under the TILC Agreements, and has obtained all required licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of Participation Agreement (TRLI 2001-1A) 30 indebtedness of TILC or any governmental authority on the part of TILC is required in the United States in connection with the execution and delivery by TILC of the TILC Agreements, or is required to be obtained in order for TILC to perform its obligations thereunder in accordance with the terms thereof, other than (i) as may be required under existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing Date in connection with the performance of its obligations under the TILC Agreements and which are routine in nature and are not normally applied for prior to the time they are required, and which TILC has no reason to believe will not be timely obtained or (ii) as may be required under the Operative Agreements in consequence of any transfer of ownership of the Equipment or the Pledged Equipment occurring after the Closing Date; (g) to the best knowledge of TILC, no casualty event or other event that may constitute an Event of Loss under the Lease or a Pledged Unit Event of Loss under the Collateral Agency Agreement has occurred as of the date of this Agreement with respect to any Unit or Pledged Unit delivered on the Closing Date; (h) (i) TILC shall have, and the TILC Bill of Sale to be delivered on the Closing Date shall convey to the Lessee, all legal and beneficial title to the Units which are being delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (ii) TILC shall have, and the TILC Assignment to be delivered on the Closing Date shall assign to the Lessee, all legal and beneficial title to the Existing Equipment Subleases, free and clear of all Liens (other than Subleases of the Existing Equipment Subleases by the Sublessees as expressly permitted by the Existing Equipment Subleases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; (iii) all of the Units being delivered on the Closing Date other than an immaterial amount shall be subject to Sublease by the Sublessees under the Existing Equipment Subleases on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; (iv) TILC shall have, and the TILC Pledged Equipment Bill of Sale to be delivered on the Closing Date shall convey to the Lessee, all legal and beneficial title to the Pledged Units which are being delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (v) below with respect to the Existing Pledged Equipment Leases, and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (v) TILC shall have, and the TILC Pledged Equipment Assignment to be delivered on the Closing Date shall assign to the Lessee, all legal and beneficial title to the Existing Pledged Equipment Leases, free and clear of all Liens (other than Participation Agreement (TRLI 2001-1A) 31 leases of the Existing Pledged Equipment Leases by the Pledged Equipment Lessees as expressly permitted by the Existing Pledged Equipment Leases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; and (vi) all of the Pledged Units other than an immaterial amount shall be subject to lease by the Pledged Equipment Lessees under the Existing Pledged Equipment Leases on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; (i) (a) all sales, use or transfer taxes, if any, due and payable upon the sale of the Equipment and assignment of Existing Equipment Subleases by TILC to the Lessee will have been paid or such transactions will then be exempt from any such taxes and TILC will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations; and (b) all sales, use or transfer taxes, if any, due and payable upon the sale of the Pledged Equipment and assignment of Existing Pledged Equipment Leases by TILC to the Lessee will have been paid or such transactions will then be exempt from any such taxes and TILC will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations; (j) all Units delivered on the Closing Date and all Pledged Units are substantially similar in terms of objectively identifiable characteristics that are relevant for purposes of the services to be performed by TILC under the Management Agreement to the equipment in the TILC Fleet; (k) in selecting the Units to be sold on the Closing Date to the Lessee pursuant to the TILC Bill of Sale and in selecting the Pledged Units to be sold to the Lessee pursuant to the TILC Pledged Equipment Bill of Sale, TILC has not discriminated against the Lessee in a negative fashion when such Units and Pledged Units are compared with the other equipment in the TILC Fleet; (l) the written information provided by TILC or on behalf of TILC to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto does not contain any untrue statement of a material fact and does not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The assumptions and related financial information relating to the proposed business and operations of TILC and the Partnership Fleet which are contained in the information on Schedule 3.2(m) have been prepared in good faith based upon information that TILC deems fair and reasonable, and there are no statements or conclusions therein which are based on or include information known to TILC to be misleading in any material respect or which fail to take into account material information known to TILC regarding the matters stated therein. Certain information contained in the Participation Agreement (TRLI 2001-1A) 32 information on Schedule 3.2(m) (e.g. statistical information relating to renewal and remarketing of railcars, potential increases in absolute or nominal railcar lease rates, anticipated utilization, and maintenance costs) is based on the historical experience of TILC. Subject to the foregoing, there can be no assurance that past experience will be indicative of future performance with respect to these or other operating and marketing factors set forth in the information on Schedule 3.2(m); (m) the representations and warranties of the Lessee contained in Section 3.2(h), clause (iv) of Section 3.2(l), the first sentence of Section 3.2(p) and in Section 3.2(r) (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to TILC) are true and correct as of the date hereof; (n) TILC is not in default under any Existing Equipment Subleases or Existing Pledged Equipment Leases, and, to the best of the TILC's knowledge, there are (i) no defaults by any Sublessee or Pledged Equipment Lessee thereunder existing as of the date hereof under the Existing Equipment Subleases or Existing Pledged Equipment Leases, except such defaults as are not material, (ii) no claims or liabilities arising as a result of the operation or use of any Unit described on Schedule 1 hereto prior to the date hereof as to which the Lessor, as owner of the Units delivered on the Closing Date, would be liable and (iii) no claims or liabilities arising as a result of the operation or use of any Pledged Unit prior to the date hereof as to which the Lessee, as owner of the Pledged Units, would be liable; (o) (i) as of the Closing Date, TILC shall have provided, or caused to be provided, in either case in accordance with the terms of the relevant Existing Equipment Sublease, a notice relating to each Existing Equipment Sublease (which notice shall be substantially in the form attached hereto as Exhibit D) to the related Sublessee under such Existing Equipment Sublease and (ii) as of the Closing Date, TILC shall have provided, or caused to be provided, in either case in accordance with the terms of the relevant Existing Pledged Equipment Lease, a notice relating to each Existing Pledged Equipment Lease (which notice shall be substantially in the form attached hereto as Exhibit D) to the related Pledged Equipment Lessee under such Existing Pledged Equipment Lease; (p) (i) the balance sheet of TILC as of March 31, 2000, and the related statements of operations, stockholders' equity and cash flows for the period then ended, and (ii) the balance sheet of TILC as of December 31, 2000 and the related statements of income and cash flows of TILC for the nine month period beginning on April 1, 2000 and ending on December 31, 2000, have been prepared in accordance with generally accepted accounting principles (except as may be stated in the notes thereto and except, with respect to interim financial statements, for year-end audit adjustments), consistently applied, and fairly set forth, in all material Participation Agreement (TRLI 2001-1A) 33 respects, the financial condition of TILC as of such dates and the results of their operations and cash flows for such periods; and (q) TILC is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by TILC for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.6(q) with such meanings. Section 3.7 Representations and Warranties of TRMI. TRMI represents and warrants to the Indenture Trustee, the Owner Trustee and the Participants, as of the date hereof: (a) TRMI is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TRMI Agreements, has the power and authority to carry on its business as now conducted, and has the requisite power and authority to execute, deliver and perform its obligations under the TRMI Agreements; (b) the TRMI Agreements have been duly authorized by all necessary corporate action, executed and delivered by TRMI, and (assuming the due authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of TRMI, enforceable against TRMI in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by TRMI of each TRMI Agreement and compliance by TRMI with all of the provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on TRMI or any of its properties, or (ii) the provisions of, or constitute a default by TRMI under, its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or other agreement or instrument to which TRMI is a party or by which TRMI or any of its properties may be bound or affected except, with respect to clause (iii) above, where such contravention would not materially adversely affect TRMI's ability to Participation Agreement (TRLI 2001-1A) 34 perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business; (d) there are no proceedings pending or, to the knowledge of TRMI, threatened against TRMI in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business; (e) TRMI is not in violation of any term of any charter instrument or bylaw or any other material agreement or instrument to which it is a party or by which it may be bound except where such violation would not materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business. TRMI is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TRMI to perform its obligations under the TRMI Agreements, and has obtained all licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebtedness of TRMI or any governmental authority on the part of TRMI is required in the United States in connection with the execution and delivery by TRMI of the TRMI Agreements, or is required to be obtained in order for TRMI to perform its obligations thereunder in accordance with the terms thereof, other than those which (i) are routine in nature and are not normally applied for prior to the time they are required, and which TRMI has no reason to believe will not be timely obtained or (ii) the failure to obtain would not have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TRMI to perform its obligations under the TRMI Agreements; (g) the written information provided by TRMI or on behalf of TRMI to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto as of the date such information was provided to the Owner Participant and/or the Loan Participant, as the case may be, did not contain any untrue statement of a material fact and did not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. No representation or warranty is given with respect to any forecasts or projections included therein or omitted therefrom; Participation Agreement (TRLI 2001-1A) 35 (h) the representations and warranties of the Lessee contained in Sections 3.2(a), (b), (c), (d), (e), (f), (g), (i), (j), (k), clauses (i), (ii) and (iii) of (l), (m), (n), (o), (p) other than the first sentence thereof, (q) and (s) are true and correct as of the date hereof (except with respect to representations and warranties made as of an earlier date, in which case such representations and warranties shall be true as of such earlier date); and (i) (x) the balance sheet of TRMI as of March 31, 2000, and the related statements of operations, stockholders' equity and cash flows for the period then ended, and (y) the balance sheet of TRMI as of December 31, 2000 and the related statements of income and cash flows of TRMI for the nine month period beginning on April 1, 2000 and ending on December 31, 2000, have been prepared in accordance with generally accepted accounting principles (except as may be stated in the notes thereto and except, with respect to interim financial statements, for year-end audit adjustments), consistently applied, and fairly set forth, in all material respects, the financial condition of TRMI as of such dates and the results of their operations and cash flows for the periods then ended. Section 3.8 Representations and Warranties of the Pass Through Trustee. The Pass Through Trustee represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Pass Through Trustee is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the full corporate power, authority and legal right under the laws of the United States of America and the State of Illinois pertaining to its banking, trust and fiduciary powers to execute, deliver and perform its obligations under the Pass Through Trustee Agreements and the Pass Through Documents to which it is a party; (b) this Agreement has been, and on the Closing Date, each of the other Pass Through Trustee Agreements will have been, duly authorized, executed and delivered by the Pass Through Trustee; this Agreement constitutes, and on the Closing Date, each of the other Pass Through Trustee Agreements will constitute, the legal, valid and binding obligations of the Pass Through Trustee, enforceable against the Pass Through Trustee in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by the Pass Through Trustee of each of the Pass Through Trustee Agreements, the purchase by the Pass Participation Agreement (TRLI 2001-1A) 36 Through Trustee of the Equipment Note pursuant to this Agreement, and the issuance of the Pass Through Certificates pursuant to the Pass Through Trust Agreement, do not contravene any law, rule or regulation of any federal or Illinois governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Pass Through Trustee and do not contravene or result in any breach of, or constitute a default under, the Pass Through Trustee's articles of association or bylaws or any agreement or instrument to which the Pass Through Trustee is a party or by which it or any of its properties may be bound or affected; (d) neither the execution and delivery by the Pass Through Trustee of each of the Pass Through Trustee Agreements nor the consummation by the Pass Through Trustee of any of the transactions contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action with respect to, any federal or Illinois governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers; (e) there are no pending or, to its knowledge, threatened actions or proceedings against the Pass Through Trustee before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Pass Through Trustee to perform its obligations under any of the Pass Through Trustee Agreements; (f) the Pass Through Trustee is not in default under any Pass Through Trustee Agreement; (g) the Pass Through Trustee does not directly or indirectly control, and is not directly or indirectly controlled by or under common control with, the Owner Participant, the Owner Trustee, the Initial Purchasers, TILC, TRMI or the Lessee; (h) the Pass Through Trustee is purchasing the Equipment Note for the purposes contemplated by the Operative Agreements and not with a view to the transfer or distribution of any Equipment Note to any other Person, except as contemplated by the Operative Agreements; and (i) except for the issue and sale of the Pass Through Certificates contemplated hereby and by the other Pass Through Trustee Agreements, the Pass Through Trustee has not directly or indirectly offered any Equipment Note or Pass Through Certificate or any interest in or to the Trust Estate, the Trust Agreement or any similar interest for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Trustee and the Owner Participant, and the Pass Through Trustee has not authorized anyone to act on its behalf to offer directly or Participation Agreement (TRLI 2001-1A) 37 indirectly any Equipment Note, any Pass Through Certificate or any interest in and to the Trust Estate, the Trust Agreement or any similar interest related to this transaction for sale to, or to solicit any offer to acquire any of the same from, any Person other than the Owner Trustee and the Owner Participant. Section 3.9 Opinion Acknowledgment. Each of the parties hereto, with respect to such party, expressly consents to the rendering by its counsel of the opinion referred to in Section 4.1(e) and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such party. SECTION 4. CLOSING CONDITIONS. Section 4.1 Conditions Precedent to Investment by Each Participant. The obligation of each Participant to make the investment specified with respect to such Participant in Section 2 on the Closing Date shall be subject to the satisfaction or waiver of the following conditions precedent (except that the obligations of any Person shall not be subject to such Person's own performance or compliance): (a) Execution of Operative Agreements. On or before the Closing Date, this Agreement, the Trust Agreement, the Lease, the Lease Supplement in respect of the Units delivered on the Closing Date, the Indenture, the Indenture Supplement in respect of the Units delivered on the Closing Date, the Equipment Note, the Pass Through Documents, the Management Agreement, the Insurance Agreement, the Transfer and Assignment Agreement, the Pledged Equipment Transfer and Assignment Agreement, the TILC Bill of Sale, the Pledged Equipment Bill of Sale, the TILC Pledged Equipment Assignment, the TILC Assignment, the Bill of Sale, the Assignment, the Collateral Agency Agreement, the Administrative Services Agreement, the OP Guaranty, the Control Agreement and the Trinity Guaranty shall each be satisfactory in form and substance to such Participant, shall have been duly executed and delivered by the parties thereto (except that the execution and delivery of the documents referred to above (other than this Agreement) by a party hereto or thereto shall not be a condition precedent to such party's obligations hereunder), shall each be in full force and effect, and executed counterparts of each shall have been delivered to such Participant or its counsel on or before the Closing Date; and no event shall have occurred and be continuing that constitutes a Lease Default or an Indenture Default. (b) Recordation and Filing. On or before the Closing Date (except as expressly stated below), the Lessee shall have caused the Lease, the Lease Supplement, the Indenture and the Indenture Supplement (each in respect of Units delivered on the Closing Date), the Collateral Agency Agreement in respect of the Pledged Units delivered on the Closing Date, the Pledged Equipment Bill of Sale, the TILC Bill of Sale, the Bill of Sale, the TILC Assignment, the TILC Pledged Participation Agreement (TRLI 2001-1A) 38 Equipment Assignment and the Assignment to be duly filed, recorded and deposited in memorandum form with the STB in conformity with 49 U.S.C. Section 11301 and with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act, and all necessary actions shall have been taken to cause publication of notice of such deposit in The Canada Gazette in accordance with said Section 105 and all appropriate Uniform Commercial Code financing statements to be filed where necessary or reasonably advisable within 10 days after the Closing Date, and the Lessee shall furnish the Indenture Trustee, the Owner Trustee, the Collateral Agent and each Participant proof thereof. Without limiting the representations and warranties set forth in any Operative Agreement, by such recording or filing of the Lease (or a financing statement or similar notice thereof), the Owner Trustee and the Lessee are not acknowledging or implying that the Lease constitutes a "security agreement" or creates a "security interest" within the meaning of the Uniform Commercial Code in any applicable jurisdiction. (c) Representations and Warranties of the Lessee. On the Closing Date, the representations and warranties of the Lessee contained in Section 3.2 and Section 3.4(b) hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from the General Partner of the Lessee certifying to the foregoing matters, and the Lessee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Lessee on or before said date. (d) Representations and Warranties of the Owner Trustee. On the Closing Date, the representations and warranties of the Trust Company and the Owner Trustee contained in Section 3.1 and Section 3.4(a) shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, the Indenture Trustee, TILC, TRMI and the Participants shall have received an Officer's Certificate to such effect dated such date from the Trust Company (in respect of the Trust Company) and the Owner Trustee (in respect of the Owner Trustee), and the Trust Company and the Owner Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Trust Company and the Owner Trustee, respectively, on or before said date. (e) Opinions of Counsel. On the Closing Date, the Owner Trustee, the Indenture Trustee and each Participant shall have received the favorable Participation Agreement (TRLI 2001-1A) 39 written opinion of each of (i) Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel for the Lessee, TILC, Trinity and TRMI, substantially in the form of Exhibit E-1, (ii) counsel for the Lessee, TILC, Trinity and TRMI (which counsel shall be the General Counsel of Trinity), substantially in the form of Exhibit E-2, (iii) Bingham Dana LLP, counsel to the Owner Trustee, substantially in the form of Exhibit E-3, (iv) Winston & Strawn, special counsel to the Owner Participant, substantially in the form of Exhibit E-4, (v) Philip Morris Capital Corporation Legal Department, counsel to the Owner Participant, substantially in the form of Exhibit E-5, (vi) Robert A. Wolz, Assistant Counsel to the Indenture Trustee, substantially in the form of Exhibit E-6, (vii) Alvord & Alvord, special STB counsel, substantially in the form of Exhibit E-7, (viii) McCarthy Tetrault, special Canadian counsel, substantially in the form of Exhibit E-8, (ix) Andrews & Kurth L.L.P., special counsel for the Collateral Agent, substantially in the form of Exhibit E-9, (x) Robert A. Wolz, Assistant Counsel to the Pass Through Trustee, substantially in the form of Exhibit E-10 and (xi) Morris, James, Hitchens & Williams, counsel for the Marks Company Trust, substantially in the form of Exhibit E-11. (f) Title. On the Closing Date, after giving effect to the transactions contemplated hereby, (i) the Owner Trustee shall have all legal and beneficial title to each Unit to be delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof), (ii) the Owner Trustee shall have received all right, title and interest of the Lessee in and to the Existing Equipment Subleases, free and clear of all Liens (other than Subleases of the Existing Equipment Subleases by the Sublessees as expressly permitted by the Existing Equipment Subleases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof) and (iii) each Sublessee under an Existing Equipment Sublease shall have been notified of the assignment thereof to the Owner Trustee. In addition, (i) the Lessee shall have all legal and beneficial title to each Pledged Unit to be delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Pledged Equipment Leases, and in clauses (iii), (iv) and (v) of the definition thereof), (ii) the Lessee shall have received all right, title and interest of TILC in and to the Existing Pledged Equipment Leases, free and clear of all Liens (other than Subleases of the Existing Pledged Equipment Leases by the Pledged Equipment Lessees as expressly permitted by the Existing Pledged Equipment Leases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof) and (iii) each Pledged Equipment Lessee under an Existing Pledged Equipment Lease shall have been notified of the assignment thereof to the Lessee. (g) Bills of Sale; Assignments. On the Closing Date, each of the following documents shall each have been duly executed and delivered: (i) the TILC Participation Agreement (TRLI 2001-1A) 40 Bill of Sale and the Bill of Sale, in each case in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date and covering the Units to be delivered on such date, transferring to the Owner Trustee and the Lessee, respectively, legal and beneficial title to such Units free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof) and warranting to the Owner Trustee that at the time of delivery of each such Unit, TILC and the Lessee, as the case may be, had legal and beneficial title thereto and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof and, with respect to the TILC Bill of Sale, warranting that TILC shall be responsible for discharging any Permitted Lien of the type described in subclause (iii) or (iv) of the definition thereof which has attached as of the Closing Date), (ii) the TILC Assignment and the Assignment, in each case in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date covering the Existing Equipment Subleases, assigning to the Owner Trustee and Lessee respectively, all right, title and interest of TILC and the Lessee, respectively, to the Existing Equipment Subleases, free and clear of all Liens (other than Permitted Liens) and warranting to the Lessee that, at the time of such assignment, TILC and the Lessee, respectively, had legal and beneficial title to the Existing Equipment Subleases and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens); (iii) the TILC Pledged Equipment Bill of Sale in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date and covering the Pledged Units to be delivered on such date, transferring to the Lessee legal and beneficial title to such Pledged Units free and clear of all Liens (other than Permitted Liens of the type described in clause (iv) below with respect to the Existing Pledged Equipment Leases, and in clauses (iii), (iv) and (v) of the definition thereof) and warranting to the Lessee that at the time of delivery of each such Pledged Unit, TILC had legal and beneficial title thereto and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens of the type described in clause (iv) below with respect to the Existing Pledged Equipment Leases, and in clauses (iii), (iv) and (v) of the definition thereof and warranting that TILC shall be responsible for discharging any Permitted Lien of the type described in subclause (iii) or (iv) of the definition thereof which has attached as of the Closing Date), and (iv) the TILC Pledged Equipment Assignment in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date covering the Existing Pledged Equipment Leases, assigning to the Lessee all right, title and interest of TILC to the Existing Pledged Equipment Leases, free and clear of all Liens (other than Permitted Liens) and Participation Agreement (TRLI 2001-1A) 41 warranting to the Lessee that, at the time of such assignment, TILC had legal and beneficial title to the Existing Pledged Equipment Leases and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens); (h) Insurance Certificate. On or before the Closing Date, the Indenture Trustee and each Participant shall have received (x) each certificate relating to insurance that is required pursuant to Section 12 of the Lease and Section 6.4 of the Collateral Agency Agreement and (y) certificates from a nationally recognized insurance broker substantially in the forms attached hereto as Exhibits A-1 and A-2 with respect to the public liability insurance required by Section 12.1(b) of the Lease and Section 6.4 of the Collateral Agency Agreement. (i) Corporate, Partnership, Limited Liability Company and Other Organizational Documents. Each of the Participants shall have received such documents and evidence with respect to Trinity, TILC, TRMI, the Lessee, the General Partner, the Limited Partner, the Owner Participant, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee as the Participants may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement and the taking of all corporate, limited partnership and other proceedings in connection therewith. (j) No Threatened Proceedings. No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transactions contemplated hereby. (k) Representations and Warranties of the Owner Participant. On the Closing Date, the representations and warranties of the Owner Participant contained in Section 3.4(e) and Section 3.5 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Indenture Trustee and the Pass Through Trustee shall have received an Officer's Certificate to such effect dated such date from the Owner Participant, and the Owner Participant shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Owner Participant on or before said date. Participation Agreement (TRLI 2001-1A) 42 (l) Notice of Delivery. The Indenture Trustee and the Participants shall have received the Notice of Delivery described in Section 2.3(a). (m) Representations and Warranties of the Indenture Trustee. On the Closing Date, the representations and warranties of the Indenture Trustee contained in Section 3.3 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Owner Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from the Indenture Trustee, and the Indenture Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Indenture Trustee on or before said date. (n) No Illegality. No change shall have occurred after the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by regulatory authorities that, in the opinion of such Participant or its counsel, would make it illegal for such Participant to enter into any transaction contemplated by the Operative Agreements. (o) Participants' Investments. (i) The Owner Participant shall have made available the Owner Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan Participant shall have made available the Loan Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3. (p) Consents. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, Trinity, TILC and TRMI, if any, required to have been obtained in connection with the transactions contemplated by this Agreement and the other Operative Agreements shall have been duly obtained and be in full force and effect. (q) Governmental Actions. All actions, if any, required to have been taken on or prior to the Closing Date in connection with the transactions contemplated by this Agreement and the other Operative Agreements on the Closing Date shall have been taken by any governmental or political agency, subdivision or instrumentality of the United States, and all orders, permits, waivers, exemptions, authorizations and approvals of such entities required to be in effect on the Closing Date in connection with the transactions contemplated by this Agreement and the other Operative Agreements on the Closing Date shall have been issued, and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect, on the Closing Date. Participation Agreement (TRLI 2001-1A) 43 (r) Tax Indemnity Agreement. On or before the Closing Date, the Tax Indemnity Agreement shall be satisfactory in form and substance to the Owner Participant, shall have been duly executed and delivered by the Lessee and the Guarantor and, assuming due authorization, execution and delivery by the Owner Participant or one of its Affiliates, shall be in full force and effect. (s) Appointment of Representative. The Owner Trustee shall have authorized its representative, who shall be an individual designated by the Lessee and acceptable to the Owner Trustee, to accept the Units being delivered on the Closing Date from the Lessee and to deliver such Units to the Lessee. The Lessee shall have authorized its representative (who shall be the same individual designated by the Lessee under this Section 6.1(s)) to accept delivery of such Units from the Owner Trustee as Lessor pursuant to the Lease. (t) Solvency of the Lessee. The Lessee shall have furnished to the Participants an Officer's Solvency Certificate (substantially in the form attached hereto as Exhibit F) as to the solvency of the Lessee as of the Closing Date stating, among other things, that on the Closing Date (i) the Collection Account has a balance of $541,755, (ii) the Lessee has funded the Liquidity Reserve Account with $6,750,000 in cash, (iii) the Lessee has delivered the deposit of $625,000 to an account designated by the Depositary (as defined in the Pass Through Trust Agreement) (or an Affiliate of the Depositary) as collateral for the Lessee's obligations under that certain Indemnity Agreement dated as of the date hereof between the Lessee and the Depositary, (iv) the Lessee has funded the Special Second Closing Account with $320,000 in cash, (v) the Lessee has funded the Excess Cash Account with $5,000,000 in cash and (vi) the Lessee has funded the Pledged Equipment Proceeds Account with $4,232,000 in cash. (u) Schedule of Subleases, Pledged Equipment Leases, Units and Pledged Units. The Participants and the Collateral Agent shall have received a schedule, certified by the Lessee and TILC, listing the Existing Equipment Subleases under the Lease, the Sublessee under each thereof and the Units covered thereby. The Participants and the Collateral Agent shall have also received a schedule, certified by the Lessee and TILC, listing the Existing Pledged Equipment Leases, the Pledged Equipment Lessee under each thereof and the Pledged Units covered thereby. (v) Projected Coverage Ratio. The Manager shall have furnished to the Participants and the Collateral Agent that portion of the report provided for in Section 7.1 of the Management Agreement setting forth the Projected Coverage Ratio for the six-month period immediately succeeding the Closing Date. Participation Agreement (TRLI 2001-1A) 44 (w) Representations and Warranties of TILC. On the Closing Date, the representations and warranties of TILC contained in Section 3.4(d) and Section 3.6 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from TILC, and TILC shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by TILC on or before said date. (x) Representations and Warranties of TRMI. On the Closing Date, the representations and warranties of TRMI contained in Section 3.4(c) and Section 3.7 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from TRMI, and TRMI shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by TRMI on or before said date. (y) Representations and Warranties of the Pass Through Trustee. On the Closing Date, the representations and warranties of the Pass Through Trustee contained in Sections 3.4(f) and Section 3.8 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Indenture Trustee, the Owner Trustee and the Owner Participant shall have received an Officer's Certificate to such effect dated such date from the Pass Through Trustee, and the Pass Through Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Pass Through Trustee on or before said date. (z) Representations and Warranties of Trinity. On the Closing Date, the representations and warranties of Trinity contained in the Trinity Guaranty shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Participation Agreement (TRLI 2001-1A) 45 Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from Trinity, and Trinity shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by Trinity on or before said date. (aa) Accountant's Letter. The Participants shall have received an accountant's letter from PriceWaterhouseCoopers L.L.P. in form and substance reasonably satisfactory to each of them. (bb) Certificate Rating. On the Closing Date, the Certificates shall be rated "AA" by Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. (cc) Sublessee and Pledged Equipment Lessee Consents. The Lessee shall have obtained the consent to assignment from Sublessees under Existing Equipment Subleases and Pledged Equipment Lessees under Existing Pledged Equipment Leases, such consents to be in form and substance reasonably satisfactory to the Participants if not in the form attached hereto as Exhibit D, with respect to a percentage of Existing Equipment Subleases relating to the Equipment and Existing Pledged Equipment Leases relating to the Pledged Equipment acceptable to each Participant. (dd) Execution and Delivery of Other Agreements. The documents related to the Marks Company, the 2001-1 SUBI Certificate related to the Marks Company, the Other Participation Agreement and the Other Trust Agreement shall have been executed and delivered by the respective parties thereto. Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant. The obligation of the Loan Participant to fund the Loan Participant's Commitment and purchase and pay for the Equipment Note to be purchased by it pursuant to Sections 2.2(b) and 2.3 on the Closing Date shall be subject to the satisfaction or waiver of the following additional conditions precedent: (a) Equipment Note. The Equipment Note to be delivered on the Closing Date shall have been duly authorized, executed and delivered to the Loan Participant by a duly authorized officer of the Owner Trustee and duly authenticated by the Indenture Trustee. (b) Sale of Pass Through Certificates. The Pass Through Certificates shall have been sold to the Initial Purchasers pursuant to the Certificate Purchase Agreement. Participation Agreement (TRLI 2001-1A) 46 (c) Appraisal. The Pass Through Trustee and each Initial Purchaser shall have received the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with the Appraisal. Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant. The obligation of the Owner Participant to provide the funds specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date with respect to any Unit to be delivered on the Closing Date shall be subject to the satisfaction or waiver of the following additional conditions precedent: (a) Appraisal. On or before the Closing Date, the Owner Participant shall have received an opinion (the "Appraisal") of Rail Solutions, Inc. (the "Appraiser"), satisfactory in form and substance to the Owner Participant (with a separate summary or other evidence of such Appraisal as it relates to fair market value and useful life being provided to the Rating Agency), concluding that: (i) the fair market value of each Unit being delivered on the Closing Date is equal to the portion of the Total Equipment Cost with respect to such Unit; (ii) at the expiration of the Basic Term and any Fixed Rate Renewal Term, (A) without taking into account inflation or deflation from and after the Closing Date or the existence of any purchase option, it is reasonable to expect that each such Unit will have a fair market value of at least 20% of the Total Equipment Cost with respect to such Unit and (B) the remaining economic life of each such Unit will be at least equal to 20% of the economic life of such Unit as estimated in the Appraisal; (iii) as of the Early Purchase Date, the estimated fair market value of each such Unit being delivered on the Closing Date, taking into account inflation or deflation from and after the Closing Date, will not exceed the portion of the Early Purchase Price attributable to such Unit; (iv) no Unit being delivered on the Closing Date is Limited Use Property; (v) the Fixed Rate Renewal is greater than or equal to the fair market rental value of each such Unit and the Lessee is not reasonably expected to exercise any Fixed Rate Renewal option; and (vi) such other matters as the Owner Participant may reasonably request; provided that the Lessee makes no representation as to the fair market value, useful life, fair market rental value or estimated residual value of the Equipment, and the Lessee shall not be responsible for, or incur any liabilities as a result of, the contents of such Appraisal or report to which it relates or, except to the extent provided in the Tax Indemnity Agreement. (b) Opinion with Respect to Certain Tax Aspects. On the Closing Date, the Owner Participant shall have received the opinion of Winston & Strawn, addressed to the Owner Participant, in form and substance satisfactory to the Owner Participant, containing such counsel's favorable opinion with respect to such tax matters as the Owner Participant may reasonably request. Participation Agreement (TRLI 2001-1A) 47 (c) Absence of Change in Tax Laws. No change or proposed change shall have occurred after the execution and delivery of this Agreement in relevant United States tax laws, regulations, or administrative or judicial interpretation thereof which change would cause an adverse change to the tax assumptions used to calculate Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price, unless the adjustment referred to in Section 2.6(a) is made to the Owner Participant's satisfaction. Section 4.4 Conditions Precedent to the Obligation of TILC and the Lessee. The obligation of TILC with respect to the sale of the Units and the Pledged Units to the Lessee on the Closing Date, the obligation of the Lessee with respect to the sale of such Units to the Owner Trustee and the obligation of the Lessee to accept such Units under the Lease as of the Closing Date is subject to the satisfaction or waiver of the following conditions precedent: (a) Corporate Documents. On or before the Closing Date, the Lessee shall have received such documents and evidence with respect to the Participants, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee as the Lessee may reasonably request in order to establish the authorization of the consummation of, or otherwise relating to the ability to consummate, the transactions contemplated by this Agreement and the other Operative Agreements, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth. (b) Operative Agreements. On or before the Closing Date, the Operative Agreements shall have been duly authorized, executed and delivered by the respective party or parties thereto (other than the Lessee, Trinity, TILC and TRMI), and an executed counterpart of each thereof shall have been delivered to the Lessee or its special counsel. (c) Representations and Warranties. On the Closing Date, the representations and warranties of each of the Owner Trustee, the Indenture Trustee and the Participants contained in Section 3 hereof shall be true and correct in all material respects as of the Closing Date as though made on and as of such date, and the Lessee shall have received an Officer's Certificate to such effect dated such date from each of the Owner Trustee as described in Section 4.1(d), the Owner Participant as described in Section 4.1(k), the Indenture Trustee as described in Section 4.1(m) and the Pass Through Trustee as described in Section 4.1(y). (d) Opinions of Counsel. On the Closing Date, the Lessee shall have received the opinions of counsel referred to in Section 4.1(e) (other than that set forth in clauses (i) and (ii) therein), addressed to the Lessee. Participation Agreement (TRLI 2001-1A) 48 (e) No Threatened Proceedings. No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transactions contemplated hereby. (f) No Illegality. No change shall have occurred after the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by regulatory authorities that, in the opinion of the Lessee or its counsel, would make it illegal for the Lessee to enter into any transaction contemplated by the Operative Agreements. (g) Participants' Investments. (i) The Owner Participant shall have made available the Owner Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan Participant shall have made available the Loan Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3. (h) Absence of Change in Tax Laws. No change shall have occurred after the execution and delivery of this Agreement in relevant United States tax laws or regulations, which change would cause an increase in the net present value (expressed as a percentage of Total Equipment Cost) of the Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to exceed 100 basis points. (i) No Adverse Accounting Treatment. The Lessee shall not have been advised by its independent accountants that the Lessee or its affiliates will not be afforded "off-balance sheet" accounting treatment with respect to the Lease and the transactions contemplated by the Operative Agreements; provided, that the Lessee shall not have deliberately caused the loss of "off-balance sheet" accounting treatment to provoke non-satisfaction of such condition precedent pursuant to this Section 4.4(i). SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE. The Lessee agrees during the Lease Term and (if longer, in the event that the Lessee has assumed all of the rights and obligations of the Lessor under the Indenture in respect of the Equipment Notes) so long as any Equipment Note remains outstanding, that it will furnish directly to each Participant the following: Participation Agreement (TRLI 2001-1A) 49 (a) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, a balance sheet of the Lessee as at the end of such quarter, together with the related consolidated statements of income and cash flows of the Lessee for the period beginning on the first day of such fiscal year and ending on the last day of such quarter, setting forth in each case (except for the balance sheet) in comparative form the figures for the corresponding periods of the previous fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles; (b) as soon as available and in any event within 120 days after the last day of each fiscal year, a copy of the Lessee's audited annual report covering the operations of the Lessee including a balance sheet, and related statements of income and retained earnings and statement of cash flows of the Lessee for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles applied on a consistent basis, which statements will have been certified by a firm of independent public accountants of recognized national standing selected by the Lessee; (c) within the time period prescribed in paragraph (a) above, a certificate, signed by the Treasurer or principal financial officer of the General Partner, (i) to the effect that such officer is not aware (without any obligation of due inquiry), as of the date of such certificate, of any Lease Default, and if a Lease Default shall exist, specifying such Lease Default, the nature and status thereof and what action Lessee is taking or plans to take with respect thereto and (ii) setting forth the Historical Coverage Ratio and the Projected Coverage Ratio as of the last Business Day of the immediately preceding calendar quarter; (d) within the time period prescribed in paragraph (b) above, a certificate, signed by the Treasurer or principal financial officer of the General Partner, (i) to the effect that the signer has reviewed the Operative Agreements and activities and records of the Lessee during the immediately preceding fiscal year and that, after due inquiry, such officer is not aware, as of the date of such certificate, of any Lease Default, and if a Lease Default shall exist, specifying such Lease Default, the nature and status thereof and what action Lessee is taking or plans to take with respect thereto, (ii) setting forth the Historical Coverage Ratio and the Projected Coverage Ratio as of the last Business Day of the preceding fiscal year and (iii) setting forth in summary terms the Lessee's compliance with Section 8.3 of the Lease as to new Subleases entered into by the Lessee, and sub-Subleases entered into by any Sublessee, during such fiscal year, including without limitation as to whether such new Subleases are subject and subordinate to the terms of the Lease; Participation Agreement (TRLI 2001-1A) 50 (e) within the time periods presented in Section 7 of the Management Agreement, each of the reports referred to therein delivered by the Manager to the Lessee; and (f) promptly after request therefor, such additional information with respect to the financial condition or business of the Lessee as the Owner Participant or the Indenture Trustee may from time to time reasonably request. SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE. Section 6.1 Restrictions on Transfer of Beneficial Interest. The Owner Participant agrees that it shall not, directly or indirectly, sell, convey, assign, pledge, mortgage or otherwise transfer all or any part of the Beneficial Interest (collectively, for purposes of this Section 6.1, a "transfer") prior to the expiration or earlier termination of the Lease Term without the Lessee's prior written consent (which consent shall not be unreasonably withheld); provided, however, no such consent shall be required in connection with any indirect transfer of the Beneficial Interest resulting from (i) any direct or indirect change of control of Philip Morris Capital Corporation or change of control of any direct or indirect parent of Philip Morris Capital Corporation or (ii) any transfer of substantially all of the assets of Philip Morris Capital Corporation as an entirety; provided, further, that no such consent shall be required if the following conditions are satisfied: (a) the Person to whom such transfer is to be made (a "Transferee") is (i) an institutional or corporate investor with tangible net worth or, in the case of a bank or lending institution, combined capital and surplus at the time of such transfer, of at least $75,000,000, determined in accordance with generally accepted accounting principles, as of the date of such transfer, or (ii) an Affiliate of an institutional or corporate investor that satisfies the requirements set forth in clause (i) above if such investor guarantees pursuant to a guaranty in form and substance satisfactory to the Lessee the obligations of the Owner Participant under the Operative Agreements assumed by such Affiliate as required herein or (iii) an Affiliate of the Owner Participant; provided that in the event of a transfer pursuant to clause (iii) which does not qualify under clauses (i) or (ii), the Owner Participant shall remain liable for all of its obligations under this Agreement and the other Operative Agreements; (b) so long as no Lease Event of Default has occurred and is continuing, neither the Transferee nor any of its Affiliates shall compete (directly or indirectly) (other than as a passive investor or loan participant in the financing of equipment or facilities used in railcar leasing) with the Lessee or TILC (unless such non-competition requirement has been waived in writing by the Lessee and TILC) in Participation Agreement (TRLI 2001-1A) 51 any respect material to the full service railcar leasing business of the Lessee or TILC; provided, that no Transferee or Affiliate thereof shall be deemed to (i) be engaged in railcar leasing or (ii) hold (directly or indirectly) any material interest in any business that is competitive with Lessee's or TILC's railcar leasing business, solely by reason of any sale, lease or other disposition (or any actions in furtherance of any of the foregoing) of any of such Person's interest in any equipment or facilities directly or indirectly owned, leased or otherwise controlled pursuant to any such Person's passive investment or loan participation in the financing of any such equipment or facilities used in railcar leasing or any re-leasing or sale of any rail equipment which is returned to or repossessed by or on behalf of such Person from a lessee or borrower in connection with a lease financing or lender transaction entered into by such Person as a passive lessor, investor or lender; (c) each of the Indenture Trustee, the Owner Trustee and the Lessee shall have received 10 days (or, if a Lease Event of Default shall have occurred and is continuing and the proposed Transferee or any of its Affiliates would not, but for the occurrence of such Lease Event of Default, have satisfied the requirements set forth in Section 6.1(b) above or Section 6.1(l) below, fifteen (15) Business Days) prior written notice of such transfer specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this Section 6.1; (d) such Transferee enters into an agreement (i) in the form attached hereto as Exhibit C or (ii) otherwise in form and substance satisfactory to each of the Lessee and the Owner Trustee and not reasonably objected to by the Indenture Trustee whereby such Transferee confirms that it shall be deemed a party to this Agreement and each other Operative Agreement to which the transferring Owner Participant is a party, and agrees to be bound by all the terms of, and to undertake all of the obligations and liabilities of the transferring Owner Participant contained in, this Agreement and such other Operative Agreements and in which the Transferee shall make representations and warranties comparable to those of the Owner Participant contained herein and therein; (e) an opinion of counsel of the Transferee (which counsel shall be reasonably acceptable to the Lessee, the Owner Trustee and the Indenture Trustee and which may be internal counsel of the Transferee), confirming (i) the existence, corporate power and authority of, and due authorization, execution and delivery of all relevant documentation by, the Transferee (with appropriate reliance on certificates of corporate officers or public officials as to matters of fact), (ii) that each agreement referred to in Section 6.1(d) above is the legal, valid, and binding obligation of the Transferee, enforceable against the Transferee in accordance with its terms (subject to customary qualifications as to bankruptcy and equitable principles) and (iii) Participation Agreement (TRLI 2001-1A) 52 compliance of the transfer with applicable requirements of federal securities laws and securities laws of the Transferee's domicile, shall be provided, prior to such transfer, to each of the Lessee, the Owner Trustee and the Indenture Trustee, which opinion shall be in form and substance reasonably satisfactory to the Lessee, the Owner Trustee and the Indenture Trustee; (f) such transfer complies in all respects with and does not violate any applicable provisions of the federal securities laws and the securities law of any applicable state or any other applicable law; (g) except as specifically consented to in writing by each of the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee, the terms of the Operative Agreements shall not be altered; (h) after giving effect to such transfer, the Beneficial Interest and the beneficial interest with respect to the Other Trust shall be held by not more than two Persons in the aggregate; provided that for the purpose of calculating the number of Persons under this Section 6.1(h), Persons that are Affiliates of each other shall be considered to be one Person; (i) all reasonable expenses of the parties hereto (including, without limitation, reasonable legal fees and expenses of special counsel) incurred in connection with each transfer of such Beneficial Interest shall be paid by the transferring Owner Participant; (j) such transfer either (i) does not involve the use of any funds which constitute assets of an employee benefit plan subject to Title I of ERISA or Section 4975 of the Code or (ii) if clause (i) is not applicable, will not constitute a prohibited transaction under ERISA or the Code; (k) as a result of and following such transfer, no Indenture Default attributable to the Owner Participant or the Owner Trustee shall have occurred and be continuing; (l) unless a Lease Event of Default shall have occurred and is continuing, the transfer does not involve the sale of the stock of any Owner Participant, the sole asset of which is all or a portion of the Beneficial Interest, to, or the merger of any such Owner Participant with or into, any Person who is a competitor of the Lessee or TILC as described in Section 6.1(b), provided that the Lessee may waive this requirement in writing; (m) the Transferee (i) is a "United States Person" within the meaning of Section 7701(a)(30) of the Code or (ii) is engaged in a United States Participation Agreement (TRLI 2001-1A) 53 trade or business for purposes of Subtitle A, Chapter 1, Subchapter N of the Code and is acquiring such Beneficial Interest in connection with such trade or business; and (n) the Owner Participant shall deliver to the Lessee an Officer's Certificate certifying as to compliance with the transfer requirements contained herein; provided that no such Officer's Certificate is required in case of a transfer of the Beneficial Interest to the Lessee (or Lessee's designee) pursuant to Section 6.9. Upon any such transfer (i) except as the context otherwise requires, such Transferee shall be deemed the "Owner Participant" for all purposes, and shall enjoy the rights and privileges and perform the obligations of the Owner Participant to the extent of the interest transferred hereunder and under each other Operative Agreement to which the Owner Participant is a party, and, except as the context otherwise requires, each reference in this Agreement and each other Operative Agreement to the "Owner Participant" shall thereafter be deemed to include such Transferee for all purposes to the extent of the interest transferred, and (ii) the transferor, except to the extent provided in Section 6.1(i) hereof and except in the case of a transfer to a Transferee described in the proviso to Section 6.1(a)(iii) hereof, shall be released from all obligations hereunder and under each other Operative Agreement to which such transferor is a party or by which such transferor is bound solely to the extent such obligations are expressly assumed by a Transferee; and provided, further, that in no event shall any such transfer or assignment waive or release the transferor from any liability on account of any breach existing prior to such transfer of any of its representations, warranties, covenants or obligations set forth herein or in any of the other Operative Agreements or for any fraudulent or willful misconduct. Subject to Section 6.1(l), the provisions of this Section 6.1 shall not be construed to restrict the Owner Participant from consolidating with or merging into any other corporation or restricting another corporation from merging into or consolidating with the Owner Participant. Notwithstanding any transfer, the transferor Owner Participant shall be entitled to all benefits accrued and all rights vested prior to such transfer, including, without limitation, rights to indemnification under any of the Operative Agreements. No transfer hereunder shall, by virtue of the Transferee engaging in a business or activity not generally conducted by other institutional or corporate investors in lease transactions, increase the Lessee's indemnification obligations under Section 7.1 or 7.2. The Owner Participant hereby acknowledges and agrees (and each Transferee by virtue of any transfer shall be deemed to have acknowledged and agreed) to the terms of the Collateral Agency Agreement. The Lessee agrees to provide notice to the Rating Agency of any proposed transfer by an Owner Participant no later than 5 days after Lessee's receipt of notice of such proposed transfer from an Owner Participant. Participation Agreement (TRLI 2001-1A) 54 Section 6.2 Lessor's Liens Attributable to the Owner Participant. The Owner Participant hereby unconditionally agrees with and for the benefit of each of the other parties to this Agreement that the Owner Participant shall not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to the Owner Participant on or against all or any portion of the Indenture Estate or the Equipment, and the Owner Participant agrees that it shall, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full any such Lessor's Lien; provided that the Owner Participant may contest any such Lessor's Lien in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest therein or interference with the use, operation, or possession of the Equipment or any portion thereof by the Lessee under the Lease or the rights of the Indenture Trustee under the Indenture. Section 6.3 Lessor's Liens Attributable to Trust Company. Trust Company hereby unconditionally agrees with and for the benefit of each of the other parties to this Agreement that it shall not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to it on or against all or any portion of the Trust Estate or the Equipment, the Trust Company agrees that it shall, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full any such Lessor's Lien; provided that the Trust Company may contest any such Lessor's Lien in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest therein or interference with the use, operation, or possession of the Equipment or any portion thereof by the Lessee under the Lease or the right of the Indenture Trustee under the Indenture. Section 6.4 Liens Created by the Indenture Trustee and the Loan Participant. (a) The Indenture Trustee, in its individual capacity, covenants and agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the Loan Participant that it shall not cause or permit to exist any Lien on or against all or any portion of the Equipment, the Pledged Equipment, the Trust Estate or the Indenture Estate arising as a result of (i) claims against the Indenture Trustee in its individual capacity not related to its interest in the Equipment, the Pledged Equipment and the Trust Estate, or to the administration of the Indenture Estate pursuant to the Indenture, (ii) acts of the Indenture Trustee in its individual capacity not contemplated by, or failure of the Indenture Trustee to take any action it is expressly required to perform by, any of the Operative Agreements, (iii) claims against the Indenture Trustee attributable to the actions of the Indenture Trustee in its individual capacity relating to Taxes or expenses that are not indemnified against by Participation Agreement (TRLI 2001-1A) 55 the Lessee pursuant to Section 7 or (iv) claims against the Indenture Trustee arising out of the transfer by the Indenture Trustee of all or any portion of its interest in the Equipment, the Pledged Equipment, the Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative Agreements and with respect to which the Indenture Trustee will, at its own cost and expense (and without any right of reimbursement from any other party hereto), promptly take such action as may be necessary duly to discharge any such Lien. (b) The Loan Participant covenants and agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee that the Loan Participant shall not cause or permit to exist any Lien on or against all or any portion of the Equipment, the Pledged Equipment, the Trust Estate or the Indenture Estate arising as a result of (i) claims against the Loan Participant not related to its interest in the Equipment, the Pledged Equipment and the Trust Estate, (ii) acts of the Loan Participant not contemplated by, or failure of the Loan Participant to take any action it is expressly required to perform by, any of the Operative Agreements, (iii) claims against the Loan Participant relating to Taxes or expenses that are not indemnified against by the Lessee pursuant to Section 7, or (iv) claims against the Loan Participant arising out of the transfer by the Loan Participant of all or any portion of its interest in the Equipment, the Pledged Equipment, the Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative Agreements and with respect to which the Loan Participant will, at its own cost and expense (and without any right of reimbursement from the Lessee), promptly take such action as may be necessary duly to discharge any such Lien. Section 6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee. Each of the Owner Participant and Trust Company, in its individual and trust capacities, hereby agrees, as to its own actions only and severally and not jointly, with (a) the Loan Participant and the Indenture Trustee (so long as the Equipment Notes remain outstanding), not to amend, supplement, or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of the Loan Participant or the Indenture Trustee without the prior written consent of such party and (b) with the Lessee, not to terminate or revoke the Trust Agreement or the trust created by the Trust Agreement prior to the payment in full and discharge of the Equipment Notes and all other indebtedness secured by the Indenture and the final discharge thereof. Each of the Trust Company and the Indenture Trustee agrees, for the benefit of the Lessee and the Owner Participant, to comply with the provisions of the Indenture and not to amend, supplement, or otherwise modify any provision of the Indenture except in the manner provided in Article IX thereof. Notwithstanding anything to the contrary contained herein or in any of the other Operative Agreements, the Indenture Trustee's obligation to take or refrain from taking any actions, or to use its discretion (including, but not limited to, the giving or withholding of consent or approval and the exercise of any rights or Participation Agreement (TRLI 2001-1A) 56 remedies under such Operative Agreement), and any liability therefor, shall, in addition to any other limitations provided herein or in any of the other Operative Agreements, be limited by the provisions of the Indenture. Section 6.6 Amendments to Operative Agreements That Are Not Lessee Agreements. Unless a Lease Event of Default shall have occurred and be continuing, the Owner Trustee, the Indenture Trustee and the Participants shall not terminate the Operative Agreements to which the Lessee is not or will not be a party, or amend, supplement, waive or modify in any manner such Operative Agreements to which the Lessee is not or will not be a party, (i) except in accordance with such Operative Agreements in effect on the date hereof (as amended, modified or supplemented from time to time in accordance with the terms hereof and of such Operative Agreements), or (ii) adverse to the Lessee or to any of its rights or interests under any of the Operative Agreements, except with the prior written consent of the Lessee. Without limiting the generality of the foregoing, each of the Owner Participant and the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (as applicable) agrees that, in any event, unless a Lease Event of Default shall have occurred and be continuing, it will not amend Section 2.10 or Article IX of the Indenture or Article IX of the Trust Agreement without the prior written consent of the Lessee. Section 6.7 Certain Representations, Warranties and Covenants. The Lessee hereby confirms its representations, warranties and covenants in Article 6 of the Collateral Agency Agreement, which are hereby incorporated in this Agreement by this reference as fully as if set forth herein in their entirety. Section 6.8 Covenants of the Manager. The Manager hereby confirms the covenants in Article 7 of the Management Agreement, which are hereby incorporated in this Agreement by this reference as fully as if set forth herein in their entirety. Section 6.9 Lessee's Purchase in Certain Circumstances. (a) If (A) the Owner Participant or any Affiliate thereof is or acquires, is acquired by, merges or otherwise consolidates with any company or Affiliate thereof who would not be an eligible "Transferee" by reason of Section 6.1(b) (and, in the case of an Affiliate, such entity continues to be an Affiliate of the Owner Participant after such acquisition, merger or consolidation), or (B) the Lessee shall have requested a waiver pursuant to Section 12.3(c) of the Lease and the Lessor and the Owner Participant shall have refused to grant such waiver or shall have granted such waiver but shall have refused to further waive the requirement that amounts be deposited in the Special Insurance Reserves Account pursuant to the Collateral Agency Agreement in connection with the granting of the initial waiver, or Participation Agreement (TRLI 2001-1A) 57 (C) the Lessee shall have elected to purchase, or arrange a purchase of, the Beneficial Interest pursuant to Section 22.1 of the Lease, the Lessee may elect either to: (i) keep the Lease and the Equipment Notes in place and require that the Owner Participant, and the Owner Participant agrees to, transfer its Beneficial Interest in accordance with the terms of Section 6.1 (other than provisions of Sections 6.1(a), (b), (i), (l) and (n)) to the Lessee or such other transferee as the Lessee may designate (such transfer to occur on a Determination Date which is designated by the Lessee by written notice to the Owner Participant not less than 60 days prior to such Determination Date) at a purchase price (the "Beneficial Interest Purchase Price") equal to (1) the Equity Portion of Termination Amount as of the date of such transfer, plus (2) in the case of clause (B) above, the excess, if any, of the Fair Market Sales Value of the Equipment calculated as of such date over the Termination Value as of such date, plus (3) the Equity Portion of Basic Rent accrued and unpaid therefor as of the date of such transfer (exclusive of any Basic Rent payable on such date), plus (4) without duplication or limitation of any amount under clauses (1) to (3) above, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto, plus (5) without duplication or limitation of any amount under clauses (1) to (4) above, that portion of Supplemental Rent due and unpaid on such date that is payable to the Owner Participant; provided, however, that, without regard to such Owner Participant's obligations under the Operative Agreements relating to the period prior to such transfer, any transfer of the Beneficial Interest pursuant to this Section 6.9 shall be without additional representations or warranties of or other liabilities or obligations on such Owner Participant other than those expressly set forth in the Owner Participant Agreements; provided, further, that in case such Owner Participant holds less than 100% of the Beneficial Interest (after excluding any Beneficial Interests held by the Lessee, TILC or any Affiliate of either thereof), the purchase price for such Owner Participant's Beneficial Interest shall be equal to (x) (i) the sum of the amounts calculated under clauses (1), (2), (3) and (4) above multiplied by (ii) a fraction equal to the portion such Owner Participant's Beneficial Interest bears to 100% of the Beneficial Interests, plus (y) without duplication or limitation of any amount under clause (x) above, that portion of Supplemental Rent due and unpaid on such date that is payable to such Owner Participant; or (ii) on a Determination Date which is designated by the Lessee by written notice to the Owner Trustee and the Indenture Trustee not less than 60 days prior to such Determination Date, purchase the Equipment for a purchase price equal to (I) the Termination Amount calculated as of such Determination Date, plus (II) in the case of clause (B) of the lead paragraph of this Section 6.9(a), the excess, if any, of the Fair Market Sales Value of the Equipment calculated as of such date over the Termination Value as of such Determination Date, plus (III) without duplication or limitation, all other amounts due and owing by the Lessee under the Participation Agreement (TRLI 2001-1A) 58 Operative Agreements with respect to the Equipment, including, without limitation, all accrued and unpaid Basic Rent therefor as of such Determination Date (exclusive of any Basic Rent payable on such date), Make-Whole Amount then payable on the Equipment Notes pursuant to Section 2.10(c) of the Indenture with respect to the Equipment and Late Payment Premium, if any, due and owing under the Operative Agreements with respect to the Equipment so that, after receipt and application of all such payments the Owner Participant shall be entitled under the terms of the Collateral Agency Agreement to receive, and does receive, in respect of all such Units, the sum of the Accumulated Equity Deficiency Amount (without duplication of any amount provided under clauses (I) - (III) above) and Late Payment Interest related thereto and any other amounts of Supplemental Rent due and unpaid on such Determination Date that are payable to the Owner Participant. (b) If the Lessee elects to exercise the option to purchase the Equipment (as opposed to such Owner Participant's Beneficial Interest) as provided in Section 6.9(a), the Lessee shall, as the purchase price therefor pay the purchase price, as specified in Section 6.9(a)(ii), with respect to the Equipment, together with all other amounts due and owing by the Lessee under the Operative Agreements. (c) In connection with any purchase of the Equipment under this Section 6.9, the Lessee will make the payments required by Section 6.9(a)(ii) in immediately available funds against delivery of a bill of sale transferring and assigning to the Lessee all right, title and interest of the Lessor in and to the Equipment on an "as-is" "where-is" basis and containing a warranty with respect to the absence of any Lessor's Lien. In such event, the costs of preparing the bill of sale or other transfer documents and all other documentation relating to such purchase and the costs of any necessary filings related thereto will be borne by the Lessee. If the Lessee shall fail to fulfill its obligations under Sections 6.9(b) and (c), all of the Lessee's obligations under the Lease and the Operative Agreements, including, without limitation, the Lessee's obligation to pay installments of Rent, with respect to the Equipment shall continue. Section 6.10 Owner Participant as Affiliate of Lessee. If at any time the original or any successor Owner Participant shall be an Affiliate of the Lessee, such Owner Participant and the Lessee agree that, notwithstanding Section 9.5 of the Indenture, they will not vote its Beneficial Interest in any respect if there is another Owner Participant not affiliated with the Lessee, and, if there is no such Owner Participant, they will not vote its Beneficial Interest to modify, amend or supplement any provision of the Lease or this Agreement or give, or permit the Owner Trustee to give, any consent, waiver, authorization or approval thereunder if any such action could reasonably be expected to adversely affect in a material manner the Indenture Participation Agreement (TRLI 2001-1A) 59 Trustee or any holder of an Equipment Note unless such action shall have been consented to by the Pass Through Trustee. Section 6.11 Records; U.S. Income Tax Information. Each of the Lessee, TRMI and TILC covenants that it will maintain or cause to be maintained and retain sufficient factual records (to the extent such records are maintained by the Lessee, TRMI and TILC respectively, any sublessee, or any trustee for or Affiliate of any thereof, in the ordinary course of their respective businesses) to enable the Owner Participant to prepare required United States federal, state and local tax returns. Upon request of the Owner Participant, the Lessee, TRMI and TILC, respectively, shall deliver such records to the Owner Participant at the expense of the Owner Participant. In addition, as soon as practicable, the Lessee, TRMI and TILC, respectively, shall provide or cause to be provided (at the expense of the Lessee) to the Owner Participant such information (in form and substance reasonable satisfactory to the Owner Participant) as the Owner Participant may reasonably request from and as shall be reasonably available to the Lessee, TRMI and TILC, respectively, to enable the Owner Participant to fulfill its tax return filing obligations, to respond to requests for information, to verify information in connection with any income tax audit and to participate effectively in any tax contest. Such information may include, without limitation, information as to the location of and use of the Equipment from time to time (to the extent such information is available on the basis of the records regularly maintained by the Lessee, TRMI and TILC, respectively, any sublessee, or any trustee for or Affiliate of any thereof, in the ordinary course of their respective businesses). SECTION 7. LESSEE'S INDEMNITIES. Section 7.1 General Tax Indemnity. (a) Tax Indemnitee Defined. For purposes of this Section 7.1, "Tax Indemnitee" means the Pass Through Trustee, both in its individual capacity and as trustee, the Owner Participant, its Affiliates (including, without limitation, Philip Morris Capital Corporation, Grant Holdings, Inc., Trimaran Leasing Investors, L.L.C. I, Trimaran Leasing Investors, L.L.C. II and Trimaran Leasing, L.P.), the Owner Trustee, the Trust Company, the Indenture Trustee, both in its individual capacity and as trustee, each of their successors or assigns permitted under the terms of the Operative Agreements, any officer, director, employee or agent of any of the foregoing, the Trust Estate and the Indenture Estate; "Equity Tax Indemnitee" means the Owner Participant, its Affiliates, the Owner Trustee, the Trust Company, and each of their respective successors, assigns, officers, directors, employees and agents and the Trust Estate; "Lender Tax Indemnitee" means each Tax Indemnitee which is not an Equity Tax Indemnitee. Participation Agreement (TRLI 2001-1A) 60 (b) Taxes Indemnified. Except as provided below, all payments by the Lessee to any Tax Indemnitee in connection with the transactions contemplated by the Operative Agreements shall be free of withholdings of any nature whatsoever (and at the time that any payment is made upon which any withholding is required the Lessee shall pay an additional amount such that the net amount actually received will, after such withholding and on an After-Tax Basis, equal the full amount of the payment then due) and shall be free of expense to each Tax Indemnitee for collection or other charges. The Lessee shall defend, indemnify and save harmless each Tax Indemnitee from and against, and as between the Lessee and each Tax Indemnitee the Lessee hereby assumes liability with respect to, all fees (including, without limitation, license fees and registration fees), taxes (including, without limitation, income, gross receipts, franchise, sales, use, value added, property and stamp taxes), assessments, levies, imposts, duties, charges or withholdings of any nature whatsoever, together with any and all penalties, additions to tax, fines or interest thereon ("Taxes") imposed against any of the Tax Indemnitees, any item of Equipment or Pledged Equipment or the Lessee, upon, arising from or relating to (i) any item of the Equipment or the Pledged Equipment, (ii) the construction, manufacture, financing, purchase, delivery, ownership, acceptance, rejection, possession, improvement, use, operation, leasing, subleasing, condition, maintenance, repair, refinancing, registration, sale, return, replacement, storage, abandonment or other application or disposition of any item of the Equipment or the Pledged Equipment, (iii) the rental payments, receipts or earnings arising from any item of the Equipment or the Pledged Equipment or payable pursuant to the Operative Agreements, or (iv) the Operative Agreements, the Equipment Note or any Sublease or any Pledged Equipment Lease or otherwise with respect to or in connection with the transactions contemplated thereby. (c) Taxes Excluded. The indemnity provided in Section 7.1(b) shall not include: (i) as to any Equity Tax Indemnitee, any Income Tax imposed by the United States federal government (but not excluding any Income Tax required to make a payment on an After-Tax Basis); (ii) as to any Equity Tax Indemnitee, any Income Tax imposed by any state, local or foreign government or taxing authority or subdivision Participation Agreement (TRLI 2001-1A) 61 thereof; provided, however, that this exclusion shall not apply to the extent such Taxes (but not including Income Taxes imposed on net income) are attributable to (I) the use or location of any item of the Equipment or the activities of the Lessee or its Affiliates or any sublessee in the taxing jurisdiction, (II) the presence or organization of the Lessee or any sublessee in the taxing jurisdiction, (III) the status of the Lessee or any sublessee as a foreign entity or as an entity owned by a foreign person or (IV) Lessee or sublessee having made (or deemed to have made) payments to the Tax Indemnitee from the relevant jurisdiction; provided, further, however, that the preceding proviso shall not apply to any jurisdiction where the Owner Trust, the Owner Trustee (other than in its individual capacity) or the Owner Participant has its legal domicile or principal place of business (determined without regard to the transactions contemplated by the Operative Agreement); (iii) as to any Equity Tax Indemnitee, any Tax that is imposed as a result of the sale, transfer or other disposition, by the Lessor or the Owner Participant of any of its rights with respect to any item of Equipment or the Owner Participant's interest in the Trust Estate unless such sale, transfer or other disposition is a result of an Event of Default, results from any substitution, repair or replacement of any item of Equipment under the Lease, or results from any sale, transfer or disposition required under the Lease (including but not limited to Section 10 of the Lease); (iv) as to any Equity Tax Indemnitee, any Taxes to the extent they exceed the Taxes that would have been imposed had an Equity Tax Indemnitee not transferred, sold or disposed of its interest or rights in any item of the Equipment to a non-U.S. Person; (v) Taxes imposed on a Lender Tax Indemnitee with respect to any period after the payment in full of the Equipment Notes; provided that the exclusion set forth in this clause (v) shall not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to or simultaneously with the applicable time of payment of the Equipment Notes or relate to any payment made by the Lessee after such date; (vi) as to any Tax Indemnitee, Taxes to the extent caused by any misrepresentation or breach of warranty or covenant by such Tax Indemnitee or a Related Party under any of the Operative Agreements or by the gross negligence or willful misconduct of such Tax Indemnitee or a Related Party; (vii) as to any Lender Tax Indemnitee, Taxes which become payable as a result of a sale, assignment, transfer or other disposition (whether voluntary or involuntary) by such Lender Tax Indemnitee of all or any portion of its interest in the Equipment or any part thereof, the Pledged Equipment or Participation Agreement (TRLI 2001-1A) 62 any part thereof, the Trust Estate, the Indenture Estate or any of the Operative Agreements or rights created thereunder, other than as a result of (A) the substitution, modification or improvement of the Equipment or any part thereof or the Pledged Equipment or any part thereof, (B) a modification to the Operative Agreements, or (C) a disposition which occurs as the result of the exercise of remedies upon a Lease Event of Default; provided, that, notwithstanding the foregoing, the Lessee shall not be obligated to indemnify any Lender Tax Indemnitee with respect to net income taxes imposed within the United States as the result of a sale, assignment, transfer or other disposition by such Lender Tax Indemnitee or any Taxes imposed as a result of the status of the Lender Tax Indemnitee as other than a resident of the United States for tax purposes; (viii) as to any Lender Tax Indemnitee, Taxes imposed as the result of such Lender Tax Indemnitee not being a resident of the United States for tax purposes; (ix) as to any Lender Tax Indemnitee, Income Taxes or transfer taxes relating to any payments of principal, interest or Make Whole Amount, if any, on the Equipment Notes or the Pass Through Certificates paid to any such Tax Indemnitee that are imposed by (A) any other jurisdiction in which such Indemnitee is subject to such Taxes as a result of it or an Affiliate being organized in such jurisdiction or conducting activities in that jurisdiction unrelated to the transactions contemplated by the Operative Agreements, (B) the United States federal government or (C) any state or local government within the United States; (x) Taxes to the extent directly resulting from or that would not have been imposed but for (x) in the case of Taxes imposed on or with respect to any Equity Tax Indemnitee, the existence of any Lessor Liens with respect to such Equity Tax Indemnitee, (y) in the case of Taxes imposed on or with respect to any Lender Tax Indemnitee, the existence of any Liens attributable to the Indenture Trustee or Liens attributable to the Pass Through Trustee; (xi) Taxes imposed on a Tax Indemnitee to the extent that such Taxes would not have been imposed upon such Tax Indemnitee but for any failure of such Tax Indemnitee or a Related Party to comply with (x) any certification, information, documentation, reporting or other similar requirements concerning the nationality, residence, identity or connection with the jurisdiction imposing such Taxes, if such compliance is required under the laws or regulations of such jurisdiction to obtain or establish relief or exemption from or reduction in such Taxes and the Tax Indemnitee or such Related Party was eligible to comply with such requirement or (y) any other certification, information, documentation, reporting or other similar requirements under the Tax laws or regulations of the jurisdiction imposing such Taxes that would establish entitlement to otherwise applicable relief Participation Agreement (TRLI 2001-1A) 63 or exemption from such Taxes; provided, however, that the exclusion set forth in this clause (xii) shall not apply (I) if such failure to comply was due to a failure of the Lessee to provide reasonable assistance on request in complying with such requirement, (II) if, in the case of Taxes imposed on the Owner Participant, in the good faith judgment of the Owner Participant there is a risk of adverse consequence to the Owner Participant or any Affiliate from such compliance against which the Owner Participant is not satisfactorily indemnified, (III) in the case of Taxes imposed on the Owner Participant, if any such failure to comply on the part of the Owner Trustee was the result of the Owner Trustee's gross negligence or failure to act in accordance with instructions of the Owner Participant, or (IV) in the case of any Tax Indemnitee, unless Lessee shall have given such Tax Indemnitee prior written notice of such requirements; (xii) Taxes that are imposed with respect to any period after the earlier of (x) return of the Equipment to the Lessor in accordance with, and at a time and place contemplated by the Lease (including the payment of all amounts due at such time) and (y) the termination of the Term pursuant to Section 6, 10, 11, 15 or 22 of the Lease and the discharge in full of Lessee's payment obligation's thereunder unless the Equipment is thereafter required to be returned, in which case, after such return; provided, however, that the exclusion set forth in this clause (xii) shall not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to or simultaneously with such return or termination; (xiii) as to any Lender Tax Indemnitee, Taxes in the nature of an intangible or similar tax upon or with respect to the value of the interest of such Lender Tax Indemnitee in the Indenture Estate, in any Equipment Note or Pass Through Certificate imposed as a result of such Lender Tax Indemnitee or any Affiliate of such Lender Tax Indemnitee being organized in, or conducting activities unrelated to the contemplated transactions in, the jurisdiction imposing such Taxes; (xiv) Taxes imposed on the Owner Trustee or the Indenture Trustee that are on, based on or measured by any trustee fees for services rendered by such Tax Indemnitee in its capacity as trustee under the Operative Agreements; (xv) Taxes imposed on any Tax Indemnitee, or any other person who, together with such Tax Indemnitee, is treated as one employer for employee benefit plan purposes, as a result of, or in connection with, any "prohibited transaction," within the meaning of the provisions of the Code or regulations thereunder or as set forth in Section 406 of ERISA or the regulations implementing ERISA or Section 4975 of the Code or the regulations thereunder; Participation Agreement (TRLI 2001-1A) 64 (xvi) Taxes for so long as (x) such Taxes are being contested in accordance with the provisions of Section 7.1(e) hereof, (y) the Lessee is in compliance with its obligations under Section 7.1(e), and (z) the payment of such Taxes is not required pursuant to Section 7.1(e); (xvii) Taxes as to which such Tax Indemnitee is indemnified pursuant to the Tax Indemnity Agreement; (xviii) any Taxes imposed on or with respect to any Certificateholder; and (xix) Taxes imposed as a result of the authorization or giving of any future amendments, supplements, waivers or consents with respect to any Operative Agreement other than (w) those which are legally required, (x) in connection with the exercise of remedies pursuant to Section 15 of the Lease, (y) such as have been proposed by the Lessee or consented to by the Lessee or (z) those that are required pursuant to the terms of the Operative Agreements. (d) Payments to Tax Indemnitee. The Lessee agrees to pay, on demand, any and all Taxes indemnified under this Section 7.1 ("Indemnified Taxes"), and to keep at all times all and every part of each item of the Equipment and Pledged Equipment free and clear of all Indemnified Taxes which might in any way affect the interest of any Tax Indemnitee therein or result in a Lien upon any such item of the Equipment or Pledged Equipment; provided, however, that the Lessee shall be under no obligation to pay any Tax so long as either the Tax Indemnitee or the Lessee is contesting in good faith and by appropriate legal proceedings such tax and the nonpayment thereof does not, in the reasonable opinion of the Tax Indemnitee, materially adversely affect the interest of any Tax Indemnitee hereunder or under the Indenture. Subject to Section 7.1(e), if any Indemnified Taxes shall have been charged or levied against any Tax Indemnitee directly and paid by such Tax Indemnitee after such Tax Indemnitee shall have given written notice thereof to the Lessee and the same shall have remained unpaid for a period of ten Business Days thereafter, the Lessee shall reimburse such Tax Indemnitee payment. (e) Contests. If a written claim is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which the Lessee may be required to indemnify against hereunder (a "Tax Claim"), such Tax Indemnitee shall give the Lessee written notice of such Tax Claim promptly (but in any event within twenty (20) days) after its receipt, and shall furnish Lessee with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim (but failure to so notify the Lessee shall relieve the Lessee of its Participation Agreement (TRLI 2001-1A) 65 obligations hereunder only to the extent it effectively precludes a contest of the claim). The Tax Indemnitee shall not pay such Tax Claim until at least thirty (30) days after providing the Lessee with such written notice, unless (a) the Tax Indemnitee is required to do so by law or regulation and (b) in the written notice described above, the Tax Indemnitee has notified the Lessee of such requirement. If the Lessee shall so request within 30 days after receipt of such notice, then such Tax Indemnitee shall in good faith at Lessee's expense contest such Tax; provided, however, that to the extent the contest involves only Taxes constituting property taxes, sales taxes, or use taxes and does not involve any taxes or other issues relating to a Tax Indemnitee which are unrelated to the transactions contemplated by the Operative Agreements and if no Equity Insufficiency Circumstance exists, such contest shall be undertaken by the Lessee at the Lessee's expense and at no-after-tax cost to the Lessor or the Owner Participant, but if such contest would involve any other type of Tax or any taxes or issues relating to a Tax Indemnitee which are unrelated to the transactions contemplated by Operative Agreements or if an Equity Insufficiency exists, then such Tax Indemnitee may, in its sole discretion, control such contest (including selecting the forum for such contest, and determining whether any such contest shall be conducted by (i) paying such Tax under protest or (ii) resisting payment of such Tax or (iii) paying such Tax and seeking a refund thereof; provided, further, however, that at such Tax Indemnitee's option, such contest shall be conducted by the Lessee in the name of such Tax Indemnitee). In no event shall such Tax Indemnitee be required or the Lessee be permitted to contest any Tax for which the Lessee is obligated to indemnify pursuant to this Section unless: (i) the Lessee shall have acknowledged in writing its liability to such Tax Indemnitee for an indemnity payment pursuant to this Section as a result of such claim if and to the extent such Tax Indemnitee or the Lessee, as the case may be, shall not prevail in the contest of such claim; provided, however, that the Lessee shall not be required to indemnify for such Taxes to the extent the results of the contest clearly and unambiguously demonstrate that the Tax is not an indemnified Tax; (ii) such Tax Indemnitee shall have received the opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee furnished at the Lessee's sole expense, to the effect that a reasonable basis exists for contesting such claim or, in the event of an appeal of a court decision, that it is more likely than not that an appellate court or an administrative agency with appellate jurisdiction, as the case may be, will reverse or substantially modify the adverse determination; (iii) the Lessee shall have agreed to pay such Tax Indemnitee on demand (and at no after-tax costs to the Lessor and the Owner Participant) all reasonable costs and expenses that such Tax Indemnitee may incur in connection with contesting such claim (including, without limitation, all costs, expenses, reasonable legal and accounting fees, disbursements, penalties, interest and additions to the Tax); (iv) no Lease Default described in Section 14(a), 14(b), 14(g) or 14(h) of the Lease or a Lease Event of Default shall have occurred and shall have been continuing, unless the Lessee shall have posted a satisfactory bond or other security with respect to the costs of such Participation Agreement (TRLI 2001-1A) 66 contest and the Taxes which may be required to be indemnified; (v) such Tax Indemnitee shall have determined that the action to be taken will not result in any substantial danger of sale, forfeiture or loss of, or the creation of any Lien, or the Lessee shall have or otherwise made a provision to protect the interest of such Tax Indemnitee (in a manner satisfactory to such Tax Indemnitee), on the Equipment or any portion thereof or any interest therein; (vi) the amount of such claims alone, or, if the subject matter thereof shall be of a continuing or recurring nature, when aggregated with substantially identical potential claims shall be (A) at least $5,000 in the event of a Lessee controlled contest, or (B) $25,000 in the event of a Tax Indemnitee controlled contest; and (vii) if such contest shall be conducted in a manner requiring the payment of the claim, the Lessee shall have paid the amount required (and at no after-tax costs to the Lessor and the Owner Participant). The Lessee shall cooperate with the Tax Indemnitee with respect to any contest controlled and conducted by the Tax Indemnitee and the Tax Indemnitee shall consult with the Lessee regarding the conduct of such contest. The Tax Indemnitee shall cooperate with respect to any contest controlled and conducted by the Lessee and the Lessee shall consult with the Tax Indemnitee regarding the conduct of such contest. Notwithstanding anything to the contrary contained in this Section 7.1, no Tax Indemnitee shall be required to contest any claim if the subject matter thereof shall be of a continuing or recurring nature and shall have previously been adversely decided to the Tax Indemnitee pursuant to the contest provisions of this Section unless there shall have been a change in the law (including, without limitation, amendments to statutes or regulations, administrative rulings or court decisions) enacted, promulgated or effective after such claim shall have been so previously decided, and such Tax Indemnitee shall have received an opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee, furnished at the Lessee's sole expense, to the effect that such change is favorable to the position which such Tax Indemnitee or the Lessee, as the case may be, had asserted in such previous contest and as a result of such change, there is a reasonable basis to contest such claim. Notwithstanding anything contained in this Section 7.1, a Tax Indemnitee will not be required to contest the imposition of any Tax and shall be permitted to settle or compromise any claim without the Lessee's consent if such Tax Indemnitee (A) shall waive its right to indemnity under this Section 7.1 with respect to such Tax (and any directly related claim and any claim the outcome of which is determined based upon the outcome of such claim) and (B) shall pay to the Lessee any amount previously paid or advanced by the Lessee pursuant to this Section 7.1 with respect to such Tax, plus interest at the rate that would have been payable by the relevant taxing authority with respect to a refund of such Tax. Participation Agreement (TRLI 2001-1A) 67 (f) Payments to Lessee. With respect to any payment or indemnity hereunder, such payment or indemnity shall have included an amount payable to the Tax Indemnitee sufficient to hold such Tax Indemnitee harmless on an After- Tax Basis from all Taxes required to be paid by such Tax Indemnitee with respect to such payment or indemnity under the laws of any federal, state or local government or taxing authority in or of the United States, or under the laws of any taxing authority or governmental subdivision in or of a foreign country; provided that, if any Tax Indemnitee realizes and recognizes a permanent tax benefit by reason of such payment or indemnity (whether such tax benefit shall be by means of a foreign tax credit, investment tax credit, depreciation or recovery deduction or otherwise), such Tax Indemnitee shall pay to the Lessee an amount equal to the sum of such tax benefit plus any tax benefit realized as the result of any payment made pursuant to this proviso, when, as, if and to the extent realized; provided further that, (i) if at the time such payment shall be due to the Lessee, a Lease Event of Default shall have occurred and be continuing, such amount shall not be payable until such Lease Event of Default shall have been cured, and (ii) the amount which such Tax Indemnitee shall be required to pay to the Lessee shall not exceed the amounts which the Lessee has theretofore paid such Tax Indemnitee hereunder with respect to such indemnity or a substantially identical indemnity. For purposes of this Section 7.1, in determining the order in which the consolidated (for federal income tax purposes) group to which such Tax Indemnitee belongs utilizes withholding or other foreign taxes as a credit against such group's United States income taxes, such Tax Indemnitee (and such group) shall be deemed to utilize (i) first, all foreign taxes other than those described in clauses (ii) and (iii) below; provided, however, that such other foreign taxes which are carried back to the taxable year for which a determination is being made pursuant to such clause (i) shall be deemed utilized after the foreign taxes described in clause (ii) below, (ii) then, on a pari passu basis, the foreign taxes indemnified hereunder together with all other foreign taxes (including fees, taxes and other charges hereunder) with respect to which such Tax Indemnitee (or any member of such group) is entitled to obtain indemnification pursuant to an indemnification provision contained in any lease, loan agreement, financing document or participation agreement (including, without limitation, this Agreement) pursuant to which there is an agreement that foreign taxes shall be, or shall be deemed to be, utilized on a basis no less favorable to the indemnitor than those contemplated in this paragraph, and (iii) third, foreign taxes attributable to transactions entered into by such Tax Indemnitee (or any member of such group) which did not provide for foreign taxes to be utilized or deemed utilized on at least a pari passu basis. (g) Reports. In the event any reports with respect to Indemnified Taxes are required to be made, the Lessee will either prepare and file such reports (and in the case of reports which are required to be filed on the basis of individual Participation Agreement (TRLI 2001-1A) 68 items of Equipment, such reports shall be prepared and filed in such manner as to show, if required, the interest of each Tax Indemnitee in such items of Equipment) or, if it shall not be permitted to file the same, it will notify each Tax Indemnitee of such reporting requirements, prepare such reports in such manner as shall be satisfactory to each Tax Indemnitee and deliver the same to each Tax Indemnitee within a reasonable period prior to the date the same is to be filed. The Lessee shall provide such information as the Owner Participant or the Lessor may reasonably require from the Lessee to enable the Owner Participant and the Lessor to fulfill their respective tax filing, tax audit, and tax litigation obligations. (h) Survival. In the event that, during the continuance of this Agreement, any Indemnified Tax accrues or becomes payable or is levied or assessed (or is attributable to the period of time during which the Lease is in existence or prior to the return of Equipment in accordance with the provisions of the Lease) which the Lessee is or will be obligated to pay or reimburse, pursuant to this Section 7.1, such liability shall continue, notwithstanding the expiration of the Lease, until all such Taxes are paid or reimbursed by the Lessee. (i) Affiliated Group. For purposes of applying this Section 7.1 with respect to any Tax, the term "Owner Participant" shall include each member of the affiliated group of corporations with which Grant Holdings, Inc. (and its successors and assigns) files consolidated or combined tax returns relating to such Imposition. (j) Income Tax. For purposes of this Section 7.1, the term "Income Tax" means any Tax based on or measured by or with respect to gross or net income (including without limitation, capital gains taxes, personal holding company taxes, minimum taxes and tax preferences) or gross or net receipts and Taxes which are capital, net worth, conduct of business, franchise or excess profits taxes and interest, additions to tax, penalties, or other charges in respect thereof (provided, however, that Taxes that are, or are in the nature of, sales, use, rental, value-added, excise, ad valorem, or property (whether tangible or intangible) taxes shall not constitute an Income Tax). (k) Certain Withholding. If the Indenture Trustee fails to withhold any Tax required to be withheld with respect to any payment to a Lender Tax Indemnitee or any claim is otherwise asserted by a taxing authority against any Equity Tax Indemnitee for or on account of any amount required to be withheld from any payment to a Lender Tax Indemnitee or Certificateholder, the Lessee will indemnify each Equity Tax Indemnitee (without regard to any exclusions in Section 7.1(c) hereof) on an After-Tax Basis against any Taxes required to be withheld and any interest, penalties, and additions to tax with respect thereto, along with other costs (including attorneys' fees) incurred in connection with such claim. Participation Agreement (TRLI 2001-1A) 69 Section 7.2 General Indemnification. (a) Claims Defined. For the purposes of Sections 7.2, 7.3 and 7.4, "Claims" shall mean any and all costs, expenses, liabilities, obligations, losses, damages, penalties, actions or suits or claims of whatsoever kind or nature (whether or not on the basis of negligence, strict or absolute liability or liability in tort) which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, any Unit or any Pledged Unit and, except as otherwise expressly provided in Section 7.2, 7.3 and 7.4, shall include, but not be limited to, all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith or related thereto. (b) Indemnified Person Defined. For the purposes of Sections 7.2, 7.3 and 7.4, "Indemnified Person" means the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee, each of their Affiliates and each of their respective directors, officers, employees, successors and permitted assigns, agents and servants, the Trust Estate and the Indenture Estate (the respective directors, officers, employees, successors and permitted assigns, agents and servants of the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as applicable, together with the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as the case may be, being referred to herein collectively as the "Related Indemnitee Group" of the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Trust Company, respectively). (c) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.2(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.2(g)): (i) this Agreement or any other Operative Agreement or any of the transactions contemplated hereby and thereby or any Unit or Pledged Unit or the ownership, lease, operation, possession, modification, improvement, abandonment, use, non-use, maintenance, lease, Sublease, substitution, control, repair, storage, alteration, transfer or other application or disposition, return, overhaul, testing, servicing, replacement or registration of any Unit or Pledged Unit (including, without limitation, injury, death or property damage of passengers, shippers or others, and environmental control, noise and pollution regulations, or the Participation Agreement (TRLI 2001-1A) 70 presence, discharge, treatment, storage, handling, generation, disposal, spillage, release, escape of or exposure of any Person or thing to (directly or indirectly) Hazardous Substances or damage to the environment (including, without limitation, costs of investigations or assessments, clean-up costs, response costs, remediation costs, removal costs, restoration costs, monitoring costs, costs of corrective actions and natural resource damages)) whether or not in compliance with the terms of the Lease or the Collateral Agency Agreement, as applicable, or by any of the commodities, items or materials from time to time contained in any Unit or Pledged Unit, whether or not in compliance with the terms of the Lease or the Collateral Agency Agreement, as applicable, or by the inadequacy of any Unit or Pledged Unit or deficiency or defect in any Unit or Pledged Unit or by any other circumstances in connection with any Unit or Pledged Unit or by the performance of any Unit or Pledged Unit or any risks relating thereto; (ii) the construction, manufacture, financing, refinancing, design, purchase, acceptance, rejection, delivery, non-delivery or condition of any Unit or any Pledged Unit (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement); (iii) any act or omission (whether negligent or otherwise) or any breach of or failure to perform or observe, or any other non-compliance with, any covenant, condition or agreement to be performed by, or other obligation of, the Lessee or any Affiliate of the Lessee under any of the Operative Agreements, or the falsity of any representation or warranty of the Lessee or any Affiliate of the Lessee in any of the Operative Agreements to which it is a party or in any document or certificate delivered by the Lessee or any Affiliate of the Lessee in connection therewith other than representations and warranties in the Tax Indemnity Agreement; (iv) the offer, sale or delivery of any Equipment Notes or Pass Through Certificates or any interest in the Trust Estate or in connection with a refinancing in accordance with the terms hereof; and (v) any violation of law, rule, regulation or order by the Lessee or any Affiliate of Lessee or any Sublessee or any Pledged Equipment Lessee or their respective directors, officers, employees, agents or servants. (d) Claims Excluded. The following are excluded from the Lessee's agreement to indemnify under this Section 7.2: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies Participation Agreement (TRLI 2001-1A) 71 are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to such Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any such Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes, whether or not the Lessee is required to indemnify therefor under Section 7.1 hereof or under the Tax Indemnity Agreement or any loss of tax benefits or increases in tax liability whether or not the Lessee is required to indemnify a Indemnified Person elsewhere in the Operative Agreements; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claims relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9) or (b) with respect to the Loan Participant, of all or any portion of the Loan Participant's interest in the Equipment Notes or the collateral therefor; Participation Agreement (TRLI 2001-1A) 72 (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Lease Event of Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; Participation Agreement (TRLI 2001-1A) 73 (xiii) with respect to the Indenture Trustee in its individual and trust capacities, Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) without affecting Lessee's obligations under Section 2.5(b), Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by Lessee or are not specifically required by the Operative Agreements. (e) Insured Claims. In the case of any Claim indemnified by the Lessee hereunder which is covered by a policy of insurance maintained by the Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified Person agrees to provide reasonable cooperation to the insurers in the exercise of their rights to investigate, defend, settle or compromise such Claim as may be required to retain the benefits of such insurance with respect to such Claim. (f) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify the Lessee of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release the Lessee from any of its obligations under this Section 7.2, except (but only if neither the Lessee nor TILC shall have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on Lessee's ability to defend such Claim or recover proceeds under any insurance policies maintained by the Lessee or to the extent Lessee's indemnification obligations are increased as a result of such failure. The Lessee shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, the Lessee shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, Participation Agreement (TRLI 2001-1A) 74 the defense of such claim or liability; provided that the Lessee shall confirm to such Indemnified Person Lessee's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against Lessee pursuant to this Section 7.2 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against TILC, TRMI and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if Lessee is entitled to control the defense of such Claim pursuant to this Section 7.2 and at the same time TILC, TRMI and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, Lessee's indemnification obligations under this Section 7.2 shall not be reduced as a result of the inability of Lessee to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by TILC, TRMI and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, the Lessee shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of the Lessee. In addition, any Indemnified Person may participate in any proceeding controlled by the Lessee pursuant to this Section 7.2, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to the Lessee materially interfere with such control, at its own expense, in respect of any such proceeding as to which the Lessee shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.2, and at the expense of the Lessee in respect of any such proceeding as to which the Lessee shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.2. The Lessee may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.2(f) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial Participation Agreement (TRLI 2001-1A) 75 proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of the Lessee unless the Indemnified Person waives its rights to indemnification hereunder. (g) Subrogation. If a Claim indemnified by the Lessee under this Section 7.2 is paid in full by the Lessee and/or an insurer under a policy of insurance maintained by the Lessee, the Lessee and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by the Lessee hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount the Lessee or any of its insurers has paid) to the Lessee; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for the Lessee's obligations under the Lease and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.2(f) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. Section 7.3 Indemnification by TILC. (a) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.3(b) below, TILC agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.3(d)): (i) any breach of or any inaccuracy in any representation or warranty made by TILC in this Agreement or any of the other Operative Agreements or in any certificate delivered by TILC pursuant hereto or thereto; (ii) any breach of or failure by TILC to perform any covenant or obligation of TILC set out in or contemplated by this Agreement or any of the other Operative Agreements; and Participation Agreement (TRLI 2001-1A) 76 (iii) any violation of law, rule, regulation or order by TILC or its directors, officers, employees, agents or servants. (b) Claims Excluded. The following are excluded from TILC's agreement to indemnify under this Section 7.3: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to such Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes or any loss of tax benefits or increases in tax liability; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claims relating to any offer, sale, Participation Agreement (TRLI 2001-1A) 77 assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9), or (b) with respect to the Loan Participant, of all or any portion of its interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Manager Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, Claims relating to a failure on Participation Agreement (TRLI 2001-1A) 78 the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by TILC or are not specifically required by the Operative Agreements. (c) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify TILC of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release TILC from any of its obligations under this Section 7.3, except (but only if TILC shall not have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on TILC's ability to defend such Claim or recover proceeds under any insurance policies maintained by TILC or to the extent TILC's indemnification obligations are increased as a result of such failure. TILC shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, TILC shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that TILC shall confirm to such Indemnified Person TILC's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such Participation Agreement (TRLI 2001-1A) 79 proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against TILC pursuant to this Section 7.3 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against Lessee, TRMI and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if TILC is entitled to control the defense of such Claim pursuant to this Section 7.3 and at the same time Lessee, TRMI and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, TILC's indemnification obligations under this Section 7.3 shall not be reduced as a result of the inability of TILC to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by Lessee, TRMI and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, TILC shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of TILC. In addition, any Indemnified Person may participate in any proceeding controlled by TILC pursuant to this Section 7.3, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to TILC materially interfere with such control, at its own expense, in respect of any such proceeding as to which TILC shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.3, and at the expense of TILC in respect of any such proceeding as to which TILC shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.3. TILC may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.3(c) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of TILC unless the Indemnified Person waives its rights to indemnification hereunder. Participation Agreement (TRLI 2001-1A) 80 (d) Subrogation. If a Claim indemnified by TILC under this Section 7.3 is paid in full by TILC and/or an insurer under a policy of insurance maintained by TILC, TILC and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by TILC hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount TILC or any of its insurers has paid) to TILC; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for TILC's obligations under the Management Agreement and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.3(c) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. Section 7.4 Indemnification by TRMI. (a) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.4(b) below, TRMI agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.4(d)): (i) any breach of or any inaccuracy in any representation or warranty made by TRMI in this Agreement or any of the other Operative Agreements or in any certificate delivered by TRMI pursuant hereto or thereto; (ii) any breach of or failure by TRMI to perform any covenant or obligation of TRMI set out in or contemplated by this Agreement or any of the other Operative Agreements; and (iii) any violation of law, rule, regulation or order by TRMI or its directors, officers, employees, agents or servants. (b) Claims Excluded. The following are excluded from TRMI's agreement to indemnify under this Section 7.4: Participation Agreement (TRLI 2001-1A) 81 (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to each Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes or any loss of tax benefits or increases in tax liability; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claim relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9), or (b) with respect to the Loan Participant, of all or any portion of its interest in the Equipment Notes or the collateral therefor; Participation Agreement (TRLI 2001-1A) 82 (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Manager Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, any Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, any Claims relating to failure on the part of the Participation Agreement (TRLI 2001-1A) 83 Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, any Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement or Pass Through Trust Supplement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) any Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by TRMI or are not specifically required by the Operative Agreements. (c) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify TRMI of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release TRMI from any of its obligations under this Section 7.4, except (but only if TRMI shall not have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on TRMI's ability to defend such Claim or recover proceeds under any insurance policies maintained by TRMI or to the extent TRMI's indemnification obligations are increased as a result of such failure. TRMI shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, TRMI shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that TRMI shall confirm to such Indemnified Person TRMI's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against TRMI pursuant to this Section 7.4 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against Lessee, TILC and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if TRMI is entitled to control the defense of such Participation Agreement (TRLI 2001-1A) 84 Claim pursuant to this Section 7.4 and at the same time Lessee, TILC and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, TRMI's indemnification obligations under this Section 7.4 shall not be reduced as a result of the inability of TRMI to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by Lessee, TILC and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, TRMI shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of TRMI. In addition, any Indemnified Person may participate in any proceeding controlled by TRMI pursuant to this Section 7.4, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to TRMI materially interfere with such control, at its own expense, in respect of any such proceeding as to which TRMI shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.4, and at the expense of TRMI in respect of any such proceeding as to which TRMI shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.4. TRMI may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.4(c) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of TRMI unless the Indemnified Person waives its rights to indemnification hereunder. (d) Subrogation. If a Claim indemnified by TRMI under this Section 7.4 is paid in full by TRMI and/or an insurer under a policy of insurance maintained by TRMI, TRMI and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Participation Agreement (TRLI 2001-1A) 85 Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by TRMI hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount TRMI or any of its insurers has paid) to TRMI; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for TRMI's obligations under the Administrative Services Agreement and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.4(c) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT. Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Lease, and expressly, severally and as to its own actions only, agrees that, so long as no Lease Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to the Lessee's rights under the Lease, including, without limitation, the right to possession, use and quiet enjoyment by the Lessee of the Equipment, or by any Sublessee of the Equipment or by any Pledged Equipment Lessee of the Pledged Equipment. SECTION 9. SUCCESSOR INDENTURE TRUSTEE. In the event that the Indenture Trustee gives notice of its resignation pursuant to Section 8.2 of the Indenture, the Owner Trustee shall promptly appoint a successor Indenture Trustee reasonably acceptable to the Lessee. SECTION 10. MISCELLANEOUS. Section 10.1 Consents. Each Participant covenants and agrees (subject, in the case of the Loan Participant, to all of the terms and provisions of the Indenture) that it shall not unreasonably withhold its consent to any consent requested by the Lessee, TILC, TRMI, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, under the terms of the Operative Agreements that by its terms is not to be unreasonably withheld by the Owner Trustee or the Indenture Trustee. Section 10.2 Refinancing. So long as no Lease Event of Default shall have occurred and be continuing, the Lessee shall have the right, at any time following the fifth anniversary of the Closing Date, and provided that Lessee is simultaneously exercising the refinancing option provided by Section 10.2 of the Other Participation Participation Agreement (TRLI 2001-1A) 86 Agreement, to request the Owner Participant and the Owner Trustee to effect an optional prepayment of all, but not less than all, of the Equipment Notes pursuant to Section 2.10(d) of the Indenture as part of a refunding or refinancing operation, provided that the Lessee shall obtain the prior consent of the Owner Participant to be granted in the sole discretion of the Owner Participant acting in good faith if such refinancing imposes any increased risk or liability on or otherwise adversely affects, the Owner Participant; provided further, that the Owner Participant shall not withhold such consent if in its sole judgment (i) any increased risk, or liability is both remote and not material, (ii) the Lessee is at the time at least as creditworthy as on the Closing Date and (iii) Lessee provides an indemnity, in form and substance satisfactory to the Owner Participant, for such increased risk or liability. As soon as practicable after receipt of such request and consent, if required, the Owner Participant and the Lessee will enter into an agreement, in form and substance satisfactory to the parties thereto, as to the terms of such refunding or refinancing as follows: (a) the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee, and any other appropriate parties will enter into a financing or loan agreement (which may involve an underwriting agreement in connection with a public offering), in form and substance reasonably satisfactory to the parties thereto, providing for (i) the issuance and sale by the Owner Trustee or such other party as may be appropriate on the date specified in such agreement (for the purposes of this Section 10.2, the "Refunding Date") of debt securities in an aggregate principal amount (in the lawful currency of the United States) equal to the principal amount of the Equipment Notes outstanding on the Refunding Date, having the same maturity date as said Equipment Notes and having a weighted average life which is not less than or greater than (in either case, by more than three months) the Remaining Weighted Average Life of said Equipment Notes, (ii) the application of the proceeds of the sale of such debt securities to the prepayment of all such Equipment Notes on the Refunding Date, and (iii) payment by Lessee to the Person or Persons entitled thereto of all other amounts, in respect of accrued interest, any Make Whole Amount or other premium, if any, payable on such Refunding Date; (b) the Lessee and the Owner Trustee will amend the Lease in a manner such that (i) if the Refunding Date is not a Rent Payment Date and the accrued and unpaid interest on the Equipment Notes is not otherwise paid pursuant to Section 10.2(a), the Lessee shall on the Refunding Date prepay that portion of the next succeeding installment of Basic Rent as shall equal the aggregate interest accrued on the Equipment Notes outstanding to the Refunding Date, (ii) Basic Rent payable in respect of the period from and after the Refunding Date shall be recalculated to preserve the Net Economic Return which the Owner Participant would have realized had such refunding not occurred, provided that the net present value of Basic Rent shall be minimized to the extent consistent therewith, and (iii) Participation Agreement (TRLI 2001-1A) 87 amounts payable in respect of Stipulated Loss Value, Stipulated Loss Amount, Early Purchase Price, Termination Value and Termination Amount from and after the Refunding Date shall be appropriately recalculated to preserve the Net Economic Return which the Owner Participant would have realized had such refunding not occurred (it being agreed that any recalculations pursuant to subclauses (ii) and (iii) of this clause (b) shall be performed in accordance with the requirements of Section 2.6 hereof); (c) the Owner Trustee will enter into an agreement to provide for the securing thereunder of the debt securities issued by the Owner Trustee pursuant to clause (a) of this Section 10.2 in like manner as the Equipment Notes and/or will enter into such amendments and supplements to the Indenture as may be necessary to effect such refunding or refinancing, which agreements, amendments and/or supplements shall be reasonably satisfactory in form and substance to the Owner Participant; provided that, no such agreement or amendment shall provide for any increase in the security for the new debt securities; and provided further that, notwithstanding the foregoing (but subject to the provisions of clauses (a) and (b) and the lead in paragraph of this Section 10.2 above), the Lessee reserves the right to set the economic terms and other terms not customarily negotiated between an owner participant and a lender of the refunding or refinancing transaction except to the extent adversely affecting cash flow, coverage ratios and reserve accounts as to the Owner Participant to be so offered to the extent that they are passed through to the Lessee in, or define rights or obligations of the Lessee under, the Operative Agreements; provided, further, that no such amendment or supplement will in the sole judgment of the Owner Participant increase its obligations or impair its rights under the Operative Agreements or otherwise adversely affect it without the consent of the Owner Participant; (d) (i) in the case of a refunding or refinancing involving a public offering of debt securities, neither the Owner Trustee nor the Owner Participant shall be an "issuer" for securities law purposes or an "obligor" within the meaning of the Trust Indenture Act of 1939, as amended, the offering materials (including any registration statement) for the refunding or refinancing transaction shall be reasonably satisfactory to the Owner Participant and (ii) the Lessee shall provide satisfactory indemnity to the Owner Trustee and Owner Participant with respect to the refunding or refinancing; (e) unless otherwise agreed by the Owner Participant, the Lessee shall pay to the Owner Trustee as Supplemental Rent an amount, on an After-Tax Basis, equal to any Make-Whole Amount, Late Payment Premium, if any, payable in respect of Equipment Notes outstanding on the Refunding Date pursuant to the Indenture, all interest which is accrued and unpaid in respect of late payments of Basic Rent or any part thereof, all reasonable fees, costs, expenses of such refunding Participation Agreement (TRLI 2001-1A) 88 or refinancing and of the parties hereto incurred in connection with such refunding or refinancing (including all reasonable out-of-pocket legal fees and expenses and the reasonable fees of any financial advisors); (f) the Lessee shall give the Indenture Trustee, the Pass Through Trustee and the Owner Participant not less than 25 days prior written notice of the Refunding Date; (g) the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received (i) such opinions of counsel as they may reasonably request concerning compliance with the Securities Act of 1933, as amended, and any other applicable law relating to the sale of securities and (ii) such other opinions of counsel and such certificates and other documents, each in form and substance reasonably satisfactory to them, as they may reasonably request in connection with compliance with the terms and conditions of this Section 10.2; and (h) all necessary authorizations, approvals and consents shall have been obtained and shall be in full force and effect. The Lessee shall pay to or reimburse the Participants, the Owner Trustee and the Indenture Trustee for all costs and expenses (including reasonable attorneys' and accountants' fees) paid or incurred by them in connection with such refunding or refinancing. Section 10.3 Amendments and Waivers. Except as otherwise provided in the Indenture, no term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party against which enforcement of the termination, amendment or waiver is sought. Section 10.4 Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by facsimile, and any such notice shall become effective (i) upon personal delivery thereof, including, without limitation, by reputable overnight courier, or (ii) in the case of notice by facsimile, upon confirmation of receipt thereof, provided such transmission is promptly further confirmed by any of the methods set forth in clause (i) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: Participation Agreement (TRLI 2001-1A) 89 If to the Lessee: Trinity Rail Leasing I L.P. 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1A) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to TILC: Trinity Industries Leasing Company 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1A) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to TRMI: Trinity Rail Management, Inc. 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1A) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to the Owner Trustee: TRLI 2001-1A Railcar Statutory Trust c/o State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street, Goodwin Square, Hartford, CT 06103 Attention: Corporate Trust Administration Facsimile No.: (860) 244-1889 Confirmation No.:(860) 244-1800 with a copy to: the Owner Participant at the address set forth below Participation Agreement (TRLI 2001-1A) 90 If to the Owner Participant: Trimaran Leasing, L.P. c/o Philip Morris Capital Corporation 225 High Ridge Road, Suite 300 Stamford, CT 06905 Attention: Vice President, Structured Finance Fax No.: (914) 335-8297 Confirmation No.: (914) 335-8204 If to the Indenture Trustee: LaSalle Bank National Association 135 South LaSalle Street Suite 1960 Chicago, IL 60603 Attention: Kristine Schossow, Corporate Trust Services Division Facsimile No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to the Pass Through Trustee: LaSalle Bank National Association 135 South LaSalle Street Suite 1960 Chicago, IL 60603 Attention: Kristine Schossow, Corporate Trust Services Division Facsimile No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to the Rating Agency: Standard & Poor's Corporation 25 Broadway New York, New York 10004 Attention: Stephen F. Rooney Facsimile No.: (212) 438-2646 Confirmation No.: (212) 438-2591 Participation Agreement (TRLI 2001-1A) 91 Section 10.5 Survival. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement, shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby on the Closing Date regardless of any investigation made by any such party or on behalf of any such party. Section 10.6 No Guarantee of Residual Value or Debt. Nothing contained herein or in the Lease, the Indenture, the Trust Agreement or the Tax Indemnity Agreement or in any certificate or other statement delivered by the Lessee in connection with the transactions contemplated hereby shall be deemed to be (i) a guarantee by the Lessee, TILC or TRMI to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Pass Through Trustee or the Loan Participant that the Equipment will have any residual value or useful life, or (ii) a guarantee by the Indenture Trustee, the Owner Trustee, the Owner Participant, the Lessee, TILC or TRMI of payment of the principal of, premium, if any, or interest on the Equipment Notes. Section 10.7 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Beneficial Interest permitted under Section 6.1 hereof and each successive holder of any Equipment Note permitted under the Indenture issued and delivered pursuant to this Agreement or the Indenture. The parties hereto agree that the Collateral Agent shall be a third party beneficiary of this Agreement. Except as expressly provided herein or in the other Operative Agreements, no party hereto may assign their interests herein without the consent of the parties hereto. Section 10.8 Business Day. Notwithstanding anything herein or in any other Operative Agreement to the contrary, if the date on which any payment is to be made pursuant to this Agreement or any other Operative Agreement is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such succeeding Business Day and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. SECTION 10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Participation Agreement (TRLI 2001-1A) 92 Section 10.10 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 10.11 Counterparts. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Section 10.12 Headings and Table of Contents. The headings of the Sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 10.13 Limitations of Liability; Extent of Interest. (a) Liabilities of Participants. Neither the Indenture Trustee, the Owner Trustee nor any Participant shall have any obligation or duty to the Lessee, to TILC, TRMI, to any other Participant or to others with respect to the transactions contemplated hereby, except those obligations or duties of such Participant expressly set forth in this Agreement and the other Operative Agreements, and neither the Indenture Trustee nor any Participant shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Indenture Trustee or any Participant be liable to the Lessee, TILC or TRMI for any action or inaction on the part of the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Owner Trustee, unless such action or inaction is at the direction of the Indenture Trustee or any Participant, as the case may be, and such action or inaction is expressly prohibited hereby. (b) No Recourse to the Owner Trustee. It is expressly understood and agreed by and between Trust Company, the Owner Trustee, the Lessee, the Owner Participant, the Indenture Trustee, and the Loan Participant, and their respective successors and permitted assigns that, subject to the proviso contained in this Section 10.13(b), all representations, warranties and undertakings of the Owner Trustee hereunder shall be binding upon the Owner Trustee only in its capacity as Owner Trustee under the Trust Agreement, and (except as expressly provided herein) Trust Company shall not be liable for any breach thereof, except for its gross Participation Agreement (TRLI 2001-1A) 93 negligence or willful misconduct, or for breach of its covenants, representations and warranties contained herein, except to the extent covenanted or made in its individual capacity; provided, however, that nothing in this Section 10.13(b) shall be construed to limit in scope or substance those representations and warranties of Trust Company made expressly in its individual capacity set forth herein. The term "Owner Trustee" as used in this Agreement shall include any successor trustee under the Trust Agreement, or the Owner Participant if the trust created thereby is revoked. (c) Extent of Interest of Holders of Equipment Notes. No holder of an Equipment Note shall have any further interest in, or other right with respect to, the mortgage and security interests created by the Indenture when and if the principal of and interest on all Equipment Notes held by such holder and all other sums payable to such holder hereunder, under the Indenture and under such Equipment Notes shall have been paid in full. Each holder of the Equipment Notes by its acceptance of an Equipment Note, agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to such holder as provided in Article III of the Indenture and that neither TILC, TRMI, the Lessee, the Owner Participant, the Indenture Trustee nor the Owner Trustee shall be personally liable to any holder of the Equipment Notes for any amounts payable under the Equipment Notes, the Indenture or hereunder, except as expressly provided in the Operative Agreements. (d) Loan Participant's Source of Funds. It is expressly understood and agreed by and between the Owner Trustee, the Lessee, the Owner Participant, the Indenture Trustee and the Loan Participant, and their respective successors and permitted assigns that, subject to the proviso contained in this Section 10.13(d), the undertakings of the Loan Participant hereunder are limited to the application of the proceeds of the sale of the Pass Through Certificates to the purchase by the Pass Through Trustee of the Equipment Notes; provided, however, that nothing in this Section 10.13(d) shall be construed to limit in scope or substance those representations and warranties of the Loan Participant made expressly in its individual capacity set forth herein. Section 10.14 Maintenance of Non-Recourse Debt. The parties hereto agree that if the Owner Trustee becomes a debtor subject to the reorganization provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code") or any successor provision, the parties hereto will make an election under 1111(b)(1)(A)(i) of the Bankruptcy Code. If (a) the Owner Trustee becomes a debtor subject to the reorganization provisions of the Bankruptcy Code or any successor provision, (b) pursuant to such reorganization provisions the Owner Trustee is required, by reason of the Owner Trustee being held to have recourse liability to the Pass Through Trustee or the Indenture Trustee, directly or indirectly, to make payment on account of any amount payable under the Equipment Notes or any of the other Operative Participation Agreement (TRLI 2001-1A) 94 Agreements and (c) the Indenture Trustee and/or the Pass Through Trustee actually receives any Excess Amount (as hereinafter defined) which reflects any payment by the Owner Trustee on account of (b) above, then the Indenture Trustee and/or the Pass Through Trustee, as the case may be, shall promptly refund to the Owner Trustee such Excess Amount. For purposes of this Section 10.14, "Excess Amount" means the amount by which such payment exceeds the amount which would have been received by the Indenture Trustee or the Pass Through Trustee if the Owner Trustee had not become subject to the recourse liability referred to in (b) above. Section 10.15 Ownership of and Rights in Units and Pledged Units. The sale of the Units described on Schedule 1 hereto, the Existing Equipment Subleases, the Pledged Units and the Existing Pledged Equipment Leases by TILC contemplated hereby is intended for all purposes to be a true sale of all of TILC's right, title and interest in and to such Units, the Existing Equipment Subleases, the Pledged Units and the Existing Pledged Equipment Leases to the Lessee, which shall be the legal owner thereof upon such sale. Upon consummation of the sale and leaseback transactions contemplated hereby, the Lessee's interest in such Units is intended to be that of a lessee only. It is intended that for federal and state income tax purposes the Owner Participant will be the owner of such Units. The rights of the Indenture Trustee in and to such Units pursuant to the Indenture is intended to be that of a secured party holding a security interest, subject to the Lease and the rights of the Lessee thereunder. No holder of an Equipment Note is intended to have any right, title or interest in or to such Units except as a beneficiary of the Lien granted by the Owner Trustee to the Indenture Trustee pursuant to the Indenture in trust for the equal and ratable benefit of the holders from time to time of the Equipment Notes. Section 10.16 No Petition. Each party hereto agrees that, prior to the date which is one year and one day after payment in full of all outstanding Equipment Notes and all obligations of the Lessee under the Operative Agreements and release of all Collateral held under the Collateral Agency Agreement (i) no party hereto shall authorize the Lessee to commence a voluntary winding-up or other voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Lessee or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect in any jurisdiction or seeking the appointment of an administrator, a trustee, receiver, liquidator, custodian or other similar official of the Lessee or any substantial part of its property or to consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against the Lessee, or to make a general assignment for the benefit of any party hereto or any other creditor of the Lessee, and (ii) none of the parties hereto shall commence or join with any other Person in commencing any proceeding against the Lessee under any bankruptcy, reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction. Each of the parties hereto agrees that, prior to the date which is one year and one day after the Participation Agreement (TRLI 2001-1A) 95 payment in full of all outstanding Equipment Notes and all obligations of the Lessee under the Operative Agreements and release of all Collateral held under the Collateral Agency Agreement, it will not institute against, or join any other Person in instituting against, Lessee an action in bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceeding under the laws of the United States or any state of the United States. Section 10.17 Consent To Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 10.4 hereof, or at such other address of which the other parties shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. SECTION 10.18 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS AGREEMENT. * * * Participation Agreement (TRLI 2001-1A) 96 IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be executed and delivered, all as of the date first above written. Lessee: TRINITY RAIL LEASING I L.P. By TILX GP I, LLC its General Partner By: ---------------------------------- Name: Eric Marchetto Title: Vice President TILC: TRINITY INDUSTRIES LEASING COMPANY By: -------------------------------------- Name: Eric Marchetto Title: Vice President TRMI: TRINITY RAIL MANAGEMENT, INC. By: -------------------------------------- Name: Eric Marchetto Title: Vice President Participation Agreement (TRLI 2001-1A) Owner Trustee: TRLI 2001-1A RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein but solely as Owner Trustee By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Participation Agreement (TRLI 2001-1A) Owner Participant: TRIMARAN LEASING, L.P. By: Trimaran Leasing Investors, L.L.C.-I, its General Partner By: Grant Holdings, Inc., its sole member By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Participation Agreement (TRLI 2001-1A) Indenture Trustee: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee By: -------------------------------------- Name: Sarah H. Webb Title: Senior Vice President Pass Through Trustee: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity except as expressly provided herein but solely as Pass Through Trustee By: -------------------------------------- Name: Sarah H. Webb Title: Senior Vice President Participation Agreement (TRLI 2001-1A) EX-10.16.2 9 d94851ex10-16_2.txt EQUIPMENT LEASE AGREEMENT (TRL 1 2001-1B) Exhibit 10.16.2 ________________________________ EQUIPMENT LEASE AGREEMENT (TRLI 2001-1B) Dated as of July 12, 2001 between TRLI 2001-1B RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein but solely as Owner Trustee, Lessor and TRINITY RAIL LEASING I L.P., Lessee Tank Cars and Covered Hopper 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, LASALLE BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT (TRLI 2001-1B), DATED AS OF JULY 12, 2001 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. ________________________________ TABLE OF CONTENTS Page ---- SECTION 1. Definitions........................................................1 SECTION 2. Acceptance and Leasing of Equipment................................1 SECTION 3. Term and Rent......................................................2 Section 3.1 Lease Term.................................................2 Section 3.2 Basic Rent.................................................2 Section 3.3 Supplemental Rent..........................................3 Section 3.4 Adjustment of Rent.........................................4 Section 3.5 Manner of Payments.........................................4 SECTION 4. Ownership and Marking of Equipment.................................4 Section 4.1 Retention of Title.........................................4 Section 4.2 Duty to Number and Mark Equipment..........................5 Section 4.3 Prohibition Against Certain Designations...................5 SECTION 5. Disclaimer of Warranties...........................................6 Section 5.1 Disclaimer of Warranties...................................6 Section 5.2 Rights Under Existing Equipment Subleases..................7 SECTION 6. Return of Equipment; Storage.......................................7 Section 6.1 Return; Holdover Rent......................................7 Section 6.2 Condition of Equipment....................................10 SECTION 7. Liens.............................................................11 SECTION 8. Maintenance; Possession; Compliance with Laws.....................11 Section 8.1 Maintenance and Operation.................................11 Section 8.2 Possession and Use........................................13 Section 8.3 Sublease..................................................13 SECTION 9. Modifications.....................................................16 Section 9.1 Required Modifications....................................16 Section 9.2 Optional Modifications....................................17 Section 9.3 Removal of Property; Replacements.........................18 Page ---- SECTION 10. Voluntary Termination.............................................18 Section 10.1 Right of Termination......................................18 Section 10.2 Sale of Equipment.........................................19 Section 10.3 Retention of Equipment by Lessor..........................21 Section 10.4 Termination of Lease......................................22 Section 10.5 Funding of Accounts on Termination........................22 SECTION 11. Loss, Destruction Requisition, Etc................................23 Section 11.1 Event of Loss.............................................23 Section 11.2 Replacement or Payment upon Event of Loss.................23 Section 11.3 Rent Termination..........................................25 Section 11.4 Disposition of Equipment; Replacement of Unit.............26 Section 11.5 Eminent Domain............................................28 SECTION 12. Insurance.........................................................28 Section 12.1 Insurance.................................................28 Section 12.2 Physical Damage Insurance.................................30 Section 12.3 Public Liability Insurance................................31 Section 12.4 Certificate of Insurance..................................32 Section 12.5 Additional Insurance......................................33 Section 12.6 Post-Lease Term Insurance.................................34 SECTION 13. Reports; Inspection...............................................34 Section 13.1 Duty of Lessee to Furnish.................................34 Section 13.2 Lessor's Inspection Rights................................35 SECTION 14. Lease Events of Default...........................................36 SECTION 15. Remedies..........................................................39 Section 15.1 Remedies..................................................39 Section 15.2 Cumulative Remedies.......................................43 Section 15.3 No Waiver.................................................43 Section 15.4 Notice of Lease Default...................................43 Section 15.5 Lessee's Duty to Return Equipment Upon Default............43 Section 15.6 Specific Performance; Lessor Appointed Lessee's Agent.....44 SECTION 16. Filings; Further Assurances.......................................45 Section 16.1 Filings...................................................45 ii Page ---- Section 16.2 Further Assurances........................................45 Section 16.3 Other Filings.............................................46 Section 16.4 Expenses..................................................46 SECTION 17. Lessor's Right to Perform.........................................46 SECTION 18. Assignment........................................................47 Section 18.1 Assignment by Lessor......................................47 Section 18.2 Assignment by Lessee......................................47 Section 18.3 Sublessee's or Others Performance and Rights..............47 SECTION 19. Net Lease, Etc....................................................48 SECTION 20. Notices...........................................................49 SECTION 21. Concerning the Indenture Trustee..................................51 Section 21.1 Limitation of the Indenture Trustee's Liabilities.........51 Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease............................................51 SECTION 22. Purchase Options; Renewal Options.................................51 Section 22.1 Early Purchase Option.....................................51 Section 22.2 Election to Retain or Return Equipment at End of Basic or Renewal Term...............................54 Section 22.3 Purchase Option...........................................54 Section 22.4 Renewal Option............................................55 Section 22.5 Rent Appraisal; Outside Renewal Date......................56 Section 22.6 Stipulated Loss Amount and Termination Amount During Renewal Term....................................57 Section 22.7 Deemed Renewals...........................................57 Section 22.8 Funding of Accounts on Purchase...........................58 SECTION 23. Limitation of Lessor's Liability..................................58 SECTION 24. Investment of Security Funds......................................58 SECTION 25. Miscellaneous.....................................................58 Section 25.1 Governing Law; Severability...............................58 iii Page ---- Section 25.2 Execution in Counterparts.................................59 Section 25.3 Headings and Table of Contents; Section References........59 Section 25.4 Successors and Assigns....................................59 Section 25.5 True Lease................................................59 Section 25.6 Amendments and Waivers....................................60 Section 25.7 Survival..................................................60 Section 25.8 Business Days.............................................60 Section 25.9 Directly or Indirectly; Performance by Managers...........60 Section 25.10 Incorporation by Reference................................61 iv APPENDICES AND EXHIBITS Exhibit A -- Form of Lease Supplement Exhibit B-1 -- Form of Net Sublease Exhibit B-2 -- Form of Full Service Sublease v EQUIPMENT LEASE AGREEMENT (TRLI 2001-1B) This Equipment Lease Agreement (TRLI 2001-1B), dated as of July 12, 2001 (this "Lease"), is by and between TRLI 2001-1B Railcar Statutory Trust by State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein, but solely as trustee under the Trust Agreement, as Lessor, and Trinity Rail Leasing I 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 to the Participation Agreement (TRLI 2001-1B), dated as of May 17, 2001 (the "Participation Agreement"), by and among (i) Trinity Rail Leasing I L.P., a Texas limited partnership (together with its permitted successors and assigns, the "Lessee"), (ii) Trinity Rail Management, Inc., a Delaware corporation, (iii) Trinity Industries Leasing Company, a Delaware corporation, (iv) TRLI 2001-1B Railcar Statutory Trust, a Connecticut statutory trust, by State Street Bank and Trust Company of Connecticut, National Association, a national banking association, ("Trust Company"), not in its individual capacity except as expressly provided herein but solely as trustee (together with its permitted successors and assigns, the "Owner Trustee"), (v) Trimaran Leasing, L.P., a Delaware limited partnership (together with its permitted successors and assigns, the "Owner Participant") and (vi) LaSalle Bank National Association, a national banking association, not in its individual capacity except as expressly provided herein but solely as pass through trustee and indenture trustee, 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. Lease Agreement (TRLI 2001-1B) 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 Basic Term Expiration Date. Subject and pursuant to Section 22.4, Lessee may elect one or more Renewal Terms and, as provided in Section 22.7 hereof, in certain circumstances a Renewal Term shall be deemed to have occurred with respect to some or all of the Units. Section 3.2 Basic Rent. Lessee hereby agrees to pay 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 such Unit 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). Schedule 3-B to the Participation Agreement sets forth the Basic Rent allocated for Federal income tax purposes to each lease period and calendar year throughout the Basic Term and in addition, sets forth that for certain months, amounts of Basic Rent shall be allocated to the following and/or preceding calendar year. Schedule 3-B to the Participation Agreement also sets forth the application of Basic Rent payments to the calendar year to which such payments relate. It is the intention of Lessor and Lessee that 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 Treas. Reg. Section 1.467-1(c)(2)(ii). 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 be 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. In addition, Lessor and Lessee intend that under no circumstances are any Basic 2 Lease Agreement (TRLI 2001-1B) Rents to be considered related to (i) any period after the calendar year succeeding the calendar year in which such Basic Rents are payable or any period before the calendar year preceding the calendar year in which such Basic Rents are payable or (ii) the period beginning on the Closing Date and ending on (but not including) September 29, 2001 (the "Basic Rent Holiday"). 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, 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. Section 3.3 Supplemental Rent. Lessee also agrees to pay to Lessor, or to whosoever shall be entitled thereto, any and all Supplemental Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise as in the case of nonpayment of Basic Rent. 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 10, in the case of the purchase of any Unit (but not in the case of a purchase of the Beneficial Interest or if the Equipment Notes are assumed in accordance with the Operative Agreements) pursuant to Section 22.1 or Section 6.9 of the Participation Agreement, and in the case of any refinancing of the Equipment Notes pursuant to Section 10.2 of the Participation Agreement. 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. 3 Lease Agreement (TRLI 2001-1B) Section 3.4 Adjustment of Rent. Lessee and Lessor agree that the 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. 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, Goodwin Square, Hartford, CT, 06103, Attention: Corporate Trust Administration, 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 into 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 135 S. LaSalle Street, Suite 1960, Chicago, IL 60603, ABA No. 071000505, Account 608775318, Attn: Kristine Schossow, Corporate Trust Services Division, Trust TRLI 2001-1B, 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 pursuant to distribution from any of the Accounts (as such term is defined in the Collateral Agency Agreement) 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 notwithstanding the delivery to and possession and use of such Unit by Lessee hereunder or any Sublessee under any sublease permitted hereby. 4 Lease Agreement (TRLI 2001-1B) 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 as soon as practicable after the date on which a Lease Supplement is executed and delivered in respect of a Replacement Unit pursuant to Section 11.4(b), Lessee will cause, each Unit to be numbered with its 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" 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, 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 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 above provided, Lessee will not allow the name of any Person to be placed on any Unit as a designation that might reasonably be interpreted as a claim of ownership; 5 Lease Agreement (TRLI 2001-1B) provided, however, that, subject to the delivery of the statement of new reporting marks specified in Section 4.2, Lessee may cause any Unit to be lettered with the names or initials or other insignia customarily used by Lessee or any Sublessee or any of their respective Affiliates on railroad equipment 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 any 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 NEITHER LESSOR, AS LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF 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 AND OWNER PARTICIPANT EXPRESSLY DISCLAIMS SELECTION 6 Lease Agreement (TRLI 2001-1B) 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. 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; 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. 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 Under Existing Equipment 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. 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 any 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 for the storage of rolling stock within the Contiguous United States sufficient 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. 7 Lease Agreement (TRLI 2001-1B) (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, f.o.b. such location, (i) as may be agreed upon by Lessor and 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 60 days thereafter. On or before the 90th 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 wilful 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 8 Lease Agreement (TRLI 2001-1B) 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 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, 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 (provided that such Units shall be transported to no more than ten (10) locations, each having adequate storage capacity) 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 Lessor; provided, however, that any incremental costs associated with movement from the storage facility designated by Lessee pursuant to this clause (iii) over the costs that would be incurred in movement from the storage facility designated by Lessor pursuant to Section 6.1 (a) shall be for the account 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. 9 Lease Agreement (TRLI 2001-1B) (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 6.1(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, 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. 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 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, (vi) empty, (vii) unless industry custom or practice indicates to the contrary, steam cleaned or otherwise cleaned in a comparable commercially acceptable manner and (viii) free and clear of all Liens except Lessor's Liens. All logs, records, books and other materials, or appropriate 10 Lease Agreement (TRLI 2001-1B) copies of any thereof, relating to the maintenance of such Unit shall, upon Lessor's request, 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 wilful misconduct; and further provided, that if such Unit is not in compliance with the conditions set forth in this Section 6.2, then 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 reason able 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 to Lessor 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 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 may be 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, or cause the Manager under the Management Agreement to maintain, repair and keep each Unit, (i) according to 11 Lease Agreement (TRLI 2001-1B) 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 or, with respect to any Equipment subject to an Existing Equipment Sublease that is a Net Sublease, the applicable Sublessee, as applicable, in respect of railcars owned or managed by the Manager or, with respect to any Equipment subject to an Existing Equipment Sublease that is a Net Sublease, the applicable Sublessee, as applicable, similar in type to such Unit, (iii) in accordance in all material respects with all manufacturer's warranties in effect 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, 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, the applicable Sublessee, as applicable, Lessee may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such standard, rule or regulation in any reasonable manner which does not materially interfere with the use, possession, operation or return of any of the Units or materially adversely affect the rights or interests of Lessor and the Indenture Trustee in the Units or hereunder or other wise expose Lessor, the Indenture Trustee or any Participant to criminal sanctions or release Lessee from the obligation to return the Units in compliance with the provisions of Section 6.2; provided further, that Lessee shall promptly notify Lessor 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 in all material respects 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. 12 Lease Agreement (TRLI 2001-1B) (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 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(i), 11.3 and 11.4. 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 forty percent (40%) of the Units and the Other Units (as determined by mileage records and measured annually on a calendar year basis) be used outside the Contiguous United States at the same time. 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 a sublease, car contract or other contract granting permission for the use of a Unit to: (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 13 Lease Agreement (TRLI 2001-1B) 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; or (iii) wholly-owned Subsidiaries of Trinity organized under the laws of (x) Canada or any political subdivision thereof (each a "Canadian Affiliate") or (y) Mexico or any political subdivision thereof (each a "Mexican Affiliate") (subleases to any of such sublessees referred to in clauses (i), (ii) or (iii) of this Section 8.3 being herein referred to as "Permitted Subleases"); provided, however, that Lessee shall not (A) sublease to a sublessee organized under the laws of Mexico or any state thereof (a "Mexican Sublessee") if, after giving effect to such sublease, 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 to Mexican Sublessees exceeds the lesser of (I) 7% (or, with Rating Agency Confirmation, 20%) of the Units, Other Units and the Pledged Units in the aggregate, or (II) the percentage of railcars leased or subleased to Mexican Sublessees in the Total Managed Fleet, and (B) sublease more than 50 Units and Other Units to any single Mexican Sublessee (other than (x) with Rating Agency Confirmation, to a Mexican Affiliate or (y) a Mexican Sublessee (I) with a credit rating of at least BBB and Baa2 as determined by S&P and Moody's, respectively (or, in the event that either S&P or Moody's shall not or cease to provide a credit rating for such entity, a credit rating of at least BBB or Baa2 by S&P or Moody's, as the case may be) or (II) with a full, unconditional irrevocable guaranty from such Mexican Sublessee's parent with a credit rating at least BBB and Baa2 as determined by S&P and Moody's, respectively, or (III) with a letter of credit from a provider with a credit rating at least A+ or A1 as determined by S&P and Moody's, respectively), provided, further, that Lessee shall not at any time sublease more than 20% (or, with Rating Agency Confirmation, 30%) of the Units and the Other Units (as measured by number of Units and Other Units and not mileage records) in the aggregate to Canadian Affiliates, provided, further, that any Unit subleased to a Canadian Affiliate or a Mexican Affiliate shall be sub-subleased to Persons of the type described in clause (i) or (ii) above pursuant to a sub-sublease containing terms 14 Lease Agreement (TRLI 2001-1B) and conditions similar in all material respects to the applicable sublease between Lessee and the applicable Canadian Affiliate or Mexican Affiliate and, provided, further, that no sub-sublease may provide greater rights to the sub-sublessee than those provided to the sublessee in the related sublease. Each Sublease (and to the extent permitted, sub-sublease) other than Existing Equipment Subleases shall include appropriate provisions so that such sublease (i) shall require the payment of rent (x) in dollars (y) at Fair Market Rental Value and (z) not disproportionately in the earlier term of the sublease compared to in the later term of the sublease; (ii) shall not permit any sub-subleasing (or in the case of any sub-sublease, any subleasing), other than (A) sub-subleases by Canadian Affiliates or Mexican Affiliates to Persons of the type described in clauses (i) or (ii) of the immediately preceding paragraph containing terms and conditions similar in all material respects to the applicable sublease between Lessee and the applicable Canadian Affiliate or Mexican Affiliate, (B) "single trip" subleases or (C) sub-subleases by Permitted Sublessees so long as such sub-sublease is (X) of a term of not more than one year, (Y) subject and subordinate to the Sublease and (Z) to a sub-sublessee and on terms such that it would be a Permitted Sublease if it were entered into directly by the Partnership and shall not permit any sub-sub-sub leasing, (iii) provide that the rights of the Sublessee to offset or otherwise set-off against amounts due to Lessee from any such Sublessee under the applicable Sublease be limited to matters arising under the Sublease (except that the Sublessee may offset or otherwise set off amounts due to the Marks Company Trustee under the Sublease), (iv) without regard to the payment of Basic Rent or the Lease Term, shall not include any term or provision which is inconsistent with the terms and conditions of this Lease or which could reasonably be expected to result in material adverse consequences to Lessor, any Participant or the Indenture Trustee (it being agreed that a sublease substantially in the form attached as Exhibit B-1 or Exhibit B-2 satisfies the provisions of this sentence) and (v) does not have a term which extends three years beyond the later of (i) the Basic Term Expiration Date or (ii) if applicable, the end of any Renewal Term then in effect. Lessee will use commercially reasonable efforts to have each Sublease other than Existing Equipment Subleases (i) provide that such Sublease and all rights of the Sublessee (and of any other person claiming or who may hereafter claim under or through the Sublessee) under such Sublease, including any purchase options of the Sublessee thereunder, be made subject and subordinate to the terms of this Lease and (ii) be substantially in the form attached as Exhibit B-1 or Exhibit B-2. 15 Lease Agreement (TRLI 2001-1B) 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 jurisdiction in which the Partnership's chief executive office is located and in the Partnership's jurisdiction of formation covering all Subleases generally. 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 such Required Modification at its own expense; provided, however, that Lessee may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such law, regulation, requirement or rule in any reasonable manner which does not materially interfere with the use, possession, operation or return of any Unit or materially adversely affect the rights or interests of Lessor or the Indenture Trustee in the Units or hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant to criminal sanctions or relieve Lessee of the obligation to return the Units in compliance with the provisions of Section 6.2; provided, further, that, with respect to a Unit subject to a Full Service Sublease, the Manager, and with respect to a Unit subject to a Net Sublease, the Sublessee, as applicable, is similarly contesting such law, regulation, requirement or rule with respect to all other similar equipment owned or operated by the Manager or the Sublessee, as applicable. Title to any Required Modification shall immediately vest in Lessor. Notwithstanding anything herein to the contrary, if Lessee, on a non-discriminatory basis, determines in its reasonable judgment (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 and the Manager certifies that it has made a similar determination with respect to similar railcars in similar 16 Lease Agreement (TRLI 2001-1B) circumstances which are part of the Manager's Fleet, 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 except that the amount payable under Section 11.2(ii)(a) as a result of such determination shall be an amount equal to the greater of the Fair Market Sales Value or Stipulated Loss Amount of such Unit; provided that there shall also be included in such Officer's Certificate a statement of how Lessee intends to meet the financial obligations imposed under said Sections 11.2, 11.3 and 11.4 with respect to such Units. 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 shall diminish the fair market value, utility, capacity, residual value or remaining economic useful life of such Unit below the fair market value, utility, capacity, residual value 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. Title to any 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. If Lessee has not removed any Severable Modification prior to the return of the related Unit as 17 Lease Agreement (TRLI 2001-1B) 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, utility, capacity, residual value 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. 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, if such termination is for less than all Units in a Functional Group across the Partnership Fleet, Lessee shall exercise such termination hereunder and under the comparable provisions contained in the Other Lease (i) with respect to at least 50 railcars in the aggregate of the type included in such Functional Group, (ii) no fewer than 25 railcars of the type included in such Functional Group shall in the aggregate remain subject to this Lease and the Other Lease, (iii) such termination shall be made hereunder and under the Other Lease pro rata in accordance with the number of units in such Functional Group subject to each such lease and (iv) the determination as to which Units are subject to termination shall otherwise be made by Lessee on a random basis without discrimination based on maintenance status, operating condition of the Units in question or otherwise) (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 Managers and a certificate executed by the Chief Financial Officer of the General Partner and the 18 Lease Agreement (TRLI 2001-1B) Chief Financial Officer of the Manager) that such Units have become obsolete or surplus to Lessee's requirements, (y) Lessor has received 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 the Manager's Fleet, 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 (z) Lessee delivers at least 120 days' prior notice to Lessor and the Indenture Trustee (i) 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, and (ii) if some but less than all of the Units in a Functional Group are designated as Terminated Units, describing in such Officer's Certificate the nondiscriminatory manner in which Lessee proposes to determine which Units in that Functional Group are to be Terminated Units. 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; 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, each Participant and the Indenture Trustee on an After Tax Basis 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 or Affiliates thereof for the cash purchase of the Terminated Units, 19 Lease Agreement (TRLI 2001-1B) 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 an Affiliate of Lessee (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)), which 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 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 and retained by 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 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 reasonable costs and expenses (including any applicable sales, transfer or similar taxes) of Lessor and Owner Participant in connection with such sale) of the Terminated Units, (C) an amount equal to the Make-Whole Amount and any unpaid Late Payment Premium in respect of 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 (exclusive of any Basic Rent due on such date) then due and payable hereunder (which shall include, without limitation, the Accumulated Equity Deficiency Amount (without duplication of amounts calculated above) and Late Payment Interest related thereto), so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant. If no sale shall have occurred, whether as a result of Lessee's failure to pay all of the amounts hereinabove required or otherwise, 20 Lease Agreement (TRLI 2001-1B) this Lease shall continue in full force and effect with respect to such Units and Lessee agrees to reimburse Lessor, each Participant and the Indenture Trustee for all reasonable costs and expenses (including reasonable legal fees and expenses) incurred by any thereof in connection therewith; provided that if such sale shall not have occurred solely because of Lessee's failure to pay the amounts hereinabove required, Lessee shall have no further right to terminate this Lease with respect to such Units. Lessee, in acting as agent for Lessor, shall have no liability to Lessor for failure to obtain the best price, shall act in its sole discretion and shall be under no duty to solicit bids publicly or in any particular market. Lessee's sole interest in acting as agent shall be to use its reasonable best efforts to sell the Units at the highest price then obtainable consistent with the terms of this Lease. 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, 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 and all Supplemental 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, but inclusive of any Supplemental Rent measured by the Make-Whole Amount and any unpaid Late Payment Interest in respect of the Terminated Units), so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant. 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. If Lessor elects not to sell the Terminated Units as 21 Lease Agreement (TRLI 2001-1B) provided in this Section 10.3, then 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. Upon payment by Lessor of the foregoing, Lessee shall pay to Lessor an amount of rent equal to the Make-Whole Amount and any unpaid Late Payment Interest in respect of the principal amount of the Equipment Notes to be prepaid together with all Basic Rent (including Basic Rent due on the Termination Date) and Supplemental Rent due and owing; provided that unless all such amounts shall have been paid to the Indenture Trustee on the Termination Date, this Lease shall continue in full force and effect. 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. 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 10.5 Funding of Accounts on Termination. Lessee will not exercise a termination option under this Section 10 with respect to all of the Units unless either (a) the full amount required to fund the Post Lease Term Reserve 22 Lease Agreement (TRLI 2001-1B) Account is (upon consummation of such purchase and distribution of all amounts required to be distributed by the Collateral Agent under the Collateral Agency Agreement) and will be then available to the Collateral Agent to fund such Post Lease Term Reserve Account or (b) an indemnity pursuant to Section 3.13 of the Collateral Agency Agreement has been provided. 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 be permanently returned to the manufacturer pursuant to any patent indemnity provisions, (iv) shall have title thereto taken or appropriated by any governmental authority, agency or instrumentality under the power of eminent domain or otherwise or (v) shall be taken or requisitioned for use by any governmental authority or any agency or instrumentality thereof under the power of eminent domain or otherwise, and such taking or requisition is for a period that exceeds the remaining Basic Term or any Renewal Term then in effect (unless such taking or requisition is by any governmental authority, agency or instrumentality of Mexico or any state thereof in which case such period shall be the lesser of the period as aforesaid or 365 days) (any such occurrence being hereinafter called an "Event of Loss"), Lessee, in accordance with the terms of Section 11.2, shall promptly and fully inform Lessor and the Indenture Trustee of such Event of Loss. Section 11.2 Replacement or Payment upon Event of Loss. Upon the occurrence of an Event of Loss or the deemed occurrence of an Event of Loss pursuant to Section 9.1 or an election to replace pursuant to Section 8.1(b), Lessee shall as soon as reasonably practical and in any event within 60 days after a Responsible Officer of the Manager shall have actual knowledge of the occurrence of such Event of Loss or election to replace give Lessor and the Indenture Trustee notice thereof (which initial notice shall identify the Unit involved). Thereafter, within the 60-day period following such initial notice, Lessee shall give Lessor and the Indenture Trustee a second notice as to which of the following options Lessee shall elect to perform (it being agreed that, except in the case of an election to replace 23 Lease Agreement (TRLI 2001-1B) pursuant to Section 8.1(b) (in which case Lessee will comply with the provisions of Section 8.1(b)), if Lessee shall fail to give such second notice, Lessee shall be deemed to have elected to perform the option set forth in Section 11.2(ii)): (i) Upon Lessee's election to perform under this clause (i) pursuant to the above-mentioned second notice (or in the circumstances of an election described in Section 8.1(b) with respect to any Unit), as promptly as practicable following such election, and in any event on or before the 60th day following such second notice (or Section 8.1(b) election), Lessee shall comply with Section 11.4(b) and shall convey or cause to be conveyed to Lessor a replacement unit ("Replacement Unit") to be leased to Lessee hereunder, such Replacement Unit to be of the same car type of the same or newer model year (or otherwise approved by Lessor, which approval shall not be unreasonably withheld), and free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) with respect to Permitted Subleases, and in clauses (iv) and (vii) of the definition thereof) and to have a fair market value, utility, residual value, remaining economic useful life and condition at least equal to the Unit so replaced (assuming such Unit was in the condition required to be maintained by the terms of this Lease) and to be (as of the date of conveyance) then subject to a currently effective Permitted Sublease having a remaining term of not less than one year; provided, that, if only railcars of newer age or greater value are available for such replacement, Lessee may on one occasion re-substitute a railcar with a value closer to or equal to that of the Unit which originally suffered the Event of Loss or was replaced (which re-substitution shall occur within twenty-four months of the original replacement (but in no event within the three year period immediately preceding the Basic Term Expiration Date) and shall comply with this Section 11 as if an Event of Loss had occurred); provided also that, if Lessee shall elect the option under this clause (i) but shall fail to perform its obligation to effect such replacement under this clause (i) within the 60-day period hereinabove provided for, then (except in the case of a failure to perform an election to replace pursuant to Section 8.1(b)) at the end of such 60-day period Lessee shall immediately give Lessor and the Indenture Trustee notice of such failure and specify that Lessee shall pay to Lessor on the next succeeding Rent Payment Date that is at least 25 days after the end of such 60-day period, or in the case of Supplemental Rent, to the Person entitled thereto, the amounts specified in clause (ii) below as of such next succeeding Rent Payment Date, and Lessee shall pay such amounts on such Rent Payment Date; provided further that Lessee shall have no right to elect replacement or re-substitution under this clause (i) if, at the time of the notice of the Event of Loss under Section 11.2 above or at the time such replacement or 24 Lease Agreement (TRLI 2001-1B) re-substitution is to occur, either (A), a Lease Default pursuant to Section 14(a), 14(b), 14(g) or 14(h) or a Lease Event of Default shall have occurred and be continuing or (B) sufficient cash amounts shall not have been made available to the Collateral Agent such that all amounts then required to be applied under Section 3.4 of the Collateral Agency Agreement in order to satisfy the amounts referred to in clauses (1) through (11) thereof, inclusive shall have been distributed as specified thereby; or (ii) on the Rent Payment Date which is not less than 25 days nor more than 60 days following the date of notice of Lessee's election to perform under this clause (ii), Lessee shall pay or cause to be paid to Lessor (or in the case of Supplemental Rent, to the Persons entitled thereto) in funds of the type specified in Section 3.5, (a) an amount equal to the Stipulated Loss Amount of each such Unit suffering an Event of Loss or deemed Event of Loss determined as of such Rent Payment Date, (b) all Basic Rent payable on such date in respect of such Unit (exclusive of any Basic Rent due on such date in respect of the Unit or Units suffering the Event of Loss), (c) any unpaid Late Payment Premium in respect of the principal amount of the Equipment Notes to be prepaid in accordance with Section 2.10(b) of the Indenture and (d) all other Rent (exclusive of any Basic Rent due on such date in respect of the Unit or Units suffering the Event of Loss) then due and payable hereunder (including, without limitation, the Accumulated Equity Deficiency Amount (without duplication of amounts calculated above) and Late Payment Interest related thereto) so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 such Unit, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant, it being understood that until such Stipulated Loss Amount and such other sums are paid, there shall be no abatement or reduction of Basic Rent on account of such Event of Loss. Section 11.3 Rent Termination. Upon the replacement of any Unit or Units in compliance with Sections 11.2(i) and 11.4(b) (but only as to replaced Units and not any Replacement Unit) or upon the payment of all sums required to be paid pursuant to Section 11.2 in respect of any Unit or Units, the Lease Term with respect to such Unit or Units and the obligation to pay Basic Rent for such Unit or Units accruing subsequent to the date of payment of Stipulated Loss Amount or date of conveyance of such Replacement Unit or Units pursuant to Section 11.2 shall 25 Lease Agreement (TRLI 2001-1B) terminate; provided that Lessee shall be obligated to pay all Rent in respect of such Unit or Units which is payable under Section 11.2 with respect to such payment of Stipulated Loss Amount or such replacement of such Unit or Units and in respect of all other Units then continuing to remain subject to this Lease. Section 11.4 Disposition of Equipment; Replacement of Unit. (a) Upon the payment of all sums required to be paid pursuant to Section 11.2 in respect of any Unit or Units, Lessor will convey to Lessee or its designee all right, title and interest of Lessor in and to such Unit or Units, "as is", "where is", without recourse or warranty, except for a warranty as to the absence of Lessor's Liens, and shall execute and deliver to Lessee or its designee, at Lessee's cost and expense, such bills of sale and other documents and instruments as Lessee or its designee may reason ably request to evidence such conveyance. As to each separate Unit so disposed of, so long as no Lease Event of Default shall have occurred and be continuing, Lessee or its designee shall (subject to any insurer's right of subrogation, if any) be entitled to any amounts arising from such disposition, plus any awards, insurance or other proceeds and damages received by Lessee, Lessor or the Indenture Trustee by reason of such Event of Loss up to the Stipulated Loss Amount attributable thereto and any remainder shall be divided between Lessee and Lessor, as their respective interests may appear. (b) At the time of or prior to any replacement of any Unit or Replacement Unit, Lessee, at its own expense, will (A) furnish Lessor with a Bill of Sale with respect to the Replacement Unit substantially in the form delivered pursuant to Section 4.1(h) of the Participation Agreement, (B) cause a Lease Supplement substantially in the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease, and duly executed by Lessee, to be delivered to Lessor for execution by the appropriate parties, it being understood that upon such execution (x) Lessee will cause such Lease Supplement to be filed for recordation in the same manner as provided for the original Lease Supplement in Section 16.1 and (y) to the extent that the Indenture has not been satisfied and discharged, Lessor shall deliver possession of the "original" counterpart of such Lease Supplement to the Indenture Trustee, (C) so long as the Indenture shall not have been satisfied and discharged, cause an Indenture Supplement substantially in the form of Exhibit A to the Indenture for such Replacement Unit, to be delivered to Lessor and to the Indenture Trustee for execution and, upon such execution, to be filed for recordation in the same manner and within the same time periods as provided for the original Indenture Supplement in Section 16.1, (D) furnish Lessor with an opinion of Lessee's 26 Lease Agreement (TRLI 2001-1B) counsel (which may be the General Counsel or Assistant General Counsel of Trinity), (x) to the effect that the Bill of Sale referred to in clause (A) above constitutes an effective instrument for the conveyance of title to the Replacement Unit to Lessor, and that legal and beneficial title to the Replacement Unit has been delivered to Lessor and (y) describing all filings and recordings required pursuant to Section 16 with respect to the Replacement Units, (E) furnish to Owner Participant (and its applicable Affiliates) an agreement of Lessee to indemnify Owner Participant (and its applicable Affiliates) against any adverse tax consequences suffered as a result of such replacement that are not otherwise indemnified under the Tax Indemnity Agreement, (F) furnish Lessor with an engineer's certificate (which may be from an employee of the Manager) certifying as to the utility, condition, model year and remaining useful life required under clause (i) of Section 11.2, (G) furnish to Lessor and the Indenture Trustee an Officer's Certificate certifying that the Replacement Unit has a fair market value, utility, residual value, model year and remaining economic useful life and condition at least equal to the Unit being replaced and is free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) with respect to Permitted Subleases, and in clauses (iv) and (vii) of the definition thereof), (H) furnish Lessor with an opinion from independent tax counsel reasonably acceptable to Owner Participant to the effect that Owner Participant should not suffer any adverse consequence as a result of such replacement, (I) furnish Lessor with an opinion of independent transportation counsel or in-house counsel for Manager as to the absence of Liens of record with the STB and as to the completion of all necessary STB filings and deposits with the Registrar General of Canada described in Section 16.1 hereof with respect to such Replacement Unit and (J) furnish such other documents and evidence as any Participant, Lessor or the Indenture Trustee, or their respective counsel, may reasonably request in order to establish the consummation of the transactions contemplated by this Section 11.4. For all purposes hereof, (i) Lessee shall be deemed to have complied with the requirements of this Section 11.4(b) as of the date of its delivery to Lessor, the Participants and the Indenture Trustee of the documents and instruments referred to in the foregoing clauses (A) through (J), signed by Lessee or its counsel, as applicable, in due form for any required filing or recording, and such filing or recording shall have been made if such documents and instruments have been executed and delivered by Lessor or Indenture Trustee or both of them in a timely manner, (ii) title to the Replacement Unit shall be deemed to have been transferred to Lessor as of such date and (iii) upon such passage of title thereto to Lessor the Replacement Unit shall be deemed part of the property leased hereunder and the Replacement Unit shall be deemed a "Unit" as defined herein. Upon such passage of title, Lessor will transfer to Lessee, "as is" and "where is" and 27 Lease Agreement (TRLI 2001-1B) without recourse or warranty (except as to Lessor's Liens), all Lessor's right, title and interest in and to the replaced Unit, and upon such transfer, Lessor will request in writing that the Indenture Trustee execute and deliver to Lessee an appropriate instrument releasing such replaced Unit from the lien of the Indenture. Lessee shall pay all reasonable out-of-pocket costs and expenses (including reasonable legal fees and expenses) incurred by Lessor, any Participant or the Indenture Trustee in connection with any replacement pursuant to this Section 11.4. Lessee further agrees that, upon receipt of fully signed counterparts of the Lease Supplement and Indenture Supplement referred to in clauses (B) and, if applicable, (C) of the first sentence of this Section 11.4(b), it will, at its sole cost and expense, cause such documents to be filed or recorded in the manner contemplated by Section 16.1. Section 11.5 Eminent Domain. In the event that during the Lease Term the use of any Unit is requisitioned or taken by any governmental authority under the power of eminent domain or otherwise for a period which does not constitute an Event of Loss, all of Lessee's obligations under the Operative Agreements, including without limitation, Lessee's obligation to pay all installments of Basic Rent, shall continue for the duration of such requisitioning or taking. Any amount referred to in Section 11.4(a) or in Section 12 which is payable to Lessor shall be deposited in the related Non-Shared Payments Account established under the Collateral Agency Agreement. SECTION 12. Insurance. Section 12.1 Insurance. Lessee will at all times after delivery and acceptance of each Unit, at its own expense, keep or cause the Insurance Manager under the Insurance Agreement to keep such Unit insured with insurers of recognized responsibility with a rating of at least A- by A.M. Best Company (or a comparable rating by a nationally or internationally recognized rating group of comparable stature) or by other insurers approved in writing by Lessor, which approval shall not be unreasonably withheld, in amounts and against risks and with deductibles and terms and conditions not less than the insurance, if any, maintained by the Manager with respect to similar equipment which it owns or leases, but in no event shall such coverage be for amounts or against risks less than the prudent industry standard for companies engaged in leasing of railcars. Without limiting the foregoing, Lessee will in any event: 28 Lease Agreement (TRLI 2001-1B) (a) keep each Unit insured against physical damage (which may be accomplished pursuant to a contingent physical damage policy) in an amount not less than the Stipulated Loss Amount attributable thereto as shown on Schedule 4 to the Participation Agreement, subject to an aggregate limit for all Units of not less than $1,500,000 per occurrence, provided that such coverage may provide for deductible amounts of not more than $50,000 per occurrence; and (b) maintain public liability insurance naming Owner Participant, Lessor, the Trust Company, the Indenture Trustee and Loan Participant as additional insureds (but only with respect to liability arising out of or related to the Operative Agreements and the Units) against bodily injury, death or property damage arising out of the use or operation of the Units with general and excess liability limits of not less than $100,000,000 per occurrence or in the aggregate, provided that such coverage may provide for deductible amounts not exceeding the lesser of (w) $10,000,000 or (x) the difference (not less than zero (0)) between (i) the level of the then current deductible maintained by Manager for the Manager's Fleet (or if Manager, its successors and assigns is no longer engaged in the railcar leasing business, the average level of the then current deductible amounts maintained by the three largest companies engaged in such business in the United States) and (ii) such amount of additional coverage as may be obtained by Lessee in reduction of the then current deductible maintained by Manager for an additional incremental annual premium payable by Lessee in the aggregate in respect of the entire Partnership Fleet of up to $100,000 as adjusted by the Inflation Factor; provided, further, that such policies which are carried on a "claims made" basis shall provide for a retroactive date not more recent than either (y) the Closing Date, or (z) a date seven years prior to the effective date of the policy. (c) It is understood and agreed that the insurance required under this Section 12.1 may be part of a company-wide insurance program of the Insurance Manager or its Affiliates, including risk-retention and self-insurance. Any policy of insurance maintained in accordance with this Section 12.1 and any policy purchased in substitution or replacement for any of such policies shall provide that if any such insurance lapses or is cancelled or terminated for any reason whatever (other than upon normal policy expiration), Lessor, the Indenture Trustee, Loan Participant and Owner Participant shall receive 30 days' prior written notice of such lapse, cancellation or termination. 29 Lease Agreement (TRLI 2001-1B) (d) If Lessee or the Insurance Manager shall maintain any liability coverages for the benefit of Lessee in excess of the coverages required hereunder (whether or not such excess coverage complies with the requirements under this Section 12), Lessee will cause all such coverages to name Owner Participant, Lessor, the Trust Company, the Indenture Trustee and Loan Participant as additional insureds (but only with respect to liability arising out of or related to the Operative Agreements or the Units), provided, however, that, the requirements of this Section 12 shall not otherwise apply to such coverages. Section 12.2 Physical Damage Insurance. (a) The insurance maintained pursuant to Section 12.1(a) shall provide that (i) so long as the Equipment Notes remain outstanding, the proceeds up to the Stipulated Loss Amount for any loss or damage to any Unit shall be paid to the Indenture Trustee under a standard loss payable clause, and thereafter to Lessor and (ii) so long as no Lease Event of Default shall have occurred and be continuing, Lessee will be entitled, at its own expense, to make all proofs of loss and/or take all other steps necessary to collect the proceeds of such insurance. (b) In lieu of maintaining the physical damage insurance required by Section 12.1(a), Lessee may self-insure with respect to the Units for such amounts and against such risks as shall be consented to by Lessor and the Indenture Trustee, which consent shall be based upon reasonable practices then in effect in the railcar leasing and insurance industries and upon the financial condition of Lessee taking into account Lessee's capital structure and that Lessee is a special purpose corporation. (c) The entire proceeds of any property insurance or third party payments for damages to any Unit received by Lessor or the Indenture Trustee shall be held by such party until, with respect to such Unit, the repairs referred to in clause (i) below are made as specified therein or payment of the Stipulated Loss Amount is made, and such entire proceeds will be paid, so long as no Lease Event of Default shall have occurred and be continuing, either: (i) to Lessee promptly following receipt by the Indenture Trustee or Lessor, as the case may be, of a written application signed by Lessee for payment to Lessee for repairing or restoring the Units which have been damaged so long as (1) Lessee shall have complied with the applicable 30 Lease Agreement (TRLI 2001-1B) provisions of this Lease, and (2) Lessee shall have certified that any damage to such Units shall have been fully repaired or restored; or (ii) if this Lease is terminated with respect to such Unit because of an Event of Loss and Lessee has paid the Stipulated Loss Amount and all other amounts due as a result thereof, such proceeds shall be promptly paid over to, or retained by, Lessee. Section 12.3 Public Liability Insurance. (a) The public liability insurance referred to in paragraph 12.1(b) shall (i) provide that in as much as such policies cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, deductibles or retentions and liability for premiums, commissions, assessments or calls (which shall be solely a liability of Lessee), shall operate in the same manner as if there were a separate policy or policies covering each insured, (ii) waive any rights of subrogation of the insurers against Owner Participant, Lessor, the Trust Company, the Indenture Trustee, and Loan Participant (iii) provide that neither Owner Participant, Lessor, the Trust Company, the Indenture Trustee nor Loan Participant shall have any responsibility for any insurance premiums, whether for coverage before or after cancellation or termination of any such policies as to Lessee and (iv) be primary without contribution from any similar insurance maintained by Owner Participant, Lessor, the Trust Company, the Indenture Trustee or Loan Participant. (b) Lessee shall use its reasonable efforts to obtain public liability insurance policies which stipulate that coverage thereunder will not be invalidated (as to Owner Participant, Loan Participant, Lessor, as Lessor of the Units and in its individual capacity, and the Indenture Trustee) by any act or neglect of Lessee, or any breach or violation by Lessee of any warranties, declarations or conditions contained in such policies, but shall be under no obligation to obtain such policies containing such stipulations if they are not available to Lessee at commercially reasonable rates in the markets in which Lessee has then placed its insurance program. (c) In the event any public liability insurance policy or coverage thereunder which are required to be maintained under Section 12.1(b) shall not be available to Lessee in the commercial insurance market on commercially reasonable terms, Lessor shall not unreasonably withhold its agreement to waive such requirement. Lessee shall make written request for any such waiver in writing, accompanied by written reports prepared, at Lessee's option, either by (i) one 31 Lease Agreement (TRLI 2001-1B) independent insurance advisor chosen by Lessee and Lessor or (ii) three independent insurance advisors, one chosen by Lessor, one chosen by Lessee and one chosen by the other two advisors (one of which may be the regular insurance broker or brokers of Lessee). The fees and expenses of all such advisors shall be paid by Lessee. The written reports required hereunder shall (x) state that such insurance (or the required coverage thereunder) is not reasonably available to Lessee at commercially reasonable premiums in the commercial insurance markets within which Lessee or the Manager normally purchases its insurance from insurers, acceptable to Lessee, with a Best's rating of A- or better for railcars of similar type and capacity and (y) explain in detail the basis for such conclusions. Upon the granting of any such waiver, Lessee shall within 15 days thereafter certify to Lessor in writing the cost (on the basis of the Manager's Fleet) of liability insurance premiums for the coverage required by Section 12.1 (b) for the immediately preceding fiscal year; and in the event that any such certificate is not received by Lessor within such 15-day period, any such waiver shall be deemed revoked. At any time after the granting of such waiver, but not more often than once a year, Lessor may make a written request for a supplemental report (in form reasonably acceptable to Lessor) from such insurance advisor(s) updating the prior report and reaffirming the conclusions set forth therein. Lessee shall provide any such required supplemental report within 60 days after receipt of the written request therefor. Any such waiver shall be effective for only as long as such insurance is not reasonably available to Lessee in the commercial markets in which Lessee normally purchases its insurance at commercially reasonable rates, it being understood that the failure of Lessee to furnish timely any such supplemental report shall be conclusive evidence that such condition no longer exists. If such supplemental report shows that such coverage is available, Lessee shall within 90 days of such report obtain such insurance coverage. During any period with respect to which such waiver has been granted and remains in effect under this Section 12.3(c), Lessee shall obtain public liability insurance as set forth in Section 12.1(b) from such carriers, in such amounts and with coverage limits and deductibles as may be reasonable in its judgment under the circumstances, but in any event (i) no less than prudent industry standards and (ii) in an amount that may be purchased for a premium equal to 200% of Lessee's cost (on a fleet-wide basis) of public liability insurance premiums for the coverage on a fleet-wide basis required by Section 12.1(b) for the final year immediately preceding the fiscal year in which such waiver first was granted. Section 12.4 Certificate of Insurance. (a) Lessee shall, prior to the Closing Date and when the renewal certificate referred to below is sent (but in any 32 Lease Agreement (TRLI 2001-1B) event not less than annually), furnish (or, in the case of (iii) below, use reasonable efforts to furnish) Lessor, the Indenture Trustee, Owner Participant and the Loan Participant with a certificate signed by the insurer or an independent insurance broker (i) showing the insurance then maintained by Lessee pursuant to Section 12.1, (ii) stating that, except as noted in such certificate, such insurance complies with the requirements contained in Exhibit B-1 (as to public liability insurance) and/or B-2 (as to physical/damage insurance) to the Participation Agreement, (iii) stating that, except as noted in such certificate, such insurance complies with the requirements contained in this Section 12 and (iv) to the extent that any provision that Lessee is required to use reasonable efforts to obtain is not contained in such insurance, such certificate shall so state and shall confirm that, in such broker's opinion, such provision is not reasonably obtainable. Lessor shall be entitled at its expense to review copies of all applicable insurance policies. With respect to any renewal policy or policies, certificates or binders evidencing such renewal shall be furnished as soon as practicable, but in no event later than 30 days after the earlier of the date such renewal is effected or the expiration date of the original policy or policies. Simultaneously, with the furnishing of such certificate, Lessee will provide appropriate evidence, reasonably satisfactory to Lessor and the Indenture Trustee, that all premiums due on such insurance have been paid. (b) Lessee agrees to use reasonable efforts to cause each of its insurers to agree that, with respect to any policy of insurance maintained pursuant to Section 12.1, such insurer will provide not less than 30 days' prior written notice to Lessor, the Indenture Trustee, Loan Participant and Owner Participant of any non-renewal or material adverse change with respect to such policy. For purposes of this Section 12.4(b), "material adverse change" shall mean a material adverse change in policy limits, exclusions or deductibles or any material adverse change in policy coverage inconsistent with the requirements of Section 12.1(b). If any of Lessee's insurers delivers such notice of non-renewal, Owner Participant may attempt to obtain and provide satisfactory insurance and Lessee shall reimburse Owner Participant for reasonable and prudent expenses incurred (i) during the period 10 days prior to expiration of existing insurance policies, for all Owner Participant's expenses excluding broker fees and commissions and insurance premiums, and (ii) on and after the expiration of existing insurance policies, for all Owner Participant's expenses including broker fees and commissions and insurance premiums. Section 12.5 Additional Insurance. In the event that Lessee shall fail to maintain insurance as herein provided in Section 12.1 or, if applicable, Section 12.3, 33 Lease Agreement (TRLI 2001-1B) Lessor may at its option, upon prior written notice to Lessee, provide such insurance and, in such event, Lessee shall, upon demand from time to time reimburse Lessor for the cost thereof together with interest from the date of payment thereof at the Late Rate, on the amount of the cost to Lessor of such insurance which Lessee shall have failed to maintain. If after Lessor has provided such insurance, Lessee then obtains the coverage provided for in Section 12.1 which was replaced by the insurance provided by Lessor, and Lessee provides Lessor with evidence of such coverage reasonably satisfactory to Lessor, Lessor shall cancel the insurance it has provided pursuant to the first sentence of this Section 12.5. In such event, Lessee shall reimburse Lessor for all costs to Lessor of cancellation, including without limitation any short rate penalty, together with interest from the date of Lessor's payment thereof at the Late Rate. In addition, at any time Lessor (either directly or in the name of Owner Participant) may at its own expense carry insurance with respect to its interest in the Units, provided that such insurance does not interfere with Lessee's ability to insure the Units as required by this Section 12 or adversely affect Lessee's insurance or the cost thereof, it being understood that all salvage rights to each Unit shall remain with Lessee's insurers at all times. Any insurance payments received from policies maintained by Lessor pursuant to the previous sentence shall be retained by Lessor without reducing or otherwise affecting Lessee's obligations hereunder, other than with respect to Unit(s) with respect to which such payments have been made. Section 12.6 Post-Lease Term Insurance. Lessee agrees that upon the expiration or earlier termination of the Lease Term, Lessee will, with respect to the public liability insurance otherwise required to be carried under this Section 12, either: (A) purchase a seven year extended reporting period for Owner Participant, Lessor and Owner Trustee, or (B) obtain the written agreement of the Manager in form and substance satisfactory to Owner Participant to carry or cause to be carried for such seven year period public liability insurance which satisfies the requirements of this Section 12 and which names Owner Participant, Lessor, the Collateral Agent and Owner Trustee as additional insureds. SECTION 13. Reports; Inspection. Section 13.1 Duty of Lessee to Furnish. On or before July 31, 2002, and on or before each July 31 thereafter, Lessee will furnish (or cause the Manager under the Management Agreement to furnish) to Lessor, Owner Participant, Loan Participant, the Indenture Trustee and the Rating Agency an accurate statement, as of 34 Lease Agreement (TRLI 2001-1B) the preceding March 31, (a) showing the amount, description and reporting marks of the Units then leased hereunder, the amount, description and reporting marks of all Units that may have suffered an Event of Loss during the 12 months ending on such March 31 (or since the Closing Date, in the case of the first such statement), and such other information regarding the condition or repair of the Units as Lessor may reasonably request, (b) stating that, in the case of all Units repainted during the period covered by such statement, the markings required by Section 4.2 hereof shall have been preserved or replaced, (c) showing the percentage of use in the United States and in each of Canada and Mexico based on the total mileage traveled by all railcars in the Total Managed Fleet (or by the Units, if and to the extent generally made available to the Manager in the ordinary course with respect to railcars in general interchange service similar to the Units) for the prior calendar year as reported to the Manager by railroads (provided, that Lessee shall cooperate with Owner Participant and Lessor and shall provide such additional information on such matters as Owner Participant or Lessor may reasonably request to enable Owner Participant and Lessor to pursue or fulfill their respective tax audit and tax litigation rights and obligations) and (d) stating that Lessee is not aware of any condition of any Unit which would cause such Unit not to comply in any material respect with the rules and regulations of the FRA and the interchange rules of the Field Manual of the AAR as they apply to the maintenance and operation of the Units in interchange and any other requirements hereunder. Section 13.2 Lessor's Inspection Rights. Lessor, Owner Participant and the Indenture Trustee each shall have the right, but not the obligation, at their respective sole cost and expense, unless a Lease Event of Default shall have occurred and be continuing, by their respective authorized representatives, to inspect the Units, all subleases thereof and Lessee's records with respect thereto. All inspections shall be conducted during Lessee's normal business hours, on the Manager's premises or in areas that are not the premises of a Sublessee to which Lessee has reasonable access, and upon reasonable prior notice to Lessee. Lessee shall not be liable for any injury to, or the death of, any Person exercising, either on behalf of Lessor, Owner Participant, the Indenture Trustee or any prospective user, the rights of inspection granted under this Section 13.2 unless caused by Lessee's gross negligence or wilful misconduct. Except following the occurrence and continuance of a Lease Event of Default, no inspection pursuant to this Section 13.2 shall interfere with the use, operation or maintenance of the Units or the ordinary course of Lessee's or any Sublessee's business, and except as provided herein, Lessee shall not be required to undertake or incur any additional liabilities in connection therewith. 35 Lease Agreement (TRLI 2001-1B) SECTION 14. Lease Events of Default. The following events shall constitute Lease Events of Default hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and each such Lease Event of Default shall be deemed to exist and continue so long as, but only as long as, it shall not have been remedied: (a) Lessee shall fail to (i) make or (ii) be deemed by virtue of the last sentence of Section 3.5 hereof to have made any payment of Basic Rent, Early Purchase Price, any other purchase price to be paid by Lessee for any Units pursuant to this Lease or the Participation Agreement, Stipulated Loss Amount or Termination Amount within 10 Business Days after the same shall have become due; provided, however, that so long as any Equipment Notes remain outstanding, failure to make (or be deemed to have made) any portion of Basic Rent on any Rent Payment Date shall not be a Lease Event of Default so long as the amounts applied under Section 3.4, clause (4), of the Collateral Agency Agreement are sufficient to make the distributions required under such clause (4) with respect to the obligations owed under this Lease; or (b) Lessee shall fail to (i) make or (ii) be deemed by virtue of payments made by the Collateral Agent to have made any payment of Supplemental Rent; including indemnity or tax indemnity payments, but not including Stipulated Loss Amount, Termination Amount, Early Purchase Price, or any other purchase price to be paid by Lessee for any Units pursuant to this Lease or the Participation Agreement after the same shall have become due and such failure shall continue unremedied for 10 Business Days after receipt by Lessee of written notice of such failure from Lessor, Owner Participant or the Indenture Trustee; provided, however, that so long as any Equipment Notes remain outstanding, failure to make (or be deemed to have made) payment of any of the amounts referred to in or to be applied pursuant to clauses (5) through (14) of Section 3.4 of the Collateral Agency Agreement shall not be a Lease Event of Default; or (c) Lessee shall fail to maintain in effect the insurance required by Section 12 or Section 6.4 of the Collateral Agency Agreement and such failure shall not have been waived as provided for therein; or 36 Lease Agreement (TRLI 2001-1B) (d) Lessee shall use or permit the use of the Units or the Pledged Units or any portion thereof in a way which is not permitted by this Lease (with respect to the Units) or the Collateral Agency Agreement (with respect to the Pledged Units), provided that such unauthorized use shall not constitute a Lease Event of Default for a period of 45 days after the occurrence thereof so long as (i) such unauthorized use is not the result of any willful action of Lessee and (ii) such unauthorized use is capable of being cured and Lessee diligently pursues such cure throughout such 45-day period; or Lessee shall make or permit any unauthorized assignment or transfer of this Lease in violation of Section 18.2; or (e) Lessee shall fail to observe or perform in any material respect any of the covenants or agreements to be observed or performed by Lessee in Section 6.2 or 6.3 of the Collateral Agency Agreement; or (f) Any representation or warranty made by Lessee in any Lessee Agreement or any representation or warranty made by TILC or TRMI in any Operative Agreement to which any such Person is a party is untrue or incorrect in any material respect as of the date of making thereof and such untruth or incorrectness shall continue to be material and unremedied; provided that, if such untruth or incorrectness is capable of being remedied, no such untruth or incorrectness shall constitute a Lease Event of Default hereunder for a period of 30 days after receipt of notice from Lessor, Owner Participant or the Indenture Trustee so long as Lessee, TILC or TRMI, as the case may be, is diligently proceeding to remedy such untruth or incorrectness and shall in fact remedy such untruth or incorrectness within such period; provided that such untrue or incorrect representation or warranty shall be deemed to be remediable or remedied only after all adverse consequences thereof, if any, can be and have been remedied as applicable; or (g) Lessee or the General Partner shall (i) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to any such relief or to the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, or (iii) admit in writing its inability to pay its debts generally as they come due, or (iv) make a general assignment for the benefit of creditors, or (v) take any corporate action to authorize any of the foregoing; or 37 Lease Agreement (TRLI 2001-1B) (h) An involuntary case or other proceeding shall be commenced against Lessee or the General Partner seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (i) Lessee shall fail to observe or perform any other of the covenants or agreements to be observed or performed by Lessee under any Lessee Agreement or any certificate and such failure shall continue unremedied for 30 days after notice from Lessor, Owner Participant or the Indenture Trustee to Lessee, specifying the failure and demanding the same to be remedied; provided that, if such failure is capable of being remedied, and the remedy requires an action other than, or in addition to, the payment of money, no such failure (other than one relating to the payment of such money) shall constitute a Lease Event of Default hereunder for a period of 90 days after receipt of such notice so long as Lessee is diligently proceeding to remedy such failure and shall in fact remedy such failure within such period; or (j) A Manager Default shall have occurred and be continuing under the Management Agreement, and Lessee shall have failed to exercise its rights under the Management Agreement in respect of such Manager Default for a period of 30 days after receipt by Lessee of written notice from Lessor, Owner Participant or the Indenture Trustee demanding that such action be taken; or (k) An Insurance Manager Default shall have occurred and be continuing under the Insurance Agreement, and Lessee shall have failed to exercise its rights under the Insurance Agreement in respect of such Insurance Manager Default for a period of 30 days after receipt by Lessee of written notice from Lessor, Owner Participant or the Indenture Trustee demanding that such action be taken; (1) The Administrator shall have defaulted in any material respect in the performance of any of its obligations under the Administrative Services Agreement, and Lessee shall have failed to exercise its rights under the Administrative Services Agreement in respect of such default for a period of 30 days after receipt by Lessee of written notice from Lessor, Owner Participant or the Indenture Trustee , demanding that such action be taken; or 38 Lease Agreement (TRLI 2001-1B) (m) A "Lease Event of Default" (as defined in the Other Lease) shall have occurred and be continuing with respect to the Other Lease. Notwithstanding anything to the contrary contained in this Lease, any failure of Lessee to perform or observe any covenant or agreement herein shall not constitute a Lease Event of Default if such failure is caused solely by reason of an event which constitutes an "Event of Loss" so long as Lessee is continuing to comply with the applicable terms of Section 11. SECTION 15. Remedies. Section 15.1 Remedies. Upon the occurrence of any Lease Event of Default and at any time thereafter so long as the same shall be continuing, Lessor may, at its option, declare this Lease to be in default by a written notice to Lessee (except that this Lease shall, without any action on the part of Lessor, be automatically deemed to have been declared in default upon the occurrence of a Lease Event of Default described in Section 14(g) or (h)); and at any time thereafter, unless Lessee shall have remedied all outstanding Lease Events of Default prior to the commencement of the exercise by Lessor of any of its remedies hereunder, Lessor may do one or more of the following as Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, applicable law then in effect: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by Lessee of the applicable covenants of this Lease or to recover damages for the breach thereof; (b) by notice in writing to Lessee, Lessor may demand that Lessee, and Lessee shall, upon written demand of Lessor and at Lessee's expense (but subject to the rights of any Sublessee which has been granted the right of quiet enjoyment of the Unit by Lessee pursuant to a Sublease, so long as no event of default by the Sublessee shall have occurred and be continuing under the relevant Sublease), (i) forthwith return all or any part of the Units so demanded to Lessor or its order in the manner and condition required by, and otherwise in accordance with all of the provisions of, Section 15.5; or Lessor with or without notice or judicial process may by its agents enter upon the premises of Lessee or other premises where any of the Units may be located and take possession of and remove all or any of the Units, and Lessor may use and employ in connection with such removal any services, aids, 39 Lease Agreement (TRLI 2001-1B) equipment, trackage and other facilities of Lessee as is reasonably required to remove such Units and thenceforth hold, possess and enjoy the same free from any right of Lessee, or its successor or assigns, to use such Units for any purpose whatever and (ii) with respect to any Unit which is then subject to a Sublease, assign all of Lessee's right, title and interest in such Sublease to Lessor; (c) sell any Unit and/or assign any Sublease at public or private sale in such manner as Lessor may determine, free and clear of any rights of Lessee (but subject to the rights of any Sublessee which has been granted the right of quiet enjoyment of the Unit by Lessee pursuant to a Sublease, so long as no event of default by the Sublessee shall have occurred and be continuing under the relevant Sublease) and without any duty to account to Lessee or any Sublessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if Lessor elects to exercise its rights under said paragraph), in which event Lessee's obligation to pay Basic Rent with respect to such Unit hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Rent is to be included in computations under paragraph (e) or (f) below if Lessor elects to exercise its rights under either of said paragraphs); (d) hold, keep idle or lease to others any Unit not then subject to a Sublease as Lessor in its sole discretion may determine, free and clear of any rights of Lessee and without any duty to account to Lessee or any Sublessee with respect to such action or inaction or for any proceeds with respect thereto, except that Lessee's obligation to pay Basic Rent with respect to such Unit due for any periods subsequent to the date upon which Lessee shall have been deprived of possession and use of such Unit pursuant to this Section 15 shall be reduced by the net proceeds, if any, received by Lessor from leasing such Unit to any Person other than Lessee; (e) whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (a), (b), (c) or (d) above with respect to any Unit, Lessor, by written notice to Lessee specifying a payment date (which date shall be a Determination Date for the purposes of computing Stipulated Loss Amount) which shall be not less than 10 days after the date of such notice, may demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent for such Unit due after the payment date specified in such notice), all Rent, other than Stipulated Loss Amount and Termination Amount or amounts calculated by reference thereto, due and payable, or accrued, in 40 Lease Agreement (TRLI 2001-1B) respect of such Unit as of the payment date specified in such notice (exclusive of any Basic Rent due on such date) plus whichever of the following amounts Lessor, in its sole discretion, shall specify in such notice: (i) an amount with respect to each such Unit which represents the excess of the present value, as of such payment date, of all rentals for such Unit which would otherwise have accrued hereunder from such payment date for the remainder of the Basic Term or any Renewal Term then in effect over the then present value of the then Fair Market Rental Value of such Unit (taking into account its actual condition) for such period discounted from the end of such Term to such payment date, such present value to be computed in each case using a per annum discount rate equal to the Debt Rate, compounded monthly from the respective dates upon which rentals would have been payable hereunder had this Lease not been terminated; or (ii) an amount equal to the excess, if any, of the Stipulated Loss Amount for such Unit computed as of the payment date specified in such notice over the Fair Market Sales Value of such Unit (taking into account its actual condition) as of the payment date specified in such notice; or (iii) if Lessor shall not have sold such Unit pursuant to the exercise of its rights under paragraph (c) above with respect to such Unit, an amount equal to the higher of Stipulated Loss Amount for such Unit computed as of the payment date specified in such notice or the Fair Market Sales Value of such Unit (assuming it is in the condition required by this Lease) as of the payment date specified in such notice; and upon payment by Lessee pursuant to said clause (iii) of such Stipulated Loss Amount or Fair Market Sales Value, as the case may be, any Late Payment Premium and of all other amounts (other than Basic Rent due on such date) payable by Lessee under this Lease and under the other Operative Agreements in respect of such Unit, Lessor shall transfer "as is" and "where is" and without recourse or warranty all right, title and interest of Lessor in and to such Unit to Lessee or as it may direct, and Lessor shall execute and deliver such documents evidencing such transfer as Lessee shall reasonably request; (f) if Lessor shall have sold any Unit pursuant to paragraph (c) above, Lessor, in lieu of exercising its rights under paragraph (e) above with respect to such Unit may, if it shall so elect, demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent for such Unit due subsequent to the Rent Payment Date next preceding such sale), any accrued and unpaid Rent for such Unit as of the date of such sale (Basic Rent for this purpose accruing at a per diem rate equal to the monthly amount due on the next following Rent Payment Date divided by 30) (exclusive of any Basic Rent due on such date), plus the amount, if any, by which the Stipulated Loss Amount of such Unit computed as of the Rent Payment Date next 41 Lease Agreement (TRLI 2001-1B) preceding the date of such sale or, if such sale occurs on a Rent Payment Date, then computed as of such Rent Payment Date, plus the amount of any Late Payment Premium, exceeds the net proceeds of such sale (taking into account for this purpose all costs and expenses, including legal fees and expenses, incurred by Lessor in connection with such sale or otherwise exercising remedies hereunder) plus interest on such excess from the date of such sale to the date of payment at the Late Rate; and (g) Lessor may terminate the leasing of any or all Units under this Lease and/or any Sublease (except with respect to a Sublease which grants the Sublessee thereunder the right of quiet enjoyment with respect to the Unit, so long as no event of default by the Sublessee shall have occurred and be continuing under the relevant Sublease) or may exercise any other right or remedy that may be available to it under applicable law. In addition, Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due hereunder before or during the exercise of any of the foregoing remedies (including, without limitation, Late Payment Interest, but exclusive of any Basic Rent due on such date), and for legal fees and other costs and expenses incurred by reason of the occurrence of any Lease Event of Default or the exercise of Lessor's remedies with respect thereto, including without limitation the repayment in full of any costs and expenses necessary to be expended in repairing any Unit in order to cause it to be in compliance with all maintenance and regulatory standards imposed by this Lease. In the event Lessor terminates this Lease pursuant to any provision of this Section 15.1, and the Stipulated Loss Amount is not payable, the amounts otherwise payable by Lessee hereunder shall be increased by any positive amount (as a payment for accrued but unpaid Basic Rent) of the Basic Rent Adjustment set forth on Schedule 4-A of the Participation Agreement opposite the relevant Rent Payment Date or decreased by the absolute value of any negative amount (as a rebate of prepaid Basic Rent) of the Basic Rent Adjustment set forth on Schedule 4-A of the Participation Agreement opposite the relevant Rent Payment Date; provided, however, that to the extent that such payment or refund does not precisely reflect the difference between Basic Rent allocated and Basic Rent paid as of the date Basic Rent ceases to accrue, the amounts due hereunder shall be further adjusted to ensure that the aggregate amount of Basic Rent paid equals the aggregate amount of Basic Rent allocated as of the date Basic Rent ceases to accrue. 42 Lease Agreement (TRLI 2001-1B) Section 15.2 Cumulative Remedies. The remedies in this Lease provided in favor of Lessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity. Lessee hereby waives any mandatory requirements of law, now or hereafter in effect, which might limit or modify any of the remedies herein provided, to the extent that such waiver is permitted by law. Except to the extent provided in the Operative Agreements, Lessee hereby waives any and all existing or future claims of any right to assert any offset or counterclaim against the Rent payments due hereunder, and agrees to make the rent payments regardless of any offset or counterclaim or claim which may be asserted by Lessee on its behalf in connection with the lease of the Units. Lessee further agrees that Lessee's obligations to pay all Rent (including, without limitation, all Basic Rent and Supplemental Rent) and its obligations to maintain the Units pursuant to Section 8 hereof and to maintain the insurance pursuant to Section 12 hereof shall constitute monetary obligations of Lessee for all purposes of Section 365 of the Bankruptcy Code. To the extent permitted by applicable law, Lessee hereby waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, lease or otherwise use the Units in mitigation of Lessor's damages as set forth in Section 15.1 or that may otherwise limit or modify any of Lessor's rights and remedies provided in this Section 15. Section 15.3 No Waiver. No delay or omission to exercise any right, power or remedy accruing to Lessor upon any breach or default by Lessee under this Lease shall impair any such right, power or remedy of Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. Section 15.4 Notice of Lease Default. Lessee agrees to furnish to Lessor, Owner Participant and the Indenture Trustee, promptly upon any officer acquiring actual knowledge of any condition which constituted or constitutes a Lease Default under this Lease, written notice specifying such condition and the nature and status thereof. Section 15.5 Lessee's Duty to Return Equipment Upon Default. If Lessor or any assignee of Lessor shall terminate this Lease pursuant to this Section 15 and shall have provided to Lessee the written demand specified in Section 15.1(b), Lessee shall forthwith deliver possession of the Units not then subject to a Sublease to Lessor (except where Lessor has received all amounts payable by Lessee 43 Lease Agreement (TRLI 2001-1B) pursuant to any notice provided by Lessor under Section 15.1(e)(iii)). For the purpose of delivering possession of any Unit not then subject to a Sublease to Lessor as above required, Lessee shall at its own cost, expense and risk (except as hereinafter stated): (a) forthwith place such Units upon such storage tracks of Lessee or any of its Affiliates or, at the expense of Lessee, on any other storage tracks, as Lessor may designate or, in the absence of such designation, as Lessee may select; (b) permit Lessor to store such Units on such tracks without charge for insurance, rent or storage until such Units have been sold, leased or otherwise disposed of by Lessor and during such period of storage Lessee shall continue to maintain all insurance required by Section 12.1 hereof; and (c) transport the Units to any place on any lines of railroad or to any connection carrier for shipment, all as Lessor may direct in writing. All such Units not then subject to a Sublease returned shall be in the condition required by Section 6.2 hereof. All amounts earned in respect of the Units after the date of termination of this Lease pursuant to this Section 15, but not exceeding amounts actually received therefor, shall be paid to Lessor or, so long as the Indenture shall not have been discharged pursuant to its terms, the Indenture Trustee, and, if received by Lessee, shall be promptly turned over to Lessor or the Indenture Trustee as aforesaid. In the event any Unit not then subject to a Sublease is not assembled, delivered and stored as hereinabove provided within 15 days after the termination of the leasing of such Unit pursuant to Section 15, Lessee shall, in addition, pay to Lessor or the Indenture Trustee as aforesaid as liquidated damages and not as a penalty, for each day thereafter an amount equal to the amount, if any, by which the daily equivalent of the average Basic Rent for the term in effect immediately prior to the expiration of the Lease for such Unit exceeds the amount, if any, received by Lessor or the Indenture Trustee as aforesaid (either directly or from Lessee) for such day for such Unit pursuant to the preceding sentence. Section 15.6 Specific Performance; Lessor Appointed Lessee's Agent. The assembling, delivery, storage and transporting of the Units not then subject to a Sublease as provided in Section 15.5 are of the essence of this Lease, and upon application to any court of equity having jurisdiction in the premises, Lessor shall be 44 Lease Agreement (TRLI 2001-1B) entitled to a decree against Lessee requiring specific performance of the covenants of Lessee so to assemble, deliver, store and transport the Units not then subject to a Sublease. Without in any way limiting the obligation of Lessee under the provisions of Section 15.5, Lessee hereby irrevocably appoints Lessor as the agent and attorney of Lessee, with full power and authority, at any time while Lessee is obligated to deliver possession of any Units not then subject to a Sublease to Lessor pursuant to this Section 15, to demand and take possession of such Unit in the name and on behalf of Lessee from whosoever shall be at the time in possession of such Unit. SECTION 16. Filings; Further Assurances. Section 16.1 Filings. This Lease or a counterpart or copy hereof or evidence hereof may be filed or recorded in any public office in the United States as may be necessary or appropriate to protect the interest of Lessor, Owner Participant or the Indenture Trustee herein or in the Units. On or prior to the Closing Date Lessee will (i) cause a memorandum of each of this Lease and the Lease Supplements dated the Closing Date, the TILC Bill of Sale, the Bill of Sale, the TILC Assignment, the Assignment, the Indenture and the Indenture Supplements dated the Closing Date (x) to be duly filed and recorded with the STB in accordance with 49 U.S.C. Section 11301 and (y) to be deposited with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act (and all necessary actions shall have been taken for publication of such deposit in the Canada Gazette in accordance with said Section 105), (ii) cause precautionary UCC-1 financing statements to be filed in appropriate jurisdictions as reasonably requested by Lessor naming Lessor as "lessor" and Lessee as "lessee" of the Equipment and (iii) will furnish Lessor, the Indenture Trustee and Owner Participant proof thereof. 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 Partner ship in the jurisdiction in which the Partnership's chief executive office is located and in the Partnership's jurisdiction of formation covering all Subleases generally. Section 16.2 Further Assurances. Lessee will duly execute and deliver to Lessor such further documents and assurances and take such further action as Lessor may from time to time reasonably request or as may be required by applicable law or regulation in order to effectively carry out the intent and purpose of this Lease and to establish and protect the rights and remedies created or intended to be created 45 Lease Agreement (TRLI 2001-1B) in favor of Lessor, the Participants and the Indenture Trustee hereunder, including, without limitation, the execution and delivery of supplements or amendments hereto, in recordable form, subjecting to this Lease any Replacement Unit and the recording or filing of counterparts hereof or thereof or Uniform Commercial Code financing statements in accordance with the laws of such jurisdiction as Lessor may from time to time deem advisable; provided, that 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 jurisdiction in which the Partnership's chief executive office is located and in the Partnership's jurisdiction of formation covering all Subleases generally. Section 16.3 Other Filings. If, at any time after the Closing Date and during the Lease Term, Mexico, or one or more states in Mexico, establishes a state or other system for filing and perfecting the ownership and/or security interests of entities such as Lessor and/or the Indenture Trustee, at the time that Lessee or the Manager takes such action with respect to other equipment similar to the Units (whether owned or leased by Lessee) and also upon the request of Lessor, any Participant, or the Indenture Trustee, Lessee shall cause any and all of the Operative Agreements to be recorded with or under such system and shall cause all other filings and recordings and all such other action required under such system to be effected and taken, in order to perfect and protect the respective right, title and interests of Lessor, Owner Participant, Loan Participant and the Indenture Trustee; provided, that 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. Section 16.4 Expenses. Lessee will pay all costs, charges and expenses (including reasonable attorneys fees) incident to any such filing, refiling, recording and rerecording or depositing and re-depositing of any such instruments or incident to the taking of such action. SECTION 17. Lessor's Right to Perform. If Lessee fails to make any payment required to be made by it hereunder or fails to perform or comply with any of its other agreements contained herein, Lessor may itself make such payment or perform or comply with such agreement, after giving not less than five Business Days' prior notice thereof to Lessee (except in the event that an Indenture Default resulting from a Lease Default or a Lease Event 46 Lease Agreement (TRLI 2001-1B) of Default shall have occurred and be continuing, in which event Lessor may effect such payment, performance or compliance to the extent necessary to cure such Indenture Default with notice given concurrently with such payment, performance or compliance), but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of Lessor incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the Late Rate from such date of payment, to the extent permitted by applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to Lessor on demand. SECTION 18. Assignment. Section 18.1 Assignment by Lessor. Lessee and Lessor hereby confirm that concurrently with the execution and delivery of this Lease, Lessor has executed and delivered to the Indenture Trustee the Indenture, which assigns as collateral security and grants a security interest in favor of the Indenture Trustee in, to and under this Lease and certain of the Rent payable hereunder (excluding Excepted Property), all as more explicitly set forth in the Indenture. Lessor agrees that it shall not otherwise assign or convey its right, title and interest in and to this Lease or any Unit, except as expressly permitted by and subject to the provisions of the Participation Agreement, the Trust Agreement and the Indenture. Section 18.2 Assignment by Lessee. Except in the case of any requisition for use by any governmental authority or any agency or instrumentality thereof referred to in Section 11.1, Lessee will not, except as expressly permitted in the Operative Agreements, without the prior written consent of Lessor and the Indenture Trustee, assign any of its rights hereunder. Section 18.3 Sublessee's or Others Performance and Rights. Any obligation imposed on Lessee in this Lease shall require only that Lessee perform or cause to be performed such obligation, even if stated herein as a direct obligation, and the performance of any such obligation by the Manager under the Management Agreement, the Insurance Manager under the Insurance Agreement or any Sublessee under a Sublease then in effect and permitted by the terms of this Lease shall constitute performance by Lessee and discharge such obligation by Lessee. Except as otherwise expressly provided herein, any right granted to Lessee in this Lease shall grant Lessee the right to (a) exercise such right or permit such right to be exercised by the Manager or the Insurance Manager or (b) in Lessee's capacity as sublessor 47 Lease Agreement (TRLI 2001-1B) pursuant to any Permitted Sublease permit any Sublessee to exercise substantially equivalent rights under any such sublease as are granted to Lessee under this Lease; provided, however, that Lessee's right to terminate this Lease pursuant to Section 10 and Lessee's purchase and renewal options set forth in Section 22 may be exercised only by Lessee; provided, further, that nothing in this Section 18.3 shall or shall be deemed to (i) create any privity of contract between any such Sublessee, on the one hand, and any of Lessor, Owner Participant or any subsequent transferee or Affiliate of any such Person, on the other hand, (ii) create any duty or other liability of any nature whatsoever on the part of any of Lessor, Owner Participant or any subsequent transferee or Affiliate of any such Person, to any such Sublessee or any Affiliate thereof or (iii) modify or waive any term or provision of Section 8.3 hereof, which Section 8.3 shall control if any conflict arises between any of the provisions thereof and this Section 18.3. The inclusion of specific references to obligations or rights of any such Sublessee in certain provisions of this Lease shall not in any way prevent or diminish the application of the provisions of the two sentences immediately preceding with respect to obligations or rights in respect of which specific reference to any such Sublessee has not been made in this Lease. SECTION 19. Net Lease, Etc. This Lease is a net lease and Lessee's obligation to pay all Rent payable hereunder shall be absolute, unconditional and irrevocable and shall not be affected by any circumstance of any character including, without limitation, (i) any set-off, abatement, counterclaim, suspension, recoupment, reduction, rescission, defense or other right that Lessee may have against Lessor, Owner Participant, the Indenture Trustee or any holder of an Equipment Note or Pass Through Certificate, any vendor or manufacturer of any Unit, or any other Person for any reason whatsoever, (ii) any defect in or failure of title, merchantability, condition, design, compliance with specifications, operation or fitness for use of all or any part of any Unit, (iii) any damage to, or removal, abandonment, requisition, taking, condemnation, loss, theft or destruction of all or any part of any Unit or any interference, interruption, restriction, curtailment or cessation in the use or possession of any Unit by Lessee or any other Person for any reason whatsoever or of whatever duration, (iv) any insolvency, bankruptcy, reorganization or similar proceeding by or against Lessee, Lessor, Owner Participant, the Indenture Trustee, Loan Participant, any holder of an Equipment Note or Pass Through Certificate or any other Person, (v) the invalidity, illegality or unenforceability of this Lease, any other Operative Agreement, or any other instrument referred to herein or therein 48 Lease Agreement (TRLI 2001-1B) or any other infirmity herein or therein or any lack of right, power or authority of Lessee, Lessor, Owner Participant, the Indenture Trustee, any holder of an Equipment Note or Pass Through Certificate or any other Person to enter into this Lease or any other Operative Agreement or to perform the obligations hereunder or thereunder or consummate the transactions contemplated hereby or thereby or any doctrine of force majeure, impossibility, frustration or failure of consideration, (vi) the breach or failure of any warranty or representation made in this Lease or any other Operative Agreement by Lessee, Lessor, Owner Participant, Loan Participant, the Indenture Trustee, any holder of an Equipment Note or Pass Through Certificate or any other Person, (vii) the requisitioning, seizure or other taking of title to or use of such Unit by any government or governmental authority or otherwise, whether or not by reason of any act or omission of Lessor, Lessee or the Indenture Trustee, or any other deprivation or limitation of use of such Unit in any respect or for any length of time, whether or not resulting from accident and whether or not without fault on the part of Lessee or (viii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. To the extent permitted by applicable law, Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Lease with respect to any Unit, except in accordance with the express terms hereof. If for any reason whatsoever this Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, Lessee nonetheless agrees, to the maximum extent permitted by law, to pay to Lessor or to the Indenture Trustee, as the case may be, an amount equal to each installment of Basic Rent and all Supplemental Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Lease not been terminated in whole or in part. Each payment of Rent made by Lessee hereunder shall be final and Lessee shall not seek or have any right to recover all or any part of such payment from Lessor or any Person for any reason whatsoever. Nothing contained herein shall be construed to waive any claim which Lessee might have under any of the Operative Agreements or otherwise or to limit the right of Lessee to make any claim it might have against Lessor or any other Person or to pursue such claim in such manner as Lessee shall deem appropriate. SECTION 20. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by facsimile capable of creating a written record, and any such notice shall become 49 Lease Agreement (TRLI 2001-1B) effective (i) upon personal delivery thereof, including, without limitation, by reputable overnight courier or (ii) in the case of notice by facsimile, upon confirmation of receipt thereof, provided such transmission is promptly further confirmed in writing by the method set forth in clause (i) addressed to the following Person at its respective address set forth below or at such other address as such Person may from time to time designate by written notice to the other Persons listed below: If to Lessor: - TRLI 2001-1B Railcar Statutory Trust - c/o State Street Bank and Trust Company of - Connecticut, National Association - 225 Asylum Street - Goodwin Square - Hartford, CT 06103 - Attention: Corporate Trust Administration - Fax No.: (617) 662-1465 - Confirmation No.: (617) 662-1680 - With copies to Owner Participant. If to Owner Participant: Trimaran Leasing, L.P. - c/o Philip Morris Capital Corporation - 225 High Ridge Road, Suite 300 - Stamford, CT 06905 Attention: Vice President, Structured Finance - Fax No.: (914) 335-8297 - Confirmation No.: (914) 335-8204 If to the Indenture Trustee: LaSalle Bank National Association 135 S. LaSalle Street, Suite 1960 - Chicago, IL 60603 Attention: Kristine Schossow Fax No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to Lessee: - Trinity Rail Leasing I L.P. - 2525 Stemmons Freeway - Dallas, TX 75207 50 Lease Agreement (TRLI 2001-1B) - Attention: Vice President Leasing Operations - Re: TRLI 2001-1B - Fax No.: (214) 589-8271 - Confirmation No.: (214) 631-4420 SECTION 21. Concerning the Indenture Trustee. Section 21.1 Limitation of the Indenture Trustee's Liabilities. Notwithstanding any provision to the contrary contained herein or in any of the Operative Agreements, the Indenture Trustee's obligation to take or refrain from taking any actions, or to use its discretion (including, but not limited to, the giving or withholding of consent or approval and the exercise of any rights or remedies under such Operative Agreements), and any liability therefor, shall, in addition to any other limitations provided herein or in the other Operative Agreements, be limited by the provisions of the Indenture, including, but not limited to, Article VI thereof. Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease. It is understood and agreed that the right, title and interest of the Indenture Trustee in, to and under this Lease and the Rent due and to become due hereunder shall by the express terms granting and conveying the same be subject to the interest of Lessee in and to the Units as created pursuant to and governed by the terms of this Lease. SECTION 22. Purchase Options; Renewal Options. Section 22.1 Early Purchase Option. In addition to the option granted Lessee pursuant to Section 6.9 of the Participation Agreement and provided that Lessee shall have duly given the notice required by the next succeeding sentence and the corresponding notice under the Other Lease and shall concurrently purchase all (but not less than all) of the units then subject to the Other Lease, Lessee shall have the right and, upon the giving of such notice, the obligation to purchase all (but not less than all) of the Units leased hereunder (as specified in such notice) on the Early Purchase Date for such Units at a price equal to the Early Purchase Price of such Units plus the other amounts specified below. Lessee shall give Lessor written notice not less than 90 days and not more than 180 days prior to the Early Purchase Date of its election to exercise the purchase option provided for in this Section 22.1, which notice shall be irrevocable. Payment of the Early Purchase Price, together with (w) all unpaid Basic Rent therefor due and payable, or accrued, prior to the 51 Lease Agreement (TRLI 2001-1B) Early Purchase Date, (x) any Make-Whole Amount and Late Payment Interest with respect to the Equipment Notes then being prepaid, (y) the Accumulated Equity Deficiency Amount (without duplication of amounts calculated above) and any Late Payment Interest related thereto and (z) any other Supplemental Rent due and owing by Lessee under the Operative Agreements (so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 the Units, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant) shall be made on the Early Purchase Date at the place of payment specified in Section 3.5 hereof in immediately available funds against delivery of a bill of sale transferring and assigning to Lessee all right, title and interest of Lessor in and to such Units on an "as-is" "where-is" basis and containing a warranty as to the absence of Lessor's Liens. Lessor shall not be required to make any other representation or warranty as to the condition of such Units or any other matters, and may specifically disclaim any such representations or warranties. The costs of preparing the bill of sale and all other documentation relating to any purchase by Lessee pursuant to this Section 22.1 and the costs of all necessary filings relating to such purchase will be borne by Lessee. In the event of any such purchase and receipt by Lessor of all of the amounts provided in this Section 22.1, the obligation of Lessee to pay Basic Rent hereunder shall cease and the Lease Term shall end. If Lessee elects to exercise the purchase option provided for in this Section 22.1, Lessee shall, as the purchase price therefor, in the sole discretion of Lessee, either (i) pay the Early Purchase Price, together with all other amounts due and owing by Lessee under the Operative Agreements, as specified in the paragraph above or (ii) pay the difference between the amount specified in clause (i) and the outstanding principal amount of the Equipment Notes as of the Early Purchase Date and assume on a full recourse basis all of the Owner Trustee's obligations under the Indenture in respect of the indebtedness evidenced by such Equipment Notes related to such Units as provided in Section 3.6 of the Indenture; provided, that, following such assumption, the purchased Units shall remain subject to the Lien of a separate indenture similar to the Indenture pursuant to Section 3.6 of the Indenture. Lessee will make the payments required by foregoing clause (i) or assume the indebtedness evidenced by the Equipment Notes as provided in foregoing clause (ii) on the Early Purchase Date in immediately available funds against delivery of a bill of sale transferring and assigning to Lessee all right, title and interest of Lessor in and to the 52 Lease Agreement (TRLI 2001-1B) Units on an "as-is" "where-is" basis and containing a warranty as to the absence of Lessor's Liens; provided, however, that Lessee shall have the option of specifying in such notice under this Section 22.1 its election to defer payment of a portion of the Early Purchase Price for such Units in four (4) installments in the amounts and on the dates set forth on Schedule 6 to the Participation Agreement so long as the portion of the Early Purchase Price payable by Lessee on the Early Purchase Date in the event of any such election by Lessee, under any circumstances and in any event, together with other amounts of Supplemental Rent payable by Lessee on such date, will be at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal and accrued interest of the Equipment Notes together with any Make Whole Amount, Late Payment Interest and all other amounts owed to the holders of the Equipment Notes under the Operative Agreements; and provided further, that such deferred portion (i) may be prepaid by Lessee at any time in whole and (ii) will be secured in favor of Lessor by a letter of credit by a bank or financial institution acceptable to Owner Participant in its sole discretion or if acceptable to Owner Participant in its sole discretion a guaranty of Trinity in form and substance reason ably satisfactory to Lessor. If Lessee shall fail to fulfill its obligations under this second paragraph of Section 22.1, all of Lessee's obligations under this Lease and the Operative Agreements, including, without limitation, Lessee's obligation to pay installments of Rent, shall continue and Lessee shall be obligated to pay all costs and expenses, including legal fees and expenses, incurred by Lessor, Owner Participant and Indenture Trustee as a result of the notice given by Lessee pursuant to this Section. Listed on Schedule 6 to the Participation Agreement as the Basic Rent Adjustment for the Early Purchase Date is the amount of Basic Rent that, as of the Early Purchase Date, has been paid for periods after the Early Purchase Date (based upon the assumption that all prior amounts of Basic Rent due have been paid) or the amount of Basic Rent that, as of the Early Purchase Date, is the amount of Basic Rent that has accrued but has not been paid for periods prior to the Early Purchase Date. If Lessee exercises its Early Purchase Option and the Basic Rent Adjustment is negative and Lessee pays all other amounts due in relation to such exercise, then Lessee shall pay an amount equal to the Early Purchase Price less the absolute value of the amount of such Basic Rent Adjustment listed on Schedule 6 to the Participation Agreement (as a rebate of such Basic Rent and not as a reduction in Early Purchase Price). If Lessee exercises the Early Purchase Option and the Basic Rent Adjustment is positive, Lessee shall pay an amount equal to the Early Purchase Price plus the Basic Rent Adjustment (as a payment of accrued, but 53 Lease Agreement (TRLI 2001-1B) unpaid Basic Rent and not an increase in the Early Purchase Price). If Lessee elects to pay the Early Purchase Price in installments, then the amount of Basic Rent Adjustment listed on Schedule 6 to the Participation Agreement shall increase or decrease, as the case may be, the amount of Early Purchase Price payable by Lessee on the Early Purchase Date. Notwithstanding the foregoing provisions of this Section 22.1 to the contrary, Lessee may purchase or cause an Affiliate of Lessee to purchase the Beneficial Interest in lieu of Lessee purchasing the Units pursuant to this Section 22.1 for a purchase price equal to the Beneficial Interest Purchase Price and may keep this Lease (and the Equipment Notes) in place; provided, that Lessee shall remain liable under this Lease to pay Basic Rent and all other payments hereunder in full, provided, further, that such purchase shall be made in all respects in accordance with Section 6.9 of the Participation Agreement. Section 22.2 Election to Retain or Return Equipment at End of Basic or Renewal Term. Not less than 180 days and not more than 360 days prior to the end of the Basic Term or any Renewal Term, Lessee shall give Lessor a preliminary notice of its decision to return or retain the Units and the units subject to the Other Lease (it being understood that at the end of the Basic Term or any Renewal Term Lessee must return all (and not less than all) such Units and units if it returns any, or retain all (and not less than all) such Units and units if it retains any) at the end of the Basic Term or such Renewal Term and not less than 120 days prior to the end of the Basic Term or the end of any Renewal Term, Lessee shall give Lessor irrevocable written notice of its decision to return or retain the Units at the end of the Basic Term or such Renewal Term. If Lessee elects to retain Units, Lessee shall comply with Section 22.3 and/or 22.4 hereof, as it may elect in accordance with the provisions thereof including the notice requirements stated therein. If Lessee fails to give the 120 days' notice required by this Section 22.2, or a subsequent notice required by Section 22.3 or 22.4, Lessee shall be deemed to have irrevocably elected to return all of the Units at the end of the Basic Term or the applicable Renewal Term, as the case may be, in accordance with Section 6. Section 22.3 Purchase Option. Provided that Lessee shall have duly given the notice required by Section 22.2 and by the next succeeding sentence of this Section 22.3 and, in the case of a purchase, Lessee shall have given a corresponding notice under the Other Lease and shall upon the purchase of the Units hereunder concurrently purchase the units under the Other Lease, Lessee shall have the right 54 Lease Agreement (TRLI 2001-1B) and, upon the giving of such notice under this Section 22.3, the obligation to purchase all of the Units at a price equal to the Fair Market Sales Value of such Units, at the expiration of the Basic Term, or, if a Renewal Term is then in effect, at the end of such Renewal Term, plus all other amounts due and owing by Lessee under the Operative Agreements, including, without limitation, Late Payment Interest and any unpaid Rent (so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant shall be entitled under the terms of the Collateral Agency Agreement to receive, and does receive, taking into account all Basic Rent payments in respect of the Units, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant). Lessee shall give Lessor written notice not less than 90 days and not more than 360 days prior to the end of the Basic Term or any Renewal Term, as the case may be, of its election to exercise the purchase option provided for in this Section 22.3, which notice shall be irrevocable. Payment of the purchase price, together with all other amounts due and owing by Lessee under the Operative Agreements shall be made at the place of payment specified in Section 3.5 hereof in immediately available funds against delivery of a bill of sale transferring and assigning to Lessee all right, title and interest of Lessor in and to such Units on an "as-is" "where-is" basis and containing a warranty as to the absence of Lessor's Liens. Lessor shall not be required to make any other representation or warranty as to the condition of such Units or any other matters, and may specifically disclaim any such representations or warranties. Section 22.4 Renewal Option. Provided no Event of Default shall have occurred and be continuing and Lessee shall have duly given the notice required by Section 22.2, and the corresponding notice under the Other Lease and shall upon the renewal of the Units hereunder concurrently renew the units under the Other Lease and Lessee has not exercised its option to purchase the Units pursuant to Section 22.3, Lessee shall have the right and, upon the giving of a notice under this Section 22.4 as below provided, the obligation to lease pursuant to this Lease all (but not less than all) of the Units at the expiration of the Basic Term or any applicable Renewal Term. Lessee may exercise this renewal option by giving Lessor written notice not less than 90 days and not more than 360 days prior to the end of the Basic Term (or, in the circumstances described below the then Renewal Term) that Lessee elects to renew this Lease with respect to all, but not less than all, of the Units then leased hereunder at a rental payment calculated by reference to the then fair market rental value (a "Fair Market Renewal") or a fixed rental (a "Fixed Rate Renewal"). At Lessee's option, such renewal may, in the case of a Fair Market Renewal, be for a 55 Lease Agreement (TRLI 2001-1B) renewal term of one or more years or, in the case of a Fixed Rate Renewal, be for an initial renewal term of three years (but not to extend beyond the Outside Renewal Date) and in connection with any renewal term following the initial renewal term, a term of one year or more expiring not later than the Outside Renewal Date, in each case as Lessee shall specify in such notice, which notice shall be irrevocable. The Basic Rent for each Unit during any Renewal Term (the "Renewal Rent") shall (a) in the case of any Fixed Rate Renewal, be 1/12th of 100% of the average annual Basic Rent allocated over the period from the end of the Basic Rent Holiday through the Basic Term Expiration Date, payable monthly in arrears and (b) in the case of any Fair Market Renewal, be 100% of the Fair Market Rental Value determined as of the commencement of the applicable Renewal Term; provided, however, that in the case of the first two years of the Fair Market Renewal period(s) that immediately follow the Basic Term Expiration Date (whether under Section 22.4 or Section 6.1), be 105% of the Fair Market Rental Value determined as of the commencement of the applicable Renewal Term; provided further, however, that the preceding proviso shall not apply in the event that the Lessee provides the Lessor, at the Lessee's sole cost and expense, with an opinion of independent tax counsel selected by Lessor (which counsel shall be selected by Lessor from among four nationally recognized law firms proposed by Lessee, each of which must be experienced in leveraged leasing transactions similar to the transactions contemplated herein) to the effect that applicable Treasury Regulations (or other administrative pronouncements upon which taxpayers may rely for Federal income tax purposes) will permit rent for such Renewal Term at a rate equal to 100% of the fair market rent determined as of the time of such Renewal Term without resulting in any adverse Federal income tax consequences to the Owner Participant Parent (within the meaning of the Tax Indemnity Agreement) under Code Section 467 or any successor provision thereto. Each Renewal Term shall commence immediately upon the expiration of the Basic Term or the preceding Renewal Term, as the case may be. Lessee shall not be entitled to enter any Fixed Rate Renewal following the expiry of any Fair Market Renewal. Section 22.5 Rent Appraisal; Outside Renewal Date. Promptly following Lessee's irrevocable written notice pursuant to Section 22.2 of its election to retain the Units at the end of the Basic Term or any Renewal Term (and, in any event, if it is anticipated that there will be any Extended Units at the end of the Basic Term or such Renewal Term), Lessor and Lessee shall determine (a) if Lessee shall have exercised a Fixed Rate Renewal, (i) the remaining useful life and Fair Market Sales Value (based on the actual condition of a reasonable sampling of such Units 56 Lease Agreement (TRLI 2001-1B) and determined pursuant to the appraisal procedure set forth in the definition of Fair Market Sales Value) of the Units, and (ii) the latest date such that (1) the period from the Closing Date to such date would not exceed 80% of the useful life of any Unit (as determined in subclause (i) above) from and after the Closing Date, and (2) the Fair Market Sales Value of each Unit (determined without regard to inflation or deflation from the Closing Date) on such date would not be less than 20% of the Equipment Cost of such Unit (such date determined under this subclause (ii) shall thereafter be the latest date to which this Lease may be renewed pursuant to a Fixed Rate Renewal under Section 22.4 (the "Outside Renewal Date")), (b) if Lessee shall have exercised the purchase option under Section 22.3(i) or any renewal option under Section 22.4, the Fair Market Sales Value of the applicable Units as of the end of the then existing Basic Term or Renewal Term, as applicable, in each case assuming such Units are at least in the condition required by this Lease, and (c) if Lessee shall have exercised a Fair Market Renewal (or if it is anticipated that there will be any Extended Units at the end the Basic Term or such Renewal Term), the Fair Market Rental Value of the applicable Units as of the end of the then existing Basic Term or Renewal Term, as applicable, in each case assuming such Units are at least in the condition required by this Lease. Section 22.6 Stipulated Loss Amount and Termination Amount During Renewal Term. All of the provisions of this Lease, other than Section 10, shall be applicable during any Renewal Term for such Units, except as specified in the next sentence. During any Renewal Term, the Stipulated Loss Amount and Termination Amount of any Unit shall be determined on the basis of the Fair Market Sales Value of such Unit as of the first day of such Renewal Term, reduced in equal monthly increments to the Fair Market Sales Value of such Unit as of the last day of such Renewal Term; provided that in no event during any Fixed Rate Renewal shall the Stipulated Loss Amount and Termination Amount of any Unit be less than 20% of the Equipment Cost of such Unit. Section 22.7 Deemed Renewals. If Lessee does not exercise its purchase option under Section 22.3 or its renewal option under Section 22.4 at the end of the Basic Term or any Renewal Term, then the Lease for any Unit subject to a Sublease at the end of the Basic Term or such Renewal Term shall be deemed automatically renewed for a Renewal Term expiring at the expiration of such Sublease's term (but in no event later than three years following the expiry of the Basic Term or such Renewal Term, as applicable) (such Unit, an "Extended Unit"). The terms and conditions of any such deemed renewal of a Unit under this Section 57 Lease Agreement (TRLI 2001-1B) 22.7 including rent shall otherwise be those generally provided in Section 22.4 in respect of a Fair Market Renewal for the period thereof (which shall be considered a Renewal Term). Section 22.8 Funding of Accounts on Purchase. Lessee will not exercise the purchase option under this Section 22 unless either (a) the full amount required to fund the Post Lease Term Reserve Account is (upon consummation of such purchase and distribution of all amounts required to be distributed by the Collateral Agent under the Collateral Agency Agreement) and will be then available to the Collateral Agent to fund such account or (b) an indemnity pursuant to Section 3.13 of the Collateral Agency Agreement has been provided. SECTION 23. Limitation of Lessor's Liability. It is expressly agreed and understood that all representations, warranties and undertakings of Lessor hereunder (except as expressly provided herein) shall be binding upon Lessor only in its capacity as Owner Trustee under the Trust Agreement and in no case shall the Trust Company be personally liable for or on account of any statements, representations, warranties, covenants or obligations stated to be those of Lessor hereunder, except that the Trust Company shall be personally liable for its gross negligence or wilful misconduct and for its breach of its covenants, representations and warranties contained herein to the extent covenanted or made in its individual capacity. SECTION 24. Investment of Security Funds. Any moneys received by Lessor or the Indenture Trustee pursuant to Section 12.2 which are required to be paid to Lessee after completion of repairs to be made pursuant to Section 12.2 or pursuant to Section 11.4(a) or 11.5, as the case may be, shall be paid directly to the appropriate Non-Shared Payments Account established under the Collateral Agency Agreement. SECTION 25. Miscellaneous. Section 25.1 Governing Law; Severability. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE 58 Lease Agreement (TRLI 2001-1B) NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible, each provision of this Lease shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Lease shall be prohibited by or invalid under the laws of any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Lease in any other jurisdiction. Section 25.2 Execution in Counterparts. This Lease may be executed in any number of counterparts, each executed counterpart constituting an original and in each case such counterparts shall constitute but one and the same instrument; provided, however, that to the extent that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code) no security interest in this Lease may be created through the transfer or possession of any counterpart hereof other than the counterpart bearing the receipt therefor executed by the Indenture Trustee on the signature page hereof, which counterpart shall constitute the only "original" hereof for purposes of the Uniform Commercial Code. Section 25.3 Headings and Table of Contents; Section References. The headings of the sections of this Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. All references herein to numbered sections, unless otherwise indicated, are to sections of this Lease. Section 25.4 Successors and Assigns. This Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective permitted successors and permitted assigns. Section 25.5 True Lease. It is the intent of the parties to this Lease that it will be a true lease and not a "conditional sale", that Lessor shall at all times be considered to be the owner of each Unit which is the subject of this Lease for the purposes of all federal, state, city and local income taxes, that this Lease conveys to Lessee no right, title or interest in any Unit except as lessee and that the Lease will be a finance lease under the provisions of Article 2A of the New York Uniform Commercial Code. Nothing contained in this Section 25.5 shall be construed to limit Lessee's use or operation of any Unit or constitute a representation, warranty or covenant by Lessee as to tax consequences. 59 Lease Agreement (TRLI 2001-1B) The parties hereto hereby agree that Lessee's obligation to make payments of the type described in the definition of "Excepted Property" is a separate and independent obligation from its obligation to make other Rent payments, and that Lessee's obligation to make payments of the type described in the definition of "Excepted Property" may be independently enforced and may be assigned, pledged or otherwise transferred separately from Lessee's obligations to make other Rent payments. The obligation to make such payments has been included herein for the convenience of the parties. Section 25.6 Amendments and Waivers. No term, covenant, agreement or condition of this Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto and except as may be permitted by the terms of the Indenture. Section 25.7 Survival. All warranties, representations, indemnities and covenants made by either party hereto, herein or in any certificate or other instrument delivered by such party or on the behalf of any such party under this Lease, shall be considered to have been relied upon by the other party hereto and shall survive the consummation of the transactions contemplated hereby on the Closing Date regard less of any investigation made by either such party or on behalf of either such party, and to the extent having accrued and not been paid or relating to or otherwise arising in connection with the transactions contemplated by the Operative Agreements during the Lease Term, shall survive the expiration or other termination of this Lease or any other Operative Agreement. Section 25.8 Business Days. If any payment is to be made hereunder or any action is to be taken hereunder on any date that is not a Business Day, such payment or action otherwise required to be made or taken on such date shall be made or taken on the immediately succeeding Business Day with the same force and effect as if made or taken on such scheduled date and as to any payment (provided any such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 25.9 Directly or Indirectly; Performance by Managers. Where any provision in this Lease refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such 60 Lease Agreement (TRLI 2001-1B) action is taken directly or indirectly by such Person. In this regard, it is understood and agreed that Lessee has entered into the Management Agreement with the Manager and the Insurance Agreement with the Insurance Manager, under which agreements certain rights and obligations of Lessee hereunder will be exercised and performed by such Persons on behalf of Lessee. Lessee agrees to instruct the Manager and the Insurance Manager to take such actions as shall be necessary or appropriate under such agreements so that Lessee shall be in compliance in all material respects with its obligations hereunder and under the other Operative Agreements. Section 25.10 Incorporation by Reference. The payment obligations set forth in Sections 7.1 and 7.2 of the Participation Agreement are hereby incorporated by reference. * * * 61 Lease Agreement (TRLI 2001-1B) IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly executed and delivered on the day and year first above written. Lessor: TRLI 2001-1B RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as otherwise expressly provide but solely as Owner Trustee By: -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- Lessee: TRINITY RAIL LEASING I L.P. By TILX GP I, LLC, its General Partner By: ----------------------------------------- Name: Eric Marchetto Title: Vice President Lease Agreement (TRLI 2001-1B) Receipt of this original counterpart of the foregoing Lease is hereby acknowledged on the ___ day of _______, 2001. LASALLE BANK NATIONAL ASSOCIATION, Indenture Trustee By: -------------------------------------------- Name: Sarah H. Webb Title: Senior Vice President Lease Agreement (TRLI 2001-1B) EXHIBIT A LEASE SUPPLEMENT NO. _____ (TRLI 2001-1B) This Lease Supplement No. ___, dated as of ____________, between TRLI 2001-1B Railcar Statutory Trust by State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Lessor"), and Trinity Rail Leasing I L.P., a Texas limited partnership ("Lessee"); Witnesseth: Lessor and Lessee have heretofore entered into that certain Equipment Lease Agreement (TRLI 2001-1B) dated as of July 12, 2001 (the "Lease"). The terms used herein are used with the meanings assigned to such terms in the Lease. The Lease provides for the execution and delivery of one or more Lease Supplements substantially in the form hereof for, among other things, the purpose of particularly describing all or a portion of the Units to be leased to Lessee under the Lease. Now, therefore, in consideration of the premises and other good and sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and Lessee hereby agree as follows: 1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts and leases from Lessor, under the Lease as herein supplemented, the Units described in Schedule 1 hereto. 2. All of the terms and provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth herein. 3. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the Uniform Commercial Code) no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart hereof other than the counterpart bearing the receipt therefor executed by Lease Agreement (TRLI 2001-1B) the Indenture Trustee on the signature page hereof, which counterpart shall constitute the only "original" hereof for purposes of the Uniform Commercial Code. 4. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 5. This Lease Supplement may be executed in any number of counterparts, each executed counterpart constituting an original but all together constituting one and the same instrument. * * * A-2 Lease Agreement (TRLI 2001-1B) IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written and to be delivered as of the date first above written. Lessor: TRLI 2001-1B RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Owner Trustee By: -------------------------------------------- Name: ------------------------------------------ Lessee: ---------------------------------------- TRINITY RAIL LEASING I L.P. By TILX GP I, LLC, its General Partner By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- (1) Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged on this ___ day of ______, 20__. LASALLE BANK NATIONAL ASSOCIATION, as Indenture Trustee By: -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- - ---------- (1) This language contained in the original counterpart only. EX-10.16.3 10 d94851ex10-16_3.txt PARTICIPATION AGREEMENT (TRL 1 2001-1B) EXHIBIT 10.16.3 PARTICIPATION AGREEMENT (TRLI 2001-1B) Dated as of May 17, 2001 among TRINITY RAIL LEASING I L.P., as Lessee, TRINITY RAIL MANAGEMENT, INC., TRINITY INDUSTRIES LEASING COMPANY, as Manager, TRLI 2001-1B RAILCAR STATUTORY TRUST, BY STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as Owner Trustee, TRIMARAN LEASING, L.P., as Owner Participant and LASALLE BANK NATIONAL ASSOCIATION, as Indenture Trustee and Pass Through Trustee Tank Cars, Covered Hopper Cars and Box Cars Participation Agreement (TRLI 2001-1B) TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT...........3 SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS .............................4 Section 2.1 Sale and Purchase of Equipment..........................4 Section 2.2 Participation in Equipment Cost.........................4 Section 2.3 Closing Date; Procedure for Participation...............4 Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions..............................6 Section 2.5 Expenses................................................6 Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and Verification............................................9 Section 2.7 Postponement of Closing Date...........................12 SECTION 3. REPRESENTATIONS AND WARRANTIES.........................14 Section 3.1 Representations and Warranties of the Trust Company....14 Section 3.2 Representations and Warranties of the Lessee...........17 Section 3.3 Representations and Warranties of the Indenture Trustee................................................22 Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest, Equipment Note and Pass Through Certificates...........................................23 Section 3.5 Representations and Warranties of the Owner Participant............................................25 Section 3.6 Representations and Warranties of TILC.................27 Section 3.7 Representations and Warranties of TRMI.................31 Section 3.8 Representations and Warranties of the Pass Through Trustee................................................33 Section 3.9 Opinion Acknowledgment.................................35 SECTION 4. CLOSING CONDITIONS.....................................35 Section 4.1 Conditions Precedent to Investment by Each Participant............................................35 Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant.......................................42 Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant......................................43 Section 4.4 Conditions Precedent to the Obligation of TILC and the Lessee.................................................44 SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE..............46 SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE.............................................47
i Participation Agreement (TRLI 2001-1B)
Page ---- Section 6.1 Restrictions on Transfer of Beneficial Interest........47 Section 6.2 Lessor's Liens Attributable to the Owner Participant...51 Section 6.3 Lessor's Liens Attributable to Trust Company...........51 Section 6.4 Liens Created by the Indenture Trustee and the Loan Participant............................................51 Section 6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee .....................................52 Section 6.6 Amendments to Operative Agreements That Are Not Lessee Agreements .....................................53 Section 6.7 Certain Representations, Warranties and Covenants......53 Section 6.8 Covenants of the Manager...............................53 Section 6.9 Lessee's Purchase in Certain Circumstances.............53 Section 6.10 Owner Participant as Affiliate of Lessee...............55 Section 6.11 Records; U.S. Income Tax Information...................55 SECTION 7. LESSEE'S INDEMNITIES...................................56 Section 7.1 General Tax Indemnity..................................56 Section 7.2 General Indemnification................................65 Section 7.3 Indemnification by TILC................................71 Section 7.4 Indemnification by TRMI................................76 SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT......................81 SECTION 9. SUCCESSOR INDENTURE TRUSTEE............................81 SECTION 10. MISCELLANEOUS..........................................81 Section 10.1 Consents...............................................81 Section 10.2 Refinancing............................................82 Section 10.3 Amendments and Waivers.................................84 Section 10.4 Notices................................................84 Section 10.5 Survival...............................................86 Section 10.6 No Guarantee of Residual Value or Debt.................87 Section 10.7 Successors and Assigns.................................87 Section 10.8 Business Day...........................................87 SECTION 10.9 GOVERNING LAW..........................................87 Section 10.10 Severability...........................................88 Section 10.11 Counterparts...........................................88 Section 10.12 Headings and Table of Content..........................88 Section 10.13 Limitations of Liability...............................88 Section 10.14 Maintenance of Non-Recourse Debt.......................89 Section 10.15 Ownership of and Rights in Units.......................90 Section 10.16 No Petition............................................90 Section 10.17 Consent To Jurisdiction................................91
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Page ---- SECTION 10.18 WAIVER OF JURY TRIAL...................................91 ANNEX A - DEFINITIONS
iii Participation Agreement (TRLI 2001-1B) EXHIBITS AND SCHEDULES Exhibit A-1 - Form of Certificate of Insurance Broker Confirming Insurance Coverage (Primary Liability) Exhibit A-2 - Form of Certificate of Insurance Broker Confirming Insurance Coverage (Excess Liability) Exhibit B-1 - Insurance Requirements as to Public Liability Insurance Exhibit B-2 - Insurance Requirements as to Physical Damage Insurance Exhibit C - Form of Transfer Agreement Exhibit D - Form of Notice of Assignment of Sublease Exhibit E - Form of Officer's Solvency Certificate Schedule 1 - Description of Equipment, Designation of Basic Groups, Designation of Functional Groups and Equipment Cost Schedule 1-B - List of Existing Subleases Schedule 2 - Commitment Percentage and Payment Information for Participants Schedule 3-A - Schedule of Basic Rent Payments and Basic Rent Expiration Date Schedule 3-B - Basic Rent Allocation Schedule Schedule 4-A - Schedule of Stipulated Loss Value and Termination Value Schedule 4-B - Termination Amount Schedule Schedule 5 - Terms of Equipment Note (including amortization) Schedule 6 - Purchase Information (price and date) Schedule 3.2(m) - Written Information Provided by Trinity Rail Leasing I L.P., Trinity Industries Leasing Company and Trinity Rail Management, Inc. iv Participation Agreement (TRLI 2001-1B) PARTICIPATION AGREEMENT (TRLI 2001-1B) This PARTICIPATION AGREEMENT (TRLI 2001-1B), dated as of May 17, 2001 (this "Agreement"), is by and among (i) Trinity Rail Leasing I L.P., a Texas limited partnership (together with its permitted successors and assigns, the "Lessee"), (ii) Trinity Rail Management, Inc., a Delaware corporation ("TRMI"), (iii) Trinity Industries Leasing Company, a Delaware corporation ("TILC"), (iv) TRLI 2001-1B Railcar Statutory Trust, a Connecticut statutory trust, by State Street Bank and Trust Company of Connecticut, National Association, a national banking association, ("Trust Company"), not in its individual capacity except as expressly provided herein but solely as trustee (together with its permitted successors and assigns, the "Owner Trustee") under the Trust Agreement (such term and other defined terms used herein shall have the meanings assigned thereto in Section 1 below), (v) Trimaran Leasing, L.P., a Delaware limited partnership (together with its permitted successors and assigns, the "Owner Participant") and (vi) LaSalle Bank National Association, a national banking association, not in its individual capacity except as expressly provided herein but solely as pass through trustee under the Pass Through Trust Agreement (in such capacity, together with its permitted successors and assigns, the "Pass Through Trustee" or the "Loan Participant"), and as trustee under the Indenture (in such capacity, together with its permitted successors and assigns, the "Indenture Trustee"). The Owner Participant and the Loan Participant are sometimes hereinafter referred to collectively as the "Participants." WITNESSETH: WHEREAS, on or prior to the date hereof, the Owner Participant and the Trust Company have entered into the Trust Agreement pursuant to which the Owner Trustee has agreed, among other things, to hold the Trust Estate for the benefit of the Owner Participant thereunder on the terms specified in the Trust Agreement, subject, however, to the Lien created under the Indenture and, subject to the terms and conditions hereof, to purchase on the Closing Date the Equipment described in Schedule 1 hereto from the Lessee and concurrently therewith to lease such Equipment to the Lessee; WHEREAS, on or prior to the date hereof and pursuant to the Pass Through Trust Agreement a grantor trust was created to facilitate the financing contemplated hereby; WHEREAS, on the Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture, pursuant to which the Owner Trustee will agree, among other things, to borrow from the Loan Participant the loan in connection with the financing of the Total Equipment Cost and to issue to the Loan Participant the Equipment Note as evidence of such loan; Participation Agreement (TRLI 2001-1B) WHEREAS, TILC will, on the Closing Date, pursuant to the Transfer and Assignment Agreement (i) sell to the Partnership all of TILC's right, title and interest in and to the Equipment described on Schedule 1 hereto and (ii) assign and transfer to the Partnership all of TILC's right, title and interest in and to any Existing Equipment Subleases; WHEREAS, TILC will, on the date hereof, pursuant to the Pledged Equipment Transfer and Assignment Agreement (i) sell to the Partnership all of TILC's right, title and interest in and to the Pledged Equipment and (ii) assign and transfer to the Partnership all of TILC's right, title and interest in and to any Existing Pledged Equipment Leases; WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, and the Owner Trustee will, among other things and subject to the terms and conditions of the Operative Agreements, (i) purchase the Equipment described in Schedule 1 hereto from the Lessee and accept delivery from the Lessee of the Bill of Sale evidencing the purchase and transfer of title of each Unit to the Owner Trustee, (ii) own the Equipment described in Schedule 1 hereto as provided in the Operative Agreements, (iii) accept pursuant to the Assignment the assignment and transfer from the Lessee of all Lessee's right, title and interest in and to the Existing Equipment Subleases and (iv) execute and deliver the Lease, pursuant to which, subject to the terms and conditions set forth therein, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, each Unit to be delivered on the Closing Date, such lease to be evidenced by the execution and delivery of the Lease Supplement covering such Units, and to assign the Existing Equipment Subleases to the Lessee, such assignment to be evidenced by the execution and delivery of the Assignment covering such Existing Equipment Subleases; WHEREAS, on the date hereof, the Lessee, TILC, TRMI, the Owner Trustee, the Indenture Trustee and the Collateral Agent have entered into the Collateral Agency Agreement, pursuant to which the Lessee will agree, among other things, to grant to the Collateral Agent for the security and the benefit of the Owner Trustee a security interest in the Collateral to secure the performance by the Lessee of its obligations under the Lease; WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, and the Owner Trustee will, among other things and subject to the terms and conditions of the Operative Agreements, grant to the Indenture Trustee for the security and the benefit of the holder of the Equipment Note a security interest in the Indenture Estate; 2 Participation Agreement (TRLI 2001-1B) WHEREAS, on the Closing Date, Lessee, Trinity and the Owner Participant (or an Affiliate of the Owner Participant) will enter into the Tax Indemnity Agreement; WHEREAS, the proceeds from the sale of the Equipment Note to the Loan Participant will be applied, together with the equity contribution made by the Owner Participant pursuant to this Agreement, to effect the purchase of the Equipment described on Schedule 1 hereto by the Owner Trustee from the Lessee as contemplated hereby; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee and TILC have entered into the Management Agreement, pursuant to which TILC will provide management services with respect to the Equipment and the Pledged Equipment; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee and TILC have entered into the Insurance Agreement, pursuant to which TILC will provide services to the Lessee in connection with obtaining, managing and maintaining insurance with respect to the Equipment and the Pledged Equipment required under the Operative Agreements; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, the General Partner, the Limited Partner and TRMI have entered into the Administrative Services Agreement, pursuant to which TRMI will provide certain administrative services with respect to the Partnership, the General Partner and the Limited Partner; and WHEREAS, concurrently with the execution and delivery of this Agreement, Trinity Industries, Inc. has issued the Trinity Guaranty in favor of the beneficiaries named therein, pursuant to which Trinity Industries, Inc. will guarantee performance of the obligations of TILC and TRMI under the Operative Agreements to which TILC or TRMI is a party, respectively. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT. Unless otherwise defined herein or unless the context shall otherwise require, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Appendix A hereto. Unless otherwise indicated, all references herein to Sections, Schedules and Exhibits refer to Sections, Schedules and Exhibits of this Agreement. 3 Participation Agreement (TRLI 2001-1B) SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS. Section 2.1 Sale and Purchase of Equipment. Subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Lessee agrees to sell to the Owner Trustee, and the Owner Trustee agrees to purchase from the Lessee, on the Closing Date and immediately following consummation of the transactions described in the third and fourth recital clauses above, the Equipment described in Schedule 1, and, in connection therewith, the Owner Trustee agrees to pay to the Lessee the cost for each Unit as specified in Schedule 1. On the Closing Date, the Lessee shall deliver each Unit described on Schedule 1 to the Owner Trustee, and the Owner Trustee shall accept such delivery. Section 2.2 Participation in Equipment Cost. (a) Equity Participation. On the Closing Date, subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Owner Participant agrees to participate in the payment of the Total Equipment Cost for the Units delivered on the Closing Date by making an equity investment in the beneficial ownership of such Units in the amount equal to the product of the Total Equipment Cost for such Units delivered on the Closing Date and the percentage set forth opposite the Owner Participant's name in Schedule 2 (the "Owner Participant's Commitment"). The aggregate amount of the Owner Participant's Commitment plus the aggregate amount of Transaction Costs payable by the Owner Participant shall not exceed the sum of (x) the Owner Participant's Commitment and (y) 2% of the Total Equipment Cost. The Owner Participant's Commitment shall be paid to the Indenture Trustee to be held (but not as part of the Indenture Estate) and applied on behalf of the Owner Trustee toward payment of the Total Equipment Cost as provided in Section 2.3. (b) Debt Participation. On the Closing Date, subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Loan Participant agrees to participate in the payment of the Total Equipment Cost for the Units delivered on the Closing Date by making a secured loan, not from its own funds but solely from funds available to it for such purposes under the Pass Through Trust Agreement, to be evidenced by the Equipment Note, to the Owner Trustee in the amount equal to the product of the Total Equipment Cost for the Units delivered on the Closing Date and the percentage set forth opposite the Loan Participant's name in Schedule 2 (the "Loan Participant's Commitment"). The Equipment Note shall bear interest at the Debt Rate. Section 2.3 Closing Date; Procedure for Participation. (a) Notice of Closing Date. Not later than three Business Days' prior to the Closing Date (or such lesser notice as may be agreed upon by the Lessee, 4 Participation Agreement (TRLI 2001-1B) the Owner Participant and the Loan Participant), the Lessee shall give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Loan Participant a notice (a "Notice of Delivery") by facsimile or other form of telecommunication or telephone (to be promptly confirmed in writing) of the Closing Date, which Notice of Delivery shall specify in reasonable detail the number and type of Units to be delivered on such date, the Total Equipment Cost of such Units, and the respective amounts of the Owner Participant's Commitment and the Loan Participant's Commitment required to be paid with respect to the Units. Prior to 11:00 a.m., Chicago time, on the Closing Date, subject to the satisfaction (or waiver) of the respective conditions specified in Section 4, the Owner Participant shall make the amount of the Owner Participant's Commitment required to be paid on the Closing Date available to the Indenture Trustee, and immediately prior to the delivery and acceptance of the Units as specified in Section 2.3(b), the Loan Participant shall make the amount of the Loan Participant's Commitment for the Total Equipment Cost required to be paid on the Closing Date available to the Indenture Trustee, in either case, by transferring or delivering such amounts, in funds immediately available on the Closing Date, to the Indenture Trustee, either directly to, or for deposit in, the Indenture Trustee's account at LaSalle Bank National Association, ABA No. 071000505, Att.: Kristine Schossow, Corporate Trust Services Division, Trust TRLI 2001-1B, Account 608775300. The making available by the Owner Participant of the amount of the Owner Participant's Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Owner Participant and the Owner Trustee. The making available by the Loan Participant of the amount of the Loan Participant's Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Loan Participant and the Indenture Trustee. (b) Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place on or before 2:00 p.m., Chicago time, on the Closing Date at the offices of Skadden, Arps, Slate, Meagher & Flom (Illinois), or at such other place or time as the parties hereto shall agree. Upon receipt by the Indenture Trustee on the Closing Date of the full amount of the Owner Participant's Commitment and the Loan Participant's Commitment in respect of the Units delivered on the Closing Date, TILC shall pursuant to the Transfer and Assignment Agreement deliver the Units described on Schedule 1 hereto to the Lessee by delivery of the TILC Bill of Sale and shall make an assignment of the Existing Equipment Subleases to the Lessee by delivery of the TILC Assignment, and immediately thereafter, (i) the Indenture Trustee, on behalf of the Owner Trustee, shall, subject to the conditions set forth in Sections 4.1, 4.2 and 4.3 having been fulfilled to the satisfaction of the Participants or waived by the Participants, pay to the Lessee from the funds then held by it, in immediately available funds, an amount equal to the Total Equipment Cost for the Units delivered on the Closing Date, (ii) the Lessee shall pay to TILC pursuant to the Transfer and Assignment Agreement an amount equal to the Total Equipment Cost for the Units delivered on the Closing Date, (iii) the Lessee shall deliver the Units described on Schedule 1 hereto by 5 Participation Agreement (TRLI 2001-1B) delivery of the Bill of Sale, (iv) the Owner Trustee shall, pursuant to the Lease, lease and deliver the Units listed on Schedule 1 hereto to the Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of the Units described on Schedule 1 hereto under the Lease, such lease, delivery and acceptance of such Units under the Lease shall be conclusively evidenced by the execution and delivery by the Lessee and the Owner Trustee of the Lease Supplement covering the Equipment so delivered as described in Schedule 1 and (v) the Owner Trustee shall execute and deliver the Equipment Note relating to such Lease Supplement to the Loan Participant. Each of the Lessee, the Owner Participant, the Owner Trustee, TILC, the Loan Participant and the Indenture Trustee hereby agrees to take all actions required to be taken by it in connection with the Closing as contemplated by this Section 2.3(b). Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions. (a) The Owner Participant agrees that the making available to the Indenture Trustee of the amount of the Owner Participant's Commitment for the Units delivered on the Closing Date in accordance with the terms of this Section 2 shall constitute, without further act, authorization and direction by the Owner Participant to the Owner Trustee, subject, on the Closing Date, to the conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the satisfaction of the Owner Participant or waived by the Owner Participant, to take the actions specified in Section 2.04 of the Trust Agreement with respect to the Units on the Closing Date. (b) The Owner Participant agrees that the authorization by the Owner Participant or its counsel to the Indenture Trustee to release to the Lessee the Owner Participant's Commitment with respect to the Units delivered on the Closing Date shall constitute, without further act, notice and confirmation that all conditions to closing set forth in Sections 4.1 and 4.3 were either met to the satisfaction of the Owner Participant or, if not so met, were waived by the Owner Participant. (c) The Loan Participant agrees that the authorization by the Loan Participant or its counsel to the Indenture Trustee to release to the Lessee the Loan Participant's Commitment with respect to the Units delivered on the Closing Date shall constitute, without further act, notice and confirmation that all conditions to closing set forth in Sections 4.1 and 4.2 were either met to the satisfaction of the Loan Participant or, if not so met, were waived by the Loan Participant. Section 2.5 Expenses. (a) If the Owner Participant shall have made its investment provided for in Section 2.2 and the transactions contemplated by this Agreement are consummated, either the Owner Participant will promptly pay, or the Owner Trustee will promptly pay, with funds the Owner Participant hereby agrees to pay (which, 6 Participation Agreement (TRLI 2001-1B) together with the Owner Participant's Commitment, shall not exceed the amount set forth in the second sentence of Section 2.2(a)) to the Owner Trustee, the following collectively referred to as the "Transaction Costs") if evidenced by an invoice delivered to the Owner Participant within four (4) months after the Closing Date and approved by the Lessee and the Owner Participant (such approval not to be unreasonably withheld or delayed): (i) the cost of reproducing, printing and filing the Operative Agreements, the Equipment Note, and all amendments and supplements to the foregoing, including all costs and fees in connection with the initial filing and recording of the Lease, the Indenture and any other document required to be filed or recorded pursuant to the provisions hereof or of any other Operative Agreement; (ii) the reasonable out-of-pocket expenses of the Owner Participant and the reasonable fees of Winston & Strawn, special counsel for the Owner Participant, plus disbursements, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; (iii) the reasonable out-of-pocket expenses of the Collateral Agent and the reasonable fees and expenses of Andrews & Kurth L.L.P., special counsel for the Collateral Agent, for their services rendered in connection with the negotiation, execution and delivery of the Operative Agreements; (iv) the reasonable fees and expenses of Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel for TILC, the Lessee and TRMI, for their services rendered in connection with the preparation of documentation, negotiation, execution and delivery of this Agreement and the other Operative Agreements; (v) the reasonable fees and expenses of Vinson & Elkins L.L.P., special counsel for the Initial Purchasers, for their services rendered in connection with the review of this Agreement and the other Operative Agreements; (vi) the reasonable fees and expenses of (x) Alvord & Alvord, special STB counsel and (y) McCarthy Tetrault, special Canadian rail counsel; (vii) the reasonable fees and expenses of Bingham Dana LLP, special counsel for the Owner Trustee, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; (viii) the reasonable fees and expenses of Schwartz, Cooper, Greenberger & Krauss, special counsel for the Indenture Trustee and the 7 Participation Agreement (TRLI 2001-1B) Pass Through Trustee, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; (ix) the reasonable fees and expenses payable to the Arrangers for their services rendered as advisor to the Lessee; (x) the initial fees and reasonable out-of-pocket expenses of the Owner Trustee; (xi) the initial fees and reasonable out-of-pocket expenses of the Indenture Trustee; (xii) the reasonable fees, if any, of Rail Solutions, Inc. (which fees shall in no event exceed the agreed-upon amount), plus disbursements, if any, for their services rendered in connection with delivering the Appraisal required by Section 4.3(a) and for other consulting services; and (xiii) the costs incurred in connection with any adjustment pursuant to Section 2.6(a). Except as expressly provided above, Transaction Costs shall not include internal costs and expenses such as salaries and overhead of whatsoever kind or nature of, or costs incurred by, parties to this Agreement pursuant to arrangements with third parties for services (other than those expressly referred to above). (b) Upon the consummation of the transactions contemplated by this Agreement, the Lessee agrees to be responsible for, and will pay when due as Supplemental Rent: (i) the reasonable expenses (including reasonable legal fees and expenses) of the Owner Trustee, the Indenture Trustee and the Participants incurred subsequent to the delivery of the Equipment on the Closing Date, in connection with any supplements, amendments, modifications, alterations, waivers or consents (whether or not consummated) of any of the Operative Agreements which are either (1) requested by the Lessee or (2) required by any applicable law or regulation (other than laws or regulations solely relating to the business of the Lessor, the Indenture Trustee, the Trust Company, the Pass Through Trustee, the Initial Purchasers, the Collateral Agent or any Participant) or (3) entered into in connection with, or as a result of, a Lease Default or (4) required pursuant to the terms of the Operative Agreements (including such reasonable expenses incurred in connection with any adjustment pursuant to Section 2.6), (ii) the ongoing fees of the Owner Trustee under the Trust Agreement; (iii) the ongoing fees of the Indenture Trustee under the Operative Agreements, (iv) the ongoing fees of the Collateral Agent under the Collateral Agency Agreement and (v) the ongoing fees of the Pass Through Trustee under the Pass Through Trust Agreement; provided that, the fees referred to in clauses (iv) and (v) immediately above shall be allocated between the transactions contemplated hereby and the transactions contemplated by the Other Participation 8 Participation Agreement (TRLI 2001-1B) Agreement on a pro rata basis based on the aggregate commitments of the Participants hereunder as compared with the aggregate commitments of the participants under the Other Participation Agreement. (c) If the transactions contemplated hereby are not consummated as a result of a default by the Owner Participant in its obligations to consummate the transactions contemplated hereby, the Owner Participant shall pay those Transaction Costs referred to in Section 2.5(a)(ii) and (xii) above and the Lessee shall pay the remainder. If the transactions contemplated hereby are not consummated due to any other reason, the Lessee shall pay all Transaction Costs. (d) Notwithstanding the foregoing provisions of this Section 2.5, the Lessee shall have no liability for (i) any costs or expenses relating to any voluntary transfer of the Owner Participant's interest in the Equipment pursuant to Section 6.1 other than during the continuance of a Lease Event of Default and no such costs or expenses shall constitute Transaction Costs, (ii) any costs or expenses relating to any voluntary transfer of any Loan Participant's interest in the Equipment Note and (iii) any costs or expenses relating to any voluntary transfer of any Certificateholder's interest in the Pass Through Certificates, and in each case no such costs or expenses shall constitute Transaction Costs. (e) To the extent Transaction Costs exceed 2% of the Total Equipment Cost, Lessee shall pay the Transaction Costs specified in Sections 2.5(a) (iv) and (ix) above up to an amount equal to the amount of such excess. Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and Verification. (a) Calculation of Adjustments. In the event that (A) the Closing Date is other than June 29, 2001, (B) the amortization of the Equipment Note is different from that set forth on Schedule 5, (C) a refinancing contemplated by Section 10.2 occurs, (D) the actual aggregate Equipment Cost or composition of the Units is different from that set forth on Schedule 1, (E) the actual aggregate amount of Transaction Costs paid pursuant to Section 2.5(a) is other than an amount equal to 2% of the Total Equipment Cost, (F) there is any change in, or cost relating to a revision in, the structure of the transaction contemplated hereby as required by the Rating Agency, (G) there is any change in the Code or in the regulations promulgated thereunder or other official administrative pronouncement, which change is enacted or effective after the execution of this Agreement and prior to the Closing Date (provided that the Owner Participant or the Lessee, as the case may be, shall have provided notice to the other prior to the Closing Date), and which change alters or eliminates any tax assumption used in calculating Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price, (H) there is any change in, or cost relating to revision in, the structure of the transaction contemplated hereby as a result of any change to the 9 Participation Agreement (TRLI 2001-1B) Equipment or the Existing Subleases from those listed in Schedule 1 and Schedule 1- A hereto, (I) there is any change in, or cost relating to revision in, the structure of the transaction contemplated hereby as a result of any change in generally accepted accounting principles affecting the accounting treatment of the transaction by the Owner Participant then, in each such case, the Owner Participant shall recalculate the payments or amounts, as the case may be, of Basic Rent, the allocation of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, Early Purchase Price, Scheduled Amortization and Scheduled Amortization Amount (and the corresponding Rated Amortization and Rated Amortization Amount) (i) to preserve the Net Economic Return that the Owner Participant would have realized had such event not occurred, and (ii) to minimize to the greatest extent possible, consistent with the foregoing clause (i), the present value (discounted monthly at an interest rate per annum equal to the Debt Rate) of the sum of the payments of Basic Rent to the Early Purchase Date and the Early Purchase Price; provided, however, that in no event shall the Early Purchase Price be less than the expected fair market value of the Equipment on the Early Purchase Date and the Basic Term Expiration Date, respectively, as determined by the Appraisal. Any such recalculation performed due to the occurrence of any one or more of the events described in clause (A), (B), (D), (E), (F), (G), (H) or (I) above shall be made prior to the Closing Date. In performing any such recalculation and in determining the Owner Participant's Net Economic Return, the Owner Participant shall utilize the same methods and assumptions originally used in making the computations of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price initially set forth in Schedules 3-A, 3-B, 4-A, 4-B and 6 (other than those assumptions changed as a result of any of the events described in clauses (A) through (I) of the preceding sentence necessitating such recalculation; it being agreed that such recalculation shall reflect solely any changes of assumptions or facts resulting directly from the event or events necessitating such recalculation). Such adjustments shall comply (to the extent the original structure complied) with Section 467 of the Code and the requirements of Sections 4.02(5), 4.07(1) and (2) of Revenue Procedure 2001-28 calculated, except in the case of a refinancing pursuant to Section 10.2, without taking into account any change after the Closing Date in or to Section 467 of the Code (and any regulations thereunder). (b) Confirmation and Verification. Upon completion of any recalculation described in Section 2.6(a), a duly authorized officer of the Owner Participant shall provide a certificate to the Lessee either (x) stating that the amounts of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price as are then set forth in Schedules 3-A, 3-B, 4-A, 4-B and 6 do not require change, or (y) setting forth such adjustments to the amounts of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts or Early Purchase Price as have been calculated by the Owner Participant in accordance with Section 2.6(a). Such certificate shall describe in reasonable detail the basis for any such adjustments, and any such 10 Participation Agreement (TRLI 2001-1B) adjustment and corresponding adjustments to the Stipulated Loss Values, Termination Values and Early Purchase Price will be computed on a basis consistent with that used by the Owner Participant in the original calculation of Basic Rent. Any such adjustment shall be deemed approved upon notice of such approval by the Lessee to the Owner Participant or on the thirty-first (31st) day following delivery of such certificate by the Owner Participant to the Lessee unless the Lessee, prior to such day, requests verification pursuant to the following sentence, and shall become effective, in the case of adjustments made pursuant to clause (A), (B), (D), (E), (F), (G), (H) or (I) of the first sentence of Section 2.6(a), as of the earlier of (i) the first Rent Payment Date and (ii) the date the Lessee approves or has been deemed to have approved such adjustment, and, in the case of an adjustment made pursuant to clause (C) of the first sentence of Section 2.6(a), as of the date of the refinancing. If the Lessee shall so request, the recalculation of any such adjustments described in this Section 2.6 shall be verified by a nationally recognized firm of independent accountants selected by the Owner Participant and reasonably acceptable to the Lessee, and any such recalculation of such adjustment as so verified shall be binding on the Lessee and the Owner Participant. Such accounting firm shall be requested to make its determination within 30 days. The Owner Participant shall provide to a representative of such accounting firm, on a confidential basis, such information as it may reasonably require, including the original assumptions used by the Owner Participant and the methods used by the Owner Participant in the original calculation of, and any recalculation of, Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price and such other information as is necessary to determine whether the computation is accurate and in conformity with the provisions of this Agreement, provided that in no event shall the Owner Participant have any obligation to provide the Lessee with any such information; and provided, further, that the Owner Participant shall have no obligation to disclose to the Lessee, such accounting firm or any other Person, or to permit the Lessee, such accounting firm or any other Person, to examine any federal, state or local income tax returns of the Owner Participant, or books or accounting records related thereto, for any taxable year. Subject to the immediately following sentence, the costs of such verification shall be borne by the Lessee. If such accounting firm's verification shall result in a decrease in the net present value (expressed as a percentage of Total Equipment Cost, discounted monthly at a rate per annum equal to the Debt Rate) of the sum of the Basic Rent to the Early Purchase Date and the Early Purchase Price, calculated as of the Closing Date, as compared to the net present value of the sum of the Basic Rent to the Early Purchase Date and the Early Purchase Price, proposed by the Owner Participant, by more than the greater of (i) ten basis points or (ii) 5% of the proposed adjustment, then the Owner Participant agrees to reimburse the Lessee for any amounts paid for such verification. Any revised adjustment resulting from such verification shall become effective on the next Rent Payment Date after such verification has been concluded (except that, in the case of an adjustment pursuant to clause (C) of the first sentence of Section 2.6(c), such adjustment shall be effective as of the date of the refinancing), and shall take into account any 11 Participation Agreement (TRLI 2001-1B) underpayment or overpayment, together with interest thereon at the Debt Rate, resulting from an earlier effectiveness of the original adjustment. (c) Compliance. Notwithstanding the foregoing, any adjustment made to the payments of Basic Rent, Stipulated Loss Amounts, Termination Amounts or Early Purchase Price, pursuant to the foregoing, shall comply with the following requirements: (i) each installment of Basic Rent, as so adjusted, under any circumstances and in any event, will be in an amount at least sufficient for the Owner Trustee to pay in full as of the due date of such installment any payment of principal of and interest on the Equipment Note required to be paid on the due date of such installment of Basic Rent in accordance with the Scheduled Amortization, and (ii) Stipulated Loss Amount, Termination Amount and Early Purchase Price, as so adjusted, under any circumstances and in any event, will be an amount which, together with any other amounts required to be paid by the Lessee under the Lease in connection with an Event of Loss or a termination of the Lease, as the case may be, will be at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal of and all unpaid interest on the Equipment Note in accordance with the Scheduled Amortization accrued to the date on which Stipulated Loss Amount, Termination Amount or Early Purchase Price, as the case may be, is paid in accordance with the terms of the Lease. (d) Invoices. All invoices in respect of Transaction Costs to the extent not delivered on the Closing Date shall be directed to the Owner Participant at the address set forth in Section 10.4, with a copy to the Lessee. Section 2.7 Postponement of Closing Date. (a) If for any reason whatsoever the Closing is not consummated on the Closing Date provided for pursuant to Section 2.3 (the "Scheduled Closing Date"), the Closing shall be deemed postponed to the next Business Day or to such other Business Day on or prior to August 31, 2001 as the Lessee shall specify by facsimile or telephonic (confirmed in writing) notice to the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Initial Purchasers, in which case the Participants will keep their funds available, provided that the notice of postponement shall be received by each party no later than 4:30 p.m., Chicago time, on the originally scheduled Closing Date, and the term "Closing Date" as used in this Agreement shall mean the postponed "Closing Date." (b) If the closing fails to occur on the Scheduled Closing Date, the Indenture Trustee shall promptly return to each Participant that makes funds avail able to it in accordance with this Section 2 such funds, together with interest or income earned thereon. (c) If the Closing fails to occur on the Scheduled Closing Date and funds are not returned to each Participant that made funds available by the 12 Participation Agreement (TRLI 2001-1B) Indenture Trustee as provided by Section 2.7(b) above, the Indenture Trustee shall, if so instructed by the Lessee in the facsimile or telephonic (confirmed in writing) notice from the Lessee (which notice shall specify the Specified Investments to be purchased), use reasonable best efforts to invest, at the risk of the Lessee (except as provided below with respect to the Indenture Trustee's gross negligence or willful misconduct), the funds received by the Indenture Trustee from the Participants in Specified Investments in accordance with the Lessee's instructions. Any such Specified Investments purchased by the Indenture Trustee upon instructions from the Lessee shall be held in trust by the Indenture Trustee (but not as part of the Indenture Estate under the Indenture) for the benefit of the Participants that provided such funds. In order to obtain funds for the payment of the Equipment Cost for the Units on the Closing Date or to return funds to the Participants pursuant to Section 2.7(b), the Indenture Trustee is authorized to sell any Specified Investments purchased as aforesaid. The Indenture Trustee shall not be liable for failure to invest such funds or for any losses incurred on such investments except for losses resulting from its own willful misconduct or gross negligence. (d) If the Closing fails to occur on the Scheduled Closing Date, unless the Indenture Trustee returns all funds to the Participants by 2:00 p.m., Chicago time, on the Scheduled Closing Date, the Lessee shall reimburse each Participant that has made funds available pursuant to this Section 2 for the loss of the use of its funds an amount equal to the excess, if any, of (x) interest on such funds at the Debt Rate for the period from and including the Scheduled Closing Date to but excluding the actual Closing Date or, if earlier, the day on which such Participant's funds are returned if such return is made by 2:00 p.m., Chicago time (or to but excluding the next following Business Day if such return is not made by such time); provided that with respect to the Owner Participant such period shall in any case be at least one day, unless the Owner Participant shall have received, prior to 12:00 noon (Chicago time) on the Business Day preceding the Scheduled Closing Date, a notice of postponement of the Scheduled Closing Date pursuant to Section 2.7(a), over (y) any amount paid to such Participant in respect of interest or income earned by the Indenture Trustee on such funds pursuant to Section 2.7(c) above. (e) If the Closing fails to occur on the Scheduled Closing Date, the Lessee shall, on the Closing Date or on the date funds are required to be returned to the Participants pursuant to Section 2.7(b) above, reimburse the Indenture Trustee, for the benefit of the Participants that provided funds which are invested by the Indenture Trustee pursuant to this Section 2.7 for any losses incurred on such investments (except with respect to any Participant, if the Closing failed to occur as a result of default by such Participant, or with respect to the Owner Participant, as result of default of the Owner Trustee (acting pursuant to instructions from the Owner Participant)). All income and profits on the investment of such funds shall be for the respective accounts of such Participants, and the Indenture Trustee shall not be liable for failure to invest such funds or for any losses incurred on such investments, except for its willful misconduct or gross negligence. 13 Participation Agreement (TRLI 2001-1B) (f) Notwithstanding the provisions of Section 2.7(a), the Participants shall not be under any obligation to make their respective commitments available beyond 2:00 p.m. (Chicago time) on August 31, 2001. SECTION 3. REPRESENTATIONS AND WARRANTIES. Section 3.1 Representations and Warranties of the Trust Company. Trust Company, in its individual capacity (except with respect to clauses (c), (k) and (m) (to the extent applicable to Trust Company in its capacity as Owner Trustee) below) and as Owner Trustee with respect to clauses (c), (f) and (k) (to the extent applicable to Trust Company in its capacity as Owner Trustee) below, represents and warrants to each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee, notwithstanding the provisions of Section 10.13 or any similar provision in any other Operative Agreement, that, as of the date hereof: (a) Trust Company (i) is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States of America, (ii) has the full corporate power, authority and legal right under the laws of the State of Connecticut and the United States pertaining to its banking, trust and fiduciary powers to carry on its business as now conducted and execute, deliver and perform its obligations hereunder and under the Trust Agreement and (iii) assuming due authorization, execution and delivery of the Trust Agreement by the Owner Participant, has full power and authority, as Owner Trustee and/or, to the extent expressly provided herein or therein, in its individual capacity, to execute, deliver and perform its obligations under each of the Owner Trustee Agreements; (b) (i) Trust Company has duly authorized, executed and delivered the Trust Agreement, (ii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, Trust Company in its trustee capacity and, to the extent expressly provided therein, in its individual capacity, has, or on or prior to the Closing Date will have, duly authorized, executed and delivered each of the other Owner Trustee Agreements and, as of the Closing Date, the Equipment Note, the Lease Supplement and the Indenture Supplement to be delivered on the Closing Date, (iii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust is a Connecticut statutory trust duly organized and validly existing in good standing under the laws of the State of Connecticut and (iv) the Trust Agreement constitutes a legal, valid and binding obligation of Trust Company enforceable against it in accordance with the terms thereof except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, each of the Owner Trustee Agreements 14 Participation Agreement (TRLI 2001-1B) (other than the Trust Agreement) to which it is a party constitutes, or when entered into will constitute, a legal, valid and binding obligation of the Owner Trustee, enforceable against it in accordance with the terms thereof, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity; (d) neither the execution and delivery by Trust Company or Owner Trustee, as the case may be, of the Owner Trustee Agreements or the Equipment Note to be delivered on the Closing Date, nor the consummation by Trust Company or Owner Trustee, as the case may be, of any of the transactions contemplated hereby or thereby, nor the compliance by Trust Company or Owner Trustee, as the case may be, with any of the terms and provisions hereof and thereof, (i) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it in its individual capacity, or (ii) violates or will violate its articles of association or bylaws, or contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, any indenture, mortgage, chattel mortgage, deed of trust, conditional sale contract, bank loan or credit agreement, license or other agreement or instrument to which Trust Company is a party or by which it or any of its properties may be bound or affected, or contravenes or will contravene any law, governmental rule or regulation of the United States of America or the State of Connecticut governing the banking, trust or fiduciary powers of Trust Company, or any judgment or order applicable to or binding on it; (e) there are no Taxes payable by Trust Company or the Owner Trustee, imposed by the State of Connecticut or any political subdivision thereof in connection with the execution and delivery by Trust Company of the Trust Agreement, and, as Trust Company or Owner Trustee, as the case may be, of this Agreement, the other Owner Trustee Agreements (other than the Trust Agreement) or the Equipment Note to be delivered on the Closing Date solely because Trust Company is a national banking association with its principal place of business in Connecticut and performs certain of its duties as Owner Trustee in the State of Connecticut; and there are no Taxes payable by Trust Company or the Owner Trustee, as the case may be, imposed by the State of Connecticut or any political subdivision thereof in connection with the acquisition of its interest in the Equipment (other than franchise or other taxes based on or measured by any fees or compensation received by Trust Company or the Owner Trustee for services rendered in connection with the transactions contemplated hereby) solely because Trust Company is a national banking association with its principal place of business in Connecticut and performs certain of its duties as Owner Trustee in the State of Connecticut; (f) there are no pending or, to its knowledge, threatened actions or proceedings against Trust Company or the Owner Trustee, before any court or 15 Participation Agreement (TRLI 2001-1B) administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of Trust Company or the Owner Trustee, as the case may be, to perform its obligations under the Trust Agreement, the other Owner Trustee Agreements or the Equipment Note to be delivered on the Closing Date; (g) both its chief executive office, and the place where its records concerning the Equipment and all its interest in, to and under all documents relating to the Trust Estate, are located in Hartford, Connecticut, and Trust Company agrees to give the Owner Participant, the Indenture Trustee and the Lessee written notice within 30 days following any relocation of said chief executive office or said place from its present location; (h) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut state or local governmental authority or agency or any United States federal governmental authority or agency regulating the banking or trust powers of Trust Company is required for the execution and delivery of, or the carrying out by, Trust Company or the Owner Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust Agreement or of any of the transactions contemplated by any of the other Owner Trustee Agreements, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken; (i) on the Closing Date, the Owner Trustee's right, title and interest in and to the Equipment delivered on the Closing Date shall be free and clear of any Lessor's Lien attributable to Trust Company; (j) proceeds received by the Owner Trustee from the Owner Participant pursuant to the Trust Agreement will be administered by it in accordance with Article III of the Trust Agreement; (k) the Owner Trustee shall receive from the Lessee such title as was conveyed to it by the Lessee, subject to the rights of the Owner Trustee and the Lessee under the Lease and the Lien created pursuant to the Indenture and the Indenture Supplement in respect of the Equipment delivered on the Closing Date, and there will be no Lessor's Liens attributable to the Owner Trustee on the Equipment or any interest therein or on the Trust Estate; (l) on the Closing Date, to its knowledge, no Indenture Default shall have occurred and be continuing; and (m) the Owner Trustee is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by 16 Participation Agreement (TRLI 2001-1B) this Agreement and the other Operative Agreements will be used by the Owner Trustee for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.1(m) with such meanings. Section 3.2 Representations and Warranties of the Lessee. The Lessee represents and warrants to the Owner Trustee, the Indenture Trustee and the Participants, as of the date hereof: (a) as to organization, powers and partnership organizational documents: (i) the Lessee is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Texas, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to enter into and perform its obligations under the Lessee Agreements, is a special purpose limited partnership organized to enter into the transactions contemplated by this Agreement, the other Operative Agreements to which it is a party and the Pass Through Documents to which it is a party, has the limited partnership power and authority to sell the Equipment described on Schedule 1 hereto to the Owner Trustee, to assign the Existing Equipment Subleases as contemplated by this Agreement and to carry on its business as now conducted, has the requisite limited partnership power and authority to execute, deliver and perform its obligations under the Lessee Agreements and has conducted no business or operations prior to the date hereof (other than those associated with its organization and capitalization or as contemplated by the Operative Agreements or the Operative Agreements (as defined in the Other Participation Agreement), (ii) the General Partner is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to execute, deliver and perform its obligations under the Partnership Agreement and each other organizational document of the Partnership to which the General Partner is a party, (iii) the Limited Partner is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to execute, deliver and perform its obligations under the Partnership Agreement and each other organizational document of the Partnership to which the Limited Partner is a party, 17 Participation Agreement (TRLI 2001-1B) (iv) the General Partner and the Limited Partner are the only partners of the Partnership; (v) the execution, delivery and performance by each Partner of the Partnership Agreement and each other organizational document of the Partner ship to which such Partner is a party (A) have been duly authorized by all requisite limited liability company or member action of such Partner and (B) did not and do not (x) violate (i) any provision of law, statute, rule or regulation, or of the certificate of formation or limited liability company agreement or other constitutive documents of such Partner, (ii) any order of any governmental authority or (iii) any provision of any indenture, agreement or other instrument to which such Partner is a party or by which it or any of its property is or may be bound, (y) conflict with, result in a breach of or constitute (alone or with notice, or lapse of time or both) a default under any such indenture, agreement or other instrument or (z) result in the creation or imposition of any Lien upon any property or assets of such Partner, (vi) each of the Partnership Agreement and each other organizational document of the Partnership has been duly executed and delivered by each party thereto and constitutes a legal, valid and binding obligation of each such party enforceable against such party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (b) each of the Lessee Agreements and the Pass Through Documents to which the Lessee is a party have been duly authorized by all necessary limited partnership action of the Lessee and, if required, limited liability company action of each Partner, this Agreement has been duly executed and delivered (and in the case of the other Lessee Agreements, such other Lessee Agreements will on the Closing Date have been duly executed and delivered) by the General Partner in its capacity as the general partner of the Lessee, and constitutes (and in the case of the other Lessee Agreements, such other Lessee Agreements will on the Closing Date constitute) the legal, valid and binding obligations of the Lessee (assuming the due authorization, execution and delivery by each other party thereto), enforceable against the Lessee in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by the Lessee of each Lessee Agreement and each Pass Through Document to which Lessee is a party and compliance by the Lessee with all of the provisions thereof do not and will not contravene any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on the Lessee or any of its properties, or contravene the provisions of, or constitute a default by the Lessee under, or result in the creation of any Lien (except for Permitted Liens) upon the property of the Lessee 18 Participation Agreement (TRLI 2001-1B) under its organizational documents or any indenture, mortgage, contract or other agreement or instrument to which the Lessee is a party or by which the Lessee or any of its properties may be bound or affected; (d) there are no proceedings pending or, to the knowledge of the Lessee, threatened against the Lessee or any Partner in any court or before any governmental authority or arbitration board or tribunal. The Lessee and each Partner are not subject to any order of any court or governmental authority or arbitration board or tribunal; (e) the unaudited balance sheet of the Lessee as at May 17, 2001 fairly presents, in conformity with generally accepted accounting principles applied on a pro forma basis, the pro forma financial position of the Lessee as of such date; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebtedness of the Lessee or any governmental authority on the part of the Lessee is required in the United States or Canada in connection with the execution and delivery by the Lessee of the Lessee Agreements or in order for the Lessee to perform its obligations thereunder in accordance with the terms thereof, other than (i) notices required to be filed with the STB and the Registrar General of Canada as described in Section 3.2(g), which notices shall have been filed on the Closing Date, (ii) as may be required under existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing Date in connection with the operation and maintenance of the Equipment and the Subleases in accordance with the Operative Agreements which are routine in nature and are not normally applied for prior to the time they are required, and which the Lessee has no reason to believe will not be timely obtained, (iii) as may be required under the Operative Agreements in connection with any refinancing of the Equipment Notes, (iv) as may be required under the Operative Agreements in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Equipment and (v) filing and recording to perfect the Liens under the Indenture and the Collateral Agency Agreement as required thereunder; (g) the Lease, the Lease Supplement, the Indenture and the Indenture Supplement (each in respect of the Units delivered on the Closing Date), the Collateral Agency Agreement (or a memorandum with respect to any or all of such documents), the TILC Bill of Sale, the Bill of Sale, the TILC Assignment, the and the Assignment will on or before the Closing Date be duly filed with the STB pursuant to 49 U.S.C. Section 11301 and deposited with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act, and such filing with the STB pursuant to 49 U.S.C. Section 11301 and such deposit with the Registrar General of Canada will under the laws of the United States and Canada perfect the Owner Trustee's, the Indenture Trustee's and the Collateral Agent's rights in such Operative 19 Participation Agreement (TRLI 2001-1B) Agreements and in the Units described on Schedule 1 hereto and no other filing, recording or deposit with, or giving of notice to any other U.S. federal, state or local government or Canadian national or provincial government or agency thereof, or any other action, is necessary in order to protect the rights of the Owner Trustee, the Indenture Trustee and the Collateral Agent in such Operative Agreements or in such Units in the United States, any state thereof or the District of Columbia or Canada or any province thereof; (h) the Equipment described on Schedule 1 hereto is covered by the insurance required by Section 12 of the Lease and the Pledged Equipment is covered by the insurance required by Section 6.4 of the Collateral Agency Agreement, and all premiums due prior to the Closing Date in respect of such insurance shall have been paid in full and such insurance is in full force and effect; (i) (i) no Lease Default has occurred and is continuing and, to the knowledge of the Lessee, no Event of Loss or event which, with the giving of notice, the passage of time or both, would constitute an Event of Loss has occurred and (ii) no Lease Default (as defined in the Other Lease) has occurred and is continuing; (j) neither the Lessee nor any Partner is an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (k) the acquisition by the Owner Participant of the Beneficial Interest for its own account will not constitute a prohibited transaction within the meaning of Section 4975(c)(1)(A) through (D) of the Code or Section 406(a)(1)(A) through (D) of ERISA. The representation made by the Lessee in the preceding clause is made in reliance upon and subject to the accuracy of the representation of the Owner Participant in Section 3.5(h) and the accuracy of the representation of the Initial Purchasers set forth in Section 4(e) of the Certificate Purchase Agreement; (l) on the Closing Date, (i) the Lessee shall have and shall pursuant to the Bill of Sale relating to the Equipment described on Schedule 1 hereto convey to the Owner Trustee, all legal and beneficial title to such Equipment free and clear of all Liens (other than Permitted Liens of the type described in clause (iii) below with respect to the Existing Equipment Subleases and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (ii) the Lessee shall have, and the Assignment to be delivered on the Closing Date shall assign to the Owner Trustee, all legal and beneficial title to the Existing Equipment Subleases, and the Lessee shall have all legal and beneficial title to the Existing Pledged Equipment Leases, free and clear of all Liens (other than in each case Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; and (iii) all of the Units delivered on the Closing Date are subject to 20 Participation Agreement (TRLI 2001-1B) sublease by Sublessees under the Existing Equipment Subleases on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; (m) the written information provided by the Lessee or on behalf of the Lessee to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto does not contain any untrue statement of a material fact and does not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The assumptions and related financial information relating to the proposed business and operations of the Lessee and the Partnership Fleet which are contained in the information on Schedule 3.2(m) have been prepared in good faith based upon information that the Lessee deems fair and reasonable, and there are no statements or conclusions therein which are based on or include information known to the Lessee to be misleading in any material respect or which fail to take into account material information known to the Lessee regarding the matters stated therein. Certain information contained in the information on Schedule 3.2(m) (e.g. statistical information relating to renewal and remarketing of railcars, potential increases in absolute or nominal railcar lease rates, anticipated utilization, and maintenance costs) is based on the historical experience of TILC. Subject to the foregoing, there can be no assurance that past experience will be indicative of future performance with respect to these or other operating and marketing factors set forth in the information on Schedule 3.2(m); (n) the Lessee and the Partners are not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by the Lessee or any Partner for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.2(n) with such meanings; (o) the Lessee is not in violation of any term of any of its organizational documents or any other agreement or instrument to which it is a party or by which it may be bound. The Lessee is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject and the Lessee has obtained all required licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (p) on the Closing Date, all sales, use or transfer taxes, if any, due and payable upon the purchase of the Equipment described on Schedule 1 hereto by 21 Participation Agreement (TRLI 2001-1B) the Lessee from TILC and by the Owner Trustee from the Lessee and upon the lease thereof by the Owner Trustee to the Lessee and, if applicable, upon the assignment of the Existing Equipment Subleases from TILC to the Lessee and by the Lessee to the Owner Trustee will have been paid or such transactions will then be exempt from any such taxes, and the Lessee will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations. No taxes, fees or other charges in connection with the execution and delivery of the Operative Agreements or the issuance and sale of the Equipment Note to be delivered on the Closing Date are payable; (q) no broker's or finder's or placement fee or commission will be payable with respect to the transactions contemplated by the Operative Agreements as a result of any action by the Lessee, except for the fees of the Arrangers, which shall be included in Transaction Costs as provided in this Agreement, and the Lessee agrees that it will hold the Participants, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee harmless from any claim, demand or liability for broker's or finder's or placement fees or commission alleged to have been incurred as a result of any action by the Lessee in connection with this transaction; (r) each Unit delivered on the Closing Date, taken as a whole, and each major component thereof, complies in all material respects with all applicable laws and regulations, conforms with the specifications for such Unit contained in the Appraisal referred to in Section 4.3(a) hereof (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to the Lessee) and is substantially complete such that it is ready and available to operate in commercial service and otherwise perform the function for which it was designed; and the railcar identification marks shown on Schedule 1 are the marks presently used on the Units of Equipment set forth on Schedule 1; and (s) neither the Lessee nor any Partner is subject to regulation as a "holding company," an "affiliate" of a "holding company," or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 3.3 Representations and Warranties of the Indenture Trustee. The Indenture Trustee represents and warrants to the Owner Participant, the Owner Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Indenture Trustee is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States and has the full corporate power, authority and legal right under the laws of the State of Illinois and the United States pertaining to its banking, trust and fiduciary powers to execute, deliver and perform its obligations under each of the Indenture Trustee Agreements; 22 Participation Agreement (TRLI 2001-1B) (b) the execution, delivery and performance by the Indenture Trustee of each of the Indenture Trustee Agreements have been duly authorized by the Indenture Trustee and will not violate any applicable federal or Illinois law governing its banking or trust powers or its charter documents or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or any of its properties may be bound or affected; (c) this Agreement has been duly executed and delivered and constitutes, and each of the other Indenture Trustee Agreements, when executed and delivered, will constitute (assuming the due authorization, execution and delivery by each other party thereto) the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (d) there are no proceedings pending or, to the knowledge of the Indenture Trustee, threatened, and to the knowledge of the Indenture Trustee there is no existing basis for any such proceedings, against or affecting the Indenture Trustee in or before any court or before any governmental authority or arbitration board or tribunal which, individually or in the aggregate, if adversely determined, might impair the ability of the Indenture Trustee to perform its obligations under the Indenture Trustee Agreements; (e) no authorization or approval or other action by, and no notice to or filing with, any stockholder, trustee or holder of indebtedness or any federal or Illinois state governmental authority or regulatory body governing the Indenture Trustee in its trust capacity, is required for the due execution, delivery and performance by the Indenture Trustee of the Indenture Trustee Agreements, except as have been previously obtained, given or taken; (f) the Indenture Trustee is not in default under any of the Indenture Trustee Agreements; and (g) neither the Indenture Trustee, nor any Person authorized to act on behalf of the Indenture Trustee, has directly or indirectly offered any interest in the Trust Estate or the Equipment Note or any security similar to either thereof related to this transaction for sale to, or solicited offers to buy any of the same from, or otherwise approached or negotiated with respect to any of the same with, any Person other than the Pass Through Trustee and the Initial Purchasers. Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest, Equipment Note and Pass Through Certificates. 23 Participation Agreement (TRLI 2001-1B) (a) Owner Trustee and Trust Company. Each of the Owner Trustee and the Trust Company represents and warrants to the Lessee, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Owner Participant that, as of the date hereof and as of the Closing Date, except as expressly provided in the Operative Agreements, neither the Owner Trustee, nor the Trust Company nor any Person authorized or employed by the Owner Trustee or the Trust Company as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (b) Lessee. The Lessee represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither the Lessee nor any Person authorized or employed by the Lessee as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (c) TRMI. TRMI represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither TRMI nor any Person authorized or employed by TRMI as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (d) TILC. TILC represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither TILC nor any Person authorized or employed by TILC as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part 24 Participation Agreement (TRLI 2001-1B) thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (e) Owner Participant. The Owner Participant represents and warrants to the Owner Trustee, the Indenture Trustee, TILC, TRMI, the Lessee and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither the Owner Participant nor any Person authorized or employed by the Owner Participant as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (f) Pass Through Trustee. The Pass Through Trustee represents and warrants to the Owner Trustee, the Indenture Trustee, TILC, TRMI, the Lessee and the Owner Participant that, as of the date hereof and as of the Closing Date, neither the Pass Through Trustee nor any Person authorized or employed by the Pass Through Trustee as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (g) Future Actions. Each of the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee and the Pass Through Trustee agrees, as to its own actions only, severally but not jointly, that neither the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee nor the Pass Through Trustee nor anyone acting on behalf of the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee or the Pass Through Trustee will offer the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or any similar interest for issue or sale to any prospective purchaser, or solicit any offer to acquire any of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof so as to cause Section 5 of the Securities Act to apply to the issuance and sale of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof. Section 3.5 Representations and Warranties of the Owner Participant. The Owner Participant represents and warrants to the Owner Trustee, the Indenture 25 Participation Agreement (TRLI 2001-1B) Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Owner Participant is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has full limited partnership power and authority to carry on its business as now conducted; (b) the Owner Participant has the requisite limited partnership power and authority to execute, deliver and perform its obligations under the Owner Participant Agreements, and the execution, delivery and performance by it thereof do not and will not contravene any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on the Owner Participant or any of its properties, or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than such as are created by the Operative Agreements) upon the Equipment under, its Certificate of Limited Partnership, limited partnership agreement or any indenture, mortgage, contract or other agreement or instrument to which the Owner Participant is a party or by which it or any of its properties may be bound or affected; (c) the Owner Participant Agreements have been duly authorized by all necessary actions on the part of the Owner Participant and its general partner, do not require any approval not already obtained of the partners of the Owner Participant or any approval or consent not already obtained of any trustee or holders of indebtedness or obligations of the Owner Participant, have been, or on or before the Closing Date will be, duly executed and delivered by the general partner of the Owner Participant in its capacity as general partner of the Owner Participant and (assuming the due authorization, execution and delivery by each other party thereto) constitute, or will constitute, the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity; (d) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery or performance by the Owner Participant of the Trust Agreement, the Tax Indemnity Agreement or this Agreement; (e) the Trust Estate is free and clear of any Lessor's Lien attributable to the Owner Participant; (f) there are no pending or, to the Owner Participant's knowledge, threatened actions or proceedings against the Owner Participant before any court or administrative agency which would materially adversely affect the Owner 26 Participation Agreement (TRLI 2001-1B) Participant's ability to perform its obligations under the Trust Agreement, the Tax Indemnity Agreement or this Agreement; (g) as of the Closing Date, the Owner Participant is purchasing the Beneficial Interest to be acquired by it for its own account with no present intention of distributing such Beneficial Interest or any part thereof in any manner which would violate the Securities Act, but without prejudice, however, to the right of the Owner Participant at all times to sell or otherwise dispose of all or any part of such Beneficial Interest in compliance with the Securities Act and any state securities or "blue sky" laws; provided, however, that subject to the provisions of Section 6.1, the disposition of the Beneficial Interest shall at all times be within the Owner Participant's control. The Owner Participant acknowledges that its Beneficial Interest has not been registered under the Securities Act, and that neither the Owner Participant, the Owner Trustee, Trust Company, the Lessee, TRMI nor TILC contemplates filing, or is legally required to file, any such registration statement. Notwithstanding the foregoing, the Owner Participant makes no representation that the Beneficial Interest is a "security" within the meaning of such term under the Securities Act; (h) with respect to the source of the amount to be invested by the Owner Participant pursuant to Section 2.2, no part of such amount constitutes assets of any employee benefit plan subject to Title I of ERISA or Section 4975 of the Code; and (i) no broker's or finder's or placement fee or commission will be payable with respect to the transactions contemplated by the Operative Agreements as a result of any action by the Owner Participant, and the Owner Participant agrees that it will hold TILC, TRMI, the Lessee, the Indenture Trustee, the Loan Participant and the Owner Trustee harmless from any claim, demand or liability for broker's or finder's or placement fees or commission alleged to have been incurred as a result of any action by the Owner Participant in connection with this transaction. Section 3.6 Representations and Warranties of TILC. TILC represents and warrants to each of the Owner Trustee, the Indenture Trustee and the Participants, as of the date hereof: (a) TILC is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TILC Agreements, has the power and authority to carry on its business as now conducted, and has the requisite power and authority to execute, deliver and perform its obligations under the TILC Agreements; 27 Participation Agreement (TRLI 2001-1B) (b) the TILC Agreements have been duly authorized by all necessary corporate action, and are, or will on the Closing Date be, duly executed and delivered by TILC, and (assuming the due authorization, execution and delivery by each other party thereto) constitute or, will on the Closing Date constitute, the legal, valid and binding obligations of TILC, enforceable against TILC in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by TILC of each TILC Agreement and compliance by TILC with all of the provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on TILC or any of its properties, or (ii) the provisions of, or constitute a default by TILC under, its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or other agreement or instrument to which TILC is a party or by which TILC or any of its properties may be bound or affected except, with respect to clause (iii), where such contravention would not materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business; (d) there are no proceedings pending or, to the knowledge of TILC, threatened against TILC in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business; (e) TILC is not in violation of any term of any charter instrument or bylaw or any other material agreement or instrument to which it is a party or by which it may be bound except where such violation would not materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business. TILC is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TILC to perform its obligations under the TILC Agreements, and has obtained all required licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebtedness of TILC or any governmental authority on the part of TILC is required in the United States in connection with the execution and delivery by TILC of the TILC Agreements, or is required to be obtained in order for TILC to perform its 28 Participation Agreement (TRLI 2001-1B) obligations thereunder in accordance with the terms thereof, other than (i) as may be required under existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing Date in connection with the performance of its obligations under the TILC Agreements and which are routine in nature and are not normally applied for prior to the time they are required, and which TILC has no reason to believe will not be timely obtained or (ii) as may be required under the Operative Agreements in consequence of any transfer of ownership of the Equipment occurring after the Closing Date; (g) to the best knowledge of TILC, no casualty event or other event that may constitute an Event of Loss under the Lease has occurred as of the date of this Agreement with respect to any Unit delivered on the Closing Date; (h) (i) TILC shall have, and the TILC Bill of Sale to be delivered on the Closing Date shall convey to the Lessee, all legal and beneficial title to the Units which are being delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (ii) TILC shall have, and the TILC Assignment to be delivered on the Closing Date shall assign to the Lessee, all legal and beneficial title to the Existing Equipment Subleases, free and clear of all Liens (other than subleases of the Existing Equipment Subleases by the Sublessees as expressly permitted by the Existing Equipment Subleases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; (iii) all of the Units being delivered on the Closing Date other than an immaterial amount shall be subject to sublease by the Sublessees under the Existing Equipment Subleases on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; (i) all sales, use or transfer taxes, if any, due and payable upon the sale of the Equipment and assignment of Existing Equipment Subleases by TILC to the Lessee will have been paid or such transactions will then be exempt from any such taxes and TILC will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations; (j) all Units delivered on the Closing Date are substantially similar in terms of objectively identifiable characteristics that are relevant for purposes of the services to be performed by TILC under the Management Agreement to the equipment in the TILC Fleet; (k) in selecting the Units to be sold on the Closing Date to the Lessee pursuant to the TILC Bill of Sale, TILC has not discriminated against the 29 Participation Agreement (TRLI 2001-1B) Lessee in a negative fashion when such Units are compared with the other equipment in the TILC Fleet; (l) the written information provided by TILC or on behalf of TILC to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto does not contain any untrue statement of a material fact and does not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The assumptions and related financial information relating to the proposed business and operations of TILC and the Partnership Fleet which are contained in the information on Schedule 3.2(m) have been prepared in good faith based upon information that TILC deems fair and reasonable, and there are no statements or conclusions therein which are based on or include information known to TILC to be misleading in any material respect or which fail to take into account material information known to TILC regarding the matters stated therein. Certain information contained in the information on Schedule 3.2(m) (e.g. statistical information relating to renewal and remarketing of railcars, potential increases in absolute or nominal railcar lease rates, anticipated utilization, and maintenance costs) is based on the historical experience of TILC. Subject to the foregoing, there can be no assurance that past experience will be indicative of future performance with respect to these or other operating and marketing factors set forth in the information on Schedule 3.2(m); (m) the representations and warranties of the Lessee contained in Section 3.2(h), clause (iii) of Section 3.2(l), the first sentence of Section 3.2(p) and in Section 3.2(r) (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to TILC) are true and correct as of the date hereof; (n) TILC is not in default under any Existing Equipment Sub leases or Existing Pledged Equipment Leases, and, to the best of the TILC's knowledge, there are (i) no defaults by any Sublessee or Pledged Equipment Lessee thereunder existing as of the date hereof under the Existing Equipment Subleases or Existing Pledged Equipment Leases, except such defaults as are not material and (ii) no claims or liabilities arising as a result of the operation or use of any Unit described on Schedule 1 hereto prior to the date hereof as to which the Lessor, as owner of the Units delivered on the Closing Date, would be liable; (o) as of the Closing Date, TILC shall have provided, or caused to be provided, in either case in accordance with the terms of the relevant Existing Equipment Sublease, a notice relating to each Existing Equipment Sublease (which notice shall be substantially in the form attached hereto as Exhibit D) to the related Sublessee under such Existing Equipment Sublease; (p) (i) the balance sheet of TILC as of March 31, 2000, and the related statements of operations, stockholders' equity and cash flows for the period 30 Participation Agreement (TRLI 2001-1B) then ended, and (ii) the balance sheet of TILC as of December 31, 2000 and the related statements of income and cash flows of TILC for the nine month period beginning on April 1, 2000 and ending on December 31, 2000, have been prepared in accordance with generally accepted accounting principles (except as may be stated in the notes thereto and except, with respect to interim financial statements, for year- end audit adjustments), consistently applied, and fairly set forth, in all material respects, the financial condition of TILC as of such dates and the results of their operations and cash flows for such periods; and (q) TILC is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by TILC for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.6(q) with such meanings. Section 3.7 Representations and Warranties of TRMI. TRMI represents and warrants to the Indenture Trustee, the Owner Trustee and the Participants, as of the date hereof: (a) TRMI is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TRMI Agreements, has the power and authority to carry on its business as now conducted, and has the requisite power and authority to execute, deliver and perform its obligations under the TRMI Agreements; (b) the TRMI Agreements have been duly authorized by all necessary corporate action, executed and delivered by TRMI, and (assuming the due authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of TRMI, enforceable against TRMI in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by TRMI of each TRMI Agreement and compliance by TRMI with all of the provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on TRMI or any of its 31 Participation Agreement (TRLI 2001-1B) properties, or (ii) the provisions of, or constitute a default by TRMI under, its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or other agreement or instrument to which TRMI is a party or by which TRMI or any of its properties may be bound or affected except, with respect to clause (iii) above, where such contravention would not materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business; (d) there are no proceedings pending or, to the knowledge of TRMI, threatened against TRMI in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business; (e) TRMI is not in violation of any term of any charter instrument or bylaw or any other material agreement or instrument to which it is a party or by which it may be bound except where such violation would not materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business. TRMI is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TRMI to perform its obligations under the TRMI Agreements, and has obtained all licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebtedness of TRMI or any governmental authority on the part of TRMI is required in the United States in connection with the execution and delivery by TRMI of the TRMI Agreements, or is required to be obtained in order for TRMI to perform its obligations thereunder in accordance with the terms thereof, other than those which (i) are routine in nature and are not normally applied for prior to the time they are required, and which TRMI has no reason to believe will not be timely obtained or (ii) the failure to obtain would not have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TRMI to perform its obligations under the TRMI Agreements; (g) the written information provided by TRMI or on behalf of TRMI to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto as of the date such information was provided to the Owner Participant and/or the Loan Participant, as the case may be, did not contain any untrue statement of a material fact and did not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which 32 Participation Agreement (TRLI 2001-1B) they were made, not misleading. No representation or warranty is given with respect to any forecasts or projections included therein or omitted therefrom; (h) the representations and warranties of the Lessee contained in Sections 3.2(a), (b), (c), (d), (e), (f), (g), (i), (j), (k), clauses (i) and (ii) of (l), (m), (n), (o), (p) other than the first sentence thereof, (q) and (s) are true and correct as of the date hereof (except with respect to representations and warranties made as of an earlier date, in which case such representations and warranties shall be true as of such earlier date); and (i) (x) the balance sheet of TRMI as of March 31, 2000, and the related statements of operations, stockholders' equity and cash flows for the period then ended, and (y) the balance sheet of TRMI as of December 31, 2000 and the related statements of income and cash flows of TRMI for the nine month period beginning on April 1, 2000 and ending on December 31, 2000, have been prepared in accordance with generally accepted accounting principles (except as may be stated in the notes thereto and except, with respect to interim financial statements, for year- end audit adjustments), consistently applied, and fairly set forth, in all material respects, the financial condition of TRMI as of such dates and the results of their operations and cash flows for the periods then ended. Section 3.8 Representations and Warranties of the Pass Through Trustee. The Pass Through Trustee represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Pass Through Trustee is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the full corporate power, authority and legal right under the laws of the United States of America and the State of Illinois pertaining to its banking, trust and fiduciary powers to execute, deliver and perform its obligations under the Pass Through Trustee Agreements and the Pass Through Documents to which it is a party; (b) this Agreement has been, and on the Closing Date, each of the other Pass Through Trustee Agreements will have been, duly authorized, executed and delivered by the Pass Through Trustee; this Agreement constitutes, and on the Closing Date, each of the other Pass Through Trustee Agreements will constitute, the legal, valid and binding obligations of the Pass Through Trustee, enforceable against the Pass Through Trustee in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; 33 Participation Agreement (TRLI 2001-1B) (c) the execution, delivery and performance by the Pass Through Trustee of each of the Pass Through Trustee Agreements, the purchase by the Pass Through Trustee of the Equipment Note pursuant to this Agreement, and the issuance of the Pass Through Certificates pursuant to the Pass Through Trust Agreement, do not contravene any law, rule or regulation of any federal or Illinois governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Pass Through Trustee and do not contravene or result in any breach of, or constitute a default under, the Pass Through Trustee's articles of association or bylaws or any agreement or instrument to which the Pass Through Trustee is a party or by which it or any of its properties may be bound or affected; (d) neither the execution and delivery by the Pass Through Trustee of each of the Pass Through Trustee Agreements nor the consummation by the Pass Through Trustee of any of the transactions contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action with respect to, any federal or Illinois governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers; (e) there are no pending or, to its knowledge, threatened actions or proceedings against the Pass Through Trustee before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Pass Through Trustee to perform its obligations under any of the Pass Through Trustee Agreements; (f) the Pass Through Trustee is not in default under any Pass Through Trustee Agreement; (g) the Pass Through Trustee does not directly or indirectly control, and is not directly or indirectly controlled by or under common control with, the Owner Participant, the Owner Trustee, the Initial Purchasers, TILC, TRMI or the Lessee; (h) the Pass Through Trustee is purchasing the Equipment Note for the purposes contemplated by the Operative Agreements and not with a view to the transfer or distribution of any Equipment Note to any other Person, except as contemplated by the Operative Agreements; and (i) except for the issue and sale of the Pass Through Certificates contemplated hereby and by the other Pass Through Trustee Agreements, the Pass Through Trustee has not directly or indirectly offered any Equipment Note or Pass Through Certificate or any interest in or to the Trust Estate, the Trust Agreement or any similar interest for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Trustee and the Owner Participant, and the Pass 34 Participation Agreement (TRLI 2001-1B) Through Trustee has not authorized anyone to act on its behalf to offer directly or indirectly any Equipment Note, any Pass Through Certificate or any interest in and to the Trust Estate, the Trust Agreement or any similar interest related to this transaction for sale to, or to solicit any offer to acquire any of the same from, any Person other than the Owner Trustee and the Owner Participant. Section 3.9 Opinion Acknowledgment. Each of the parties hereto, with respect to such party, expressly consents to the rendering by its counsel of the opinion referred to in Section 4.1(e) and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such party. SECTION 4. CLOSING CONDITIONS. Section 4.1 Conditions Precedent to Investment by Each Participant. The obligation of each Participant to make the investment specified with respect to such Participant in Section 2 on the Closing Date shall be subject to the satisfaction or waiver of the following conditions precedent on or before August 31, 2001 (except that the obligations of any Person shall not be subject to such Person's own performance or compliance): (a) Execution of Operative Agreements. On or before the Closing Date, the Lease, the Lease Supplement in respect of the Units delivered on the Closing Date, the Indenture, the Indenture Supplement in respect of the Units delivered on the Closing Date, the Equipment Note, the Transfer and Assignment Agreement, the TILC Bill of Sale, the TILC Assignment, the Bill of Sale, the Assignment and the OP Guaranty shall each be satisfactory in form and substance to such Participant, shall have been duly executed and delivered by the parties thereto (except that the execution and delivery of the documents referred to above (other than this Agreement) by a party hereto or thereto shall not be a condition precedent to such party's obligations hereunder), shall each be in full force and effect, and executed counterparts of each shall have been delivered to such Participant or its counsel on or before the Closing Date; and no event shall have occurred and be continuing that constitutes a Lease Default or an Indenture Default. (b) The Operative Agreements (as defined in the Other Participation Agreement) remain in full force and effect. (c) Recordation and Filing. On or before the Closing Date (except as expressly stated below), the Lessee shall have caused the Lease, the Lease Supplement, the Indenture and the Indenture Supplement (each in respect of Units delivered on the Closing Date), the TILC Bill of Sale, the Bill of Sale, the TILC Assignment and the Assignment to be duly filed, recorded and deposited in memorandum form with the STB in conformity with 49 U.S.C. Section 11301 and with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act, and all necessary actions shall have been taken to cause publication of notice of 35 Participation Agreement (TRLI 2001-1B) such deposit in The Canada Gazette in accordance with said Section 105 and all appropriate Uniform Commercial Code financing statements to be filed where necessary or reasonably advisable within 10 days after the Closing Date, and the Lessee shall furnish the Indenture Trustee, the Owner Trustee, the Collateral Agent and each Participant proof thereof. Without limiting the representations and warranties set forth in any Operative Agreement, by such recording or filing of the Lease (or a financing statement or similar notice thereof), the Owner Trustee and the Lessee are not acknowledging or implying that the Lease constitutes a "security agreement" or creates a "security interest" within the meaning of the Uniform Commercial Code in any applicable jurisdiction. (d) Representations and Warranties of the Lessee. On the Closing Date, the representations and warranties of the Lessee contained in Section 3.2 and Section 3.4(b) hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from the General Partner of the Lessee certifying to the foregoing matters, and the Lessee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Lessee on or before said date. (e) Representations and Warranties of the Owner Trustee. On the Closing Date, the representations and warranties of the Trust Company and the Owner Trustee contained in Section 3.1 and Section 3.4(a) shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, the Indenture Trustee, TILC, TRMI and the Participants shall have received an Officer's Certificate to such effect dated such date from the Trust Company (in respect of the Trust Company) and the Owner Trustee (in respect of the Owner Trustee), and the Trust Company and the Owner Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Trust Company and the Owner Trustee, respectively, on or before said date. (f) Opinions of Counsel. On the Closing Date, the Owner Trustee, the Indenture Trustee and each Participant shall have received the favorable written opinion of each of (i) Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel for the Lessee, TILC and TRMI, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (ii) counsel for the Lessee, TILC and TRMI (which counsel shall be the General Counsel of Trinity), substantially in the form of the corresponding opinion delivered in connection with the closing under the Other 36 Participation Agreement (TRLI 2001-1B) Participation Agreement, (iii) Bingham Dana LLP, counsel to the Owner Trustee, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (iv) Winston & Strawn, special counsel to the Owner Participant, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (v) Philip Morris Capital Corporation Legal Department, counsel to the Owner Participant, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (vi) Robert A. Wolz, Assistant Counsel to the Indenture Trustee, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (vii) Alvord & Alvord, special STB counsel, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (viii) McCarthy Tetrault, special Canadian counsel, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement, (ix) Andrews & Kurth L.L.P., special counsel for the Collateral Agent, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement and (x) Robert A. Wolz, Assistant Counsel to the Pass Through Trustee, substantially in the form of the corresponding opinion delivered in connection with the closing under the Other Participation Agreement. (g) Title. On the Closing Date, after giving effect to the transactions contemplated hereby, (i) the Owner Trustee shall have all legal and beneficial title to each Unit to be delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof), (ii) the Owner Trustee shall have received all right, title and interest of the Lessee in and to the Existing Equipment Subleases, free and clear of all Liens (other than subleases of the Existing Equipment Subleases by the Sublessees as expressly permitted by the Existing Equipment Subleases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof) and (iii) each Sublessee under an Existing Equipment Sublease shall have been notified of the assignment thereof to the Owner Trustee. (h) Bills of Sale; Assignments. On the Closing Date, each of the following documents shall each have been duly executed and delivered: (i) the TILC Bill of Sale and the Bill of Sale, in each case in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date and covering the Units to be delivered on such date, transferring to the Owner Trustee and the Lessee, respectively, legal and beneficial title to such Units free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof) and warranting to the Owner Trustee that at the time of delivery of each such Unit, TILC and the Lessee, as the case may be, had legal and beneficial title thereto and good and lawful 37 Participation Agreement (TRLI 2001-1B) right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof and, with respect to the TILC Bill of Sale, warranting that TILC shall be responsible for discharging any Permitted Lien of the type described in subclause (iii) or (iv) of the definition thereof which has attached as of the Closing Date) and (ii) the TILC Assignment and the Assignment, in each case in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date covering the Existing Equipment Subleases, assigning to the Owner Trustee and Lessee respectively, all right, title and interest of TILC and the Lessee, respectively, to the Existing Equipment Subleases, free and clear of all Liens (other than Permitted Liens) and warranting to the Lessee that, at the time of such assignment, TILC and the Lessee, respectively, had legal and beneficial title to the Existing Equipment Subleases and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens); (i) Insurance Certificate. On or before the Closing Date, the Indenture Trustee and each Participant shall have received (x) each certificate relating to insurance that is required pursuant to Section 12 of the Lease and Section 6.4 of the Collateral Agency Agreement and (y) certificates from a nationally recognized insurance broker substantially in the forms attached hereto as Exhibits A- 1 and A-2 with respect to the public liability insurance required by Section 12.1(b) of the Lease and Section 6.4 of the Collateral Agency Agreement. (j) Corporate, Partnership, Limited Liability Company and Other Organizational Documents. Each of the Participants shall have received such documents and evidence with respect to Trinity, TILC, TRMI, the Lessee, the General Partner, the Limited Partner, the Owner Participant, the Pass Through Trustee, the Owner Trustee and the Indenture Trustee as the Participants may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement and the taking of all corporate, limited partnership and other proceedings in connection therewith. (k) No Threatened Proceedings. No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transactions contemplated hereby. (l) Representations and Warranties of the Owner Participant. On the Closing Date, the representations and warranties of the Owner Participant contained in Section 3.4(e) and Section 3.5 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, 38 Participation Agreement (TRLI 2001-1B) except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Indenture Trustee and the Pass Through Trustee shall have received an Officer's Certificate to such effect dated such date from the Owner Participant, and the Owner Participant shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Owner Participant on or before said date. (m) Notice of Delivery. The Indenture Trustee and the Participants shall have received the Notice of Delivery described in Section 2.3(a). (n) Representations and Warranties of the Indenture Trustee. On the Closing Date, the representations and warranties of the Indenture Trustee contained in Section 3.3 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Owner Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from the Indenture Trustee, and the Indenture Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Indenture Trustee on or before said date. (o) No Illegality. No change shall have occurred after the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by regulatory authorities that, in the opinion of such Participant or its counsel, would make it illegal for such Participant to enter into any transaction contemplated by the Operative Agreements. (p) Participants' Investments. (i) The Owner Participant shall have made available the Owner Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan Participant shall have made available the Loan Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3. (q) Consents. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, Trinity, TILC and TRMI, if any, required to have been obtained in connection with the transactions contemplated by this Agreement and the other Operative Agreements shall have been duly obtained and be in full force and effect. (r) Governmental Actions. All actions, if any, required to have been taken on or prior to the Closing Date in connection with the transactions 39 Participation Agreement (TRLI 2001-1B) contemplated by this Agreement and the other Operative Agreements on the Closing Date shall have been taken by any governmental or political agency, subdivision or instrumentality of the United States, and all orders, permits, waivers, exemptions, authorizations and approvals of such entities required to be in effect on the Closing Date in connection with the transactions contemplated by this Agreement and the other Operative Agreements on the Closing Date shall have been issued, and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect, on the Closing Date. (s) Tax Indemnity Agreement. On or before the Closing Date, the Tax Indemnity Agreement shall be satisfactory in form and substance to the Owner Participant, shall have been duly executed and delivered by the Lessee and the Guarantor and, assuming due authorization, execution and delivery by the Owner Participant or one of its Affiliates, shall be in full force and effect. (t) Appointment of Representative. The Owner Trustee shall have authorized its representative, who shall be an individual designated by the Lessee and acceptable to the Owner Trustee, to accept the Units being delivered on the Closing Date from the Lessee and to deliver such Units to the Lessee. The Lessee shall have authorized its representative (who shall be the same individual designated by the Lessee under this Section 6.1(s)) to accept delivery of such Units from the Owner Trustee as Lessor pursuant to the Lease. (u) Solvency of the Lessee. The Lessee shall have furnished to the Participants an Officer's Solvency Certificate (substantially in the form attached hereto as Exhibit E) as to the solvency of the Lessee as of the Closing Date. (v) Schedule of Subleases and Units. The Participants and the Collateral Agent shall have received a schedule, certified by the Lessee and TILC, listing the Existing Equipment Subleases under the Lease, the Sublessee under each thereof and the Units covered thereby. (w) Projected Coverage Ratio. The Manager shall have furnished to the Participants and the Collateral Agent that portion of the report provided for in Section 7.1 of the Management Agreement setting forth the Projected Coverage Ratio for the six-month period immediately succeeding the Closing Date. (x) Representations and Warranties of TILC. On the Closing Date, the representations and warranties of TILC contained in Section 3.4(d) and Section 3.6 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from TILC, and TILC 40 Participation Agreement (TRLI 2001-1B) shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by TILC on or before said date. (y) Representations and Warranties of TRMI. On the Closing Date, the representations and warranties of TRMI contained in Section 3.4(c) and Section 3.7 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from TRMI, and TRMI shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by TRMI on or before said date. (z) Representations and Warranties of the Pass Through Trustee. On the Closing Date, the representations and warranties of the Pass Through Trustee contained in Sections 3.4(f) and Section 3.8 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Indenture Trustee, the Owner Trustee and the Owner Participant shall have received an Officer's Certificate to such effect dated such date from the Pass Through Trustee, and the Pass Through Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Pass Through Trustee on or before said date. (aa) Representations and Warranties of Trinity. On the Closing Date, the representations and warranties of Trinity contained in the Trinity Guaranty shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from Trinity, and Trinity shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by Trinity on or before said date. (bb) Accountant's Letter. The Participants shall have received an accountant's letter from PriceWaterhouseCoopers L.L.P. in form and substance reasonably satisfactory to each of them. 41 Participation Agreement (TRLI 2001-1B) (cc) First Closing. The Closing Date (as defined in the Other Lease) shall have occurred and no Indenture Default or Indenture Event of Default (as defined in the Other Lease) shall have occurred and be continuing. (dd) Sublease Consents. The Lessee shall have obtained the consent to assignment from each Sublessee under each Existing Equipment Sub lease, such consents to be substantially in the form of the consents received with respect to the Other Participation Agreement. (ee) Certificate Rating. On the Closing Date, the Certificates shall be rated at least "AA" by S&P. Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant. The obligation of the Loan Participant to fund the Loan Participant's Commitment and purchase and pay for the Equipment Note to be purchased by it pursuant to Sections 2.2(b) and 2.3 on the Closing Date shall be subject to the satisfaction or waiver of the following additional conditions precedent: (a) Equipment Note. The Equipment Note to be delivered on the Closing Date shall have been duly authorized, executed and delivered to the Loan Participant by a duly authorized officer of the Owner Trustee and duly authenticated by the Indenture Trustee. (b) Appraisal. The Pass Through Trustee and each Initial Purchaser shall have received the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with the Appraisal. (c) No Material Adverse Change. No material adverse change shall have occurred in the business, operations or financial condition of any of the Lessee, the Manager, the Administrator, the Insurance Manager or Trinity. (d) No Material Changes. If as a result of the operation of Section 2.6, adjustments have been made to Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, or the Scheduled Amortization for the Equipment Notes, after the date hereof and prior to the Closing Date, the following conditions remain true on the Closing Date after giving effect to such adjustments: (i) the Rated Maturity Date shall be unchanged; (ii) the adjusted Scheduled Amortization for the Equipment Notes amortizes the Equipment Note by the Rated Maturity Date; (iii) the Debt Rate shall remain unchanged; (iv) the weighted average life of the Equipment Note does not differ from the weighted average life of the Equipment Note before such adjustment by more than six (6) months; (v) the ratio of the principal amount of the Equipment Note to the aggregate fair market value of the Equipment calculated after such adjustment does not differ by more than 2% from the same ratio calculated on or prior to the date hereof based on the Equipment listed in Schedule 1 attached hereto; and (vi) there has been no 42 Participation Agreement (TRLI 2001-1B) material change in the composition of the pool of Subleases (in terms of the nature and terms of the Subleases and the identity and credit quality of the Sublessees) since the date hereof. Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant. The obligation of the Owner Participant to provide the funds specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date with respect to any Unit to be delivered on the Closing Date shall be subject to the satisfaction or waiver of the following additional conditions precedent: (a) Appraisal. On or before the Closing Date, the Owner Participant shall have received an opinion (the "Appraisal") of Rail Solutions, Inc. (the "Appraiser"), satisfactory in form and substance to the Owner Participant (with a separate summary or other evidence of such Appraisal as it relates to fair market value and useful life being provided to the Rating Agency), concluding that: (i) the fair market value of each Unit being delivered on the Closing Date is equal to the portion of the Total Equipment Cost with respect to such Unit; (ii) at the expiration of the Basic Term and any Fixed Rate Renewal Term, (A) without taking into account inflation or deflation from and after the Closing Date or the existence of any purchase option, it is reasonable to expect that each such Unit will have a fair market value of at least 20% of the Total Equipment Cost with respect to such Unit and (B) the remaining economic life of each such Unit will be at least equal to 20% of the economic life of such Unit as estimated in the Appraisal; (iii) as of the Early Purchase Date, the estimated fair market value of each such Unit being delivered on the Closing Date, taking into account inflation or deflation from and after the Closing Date, will not exceed the portion of the Early Purchase Price attributable to such Unit; (iv) no Unit being delivered on the Closing Date is Limited Use Property; (v) the Fixed Rate Renewal is greater than or equal to the fair market rental value of each such Unit and the Lessee is not reasonably expected to exercise any Fixed Rate Renewal option; and (vi) such other matters as the Owner Participant may reason ably request; provided that the Lessee makes no representation as to the fair market value, useful life, fair market rental value or estimated residual value of the Equipment, and the Lessee shall not be responsible for, or incur any liabilities as a result of, the contents of such Appraisal or report to which it relates or, except to the extent provided in the Tax Indemnity Agreement. (b) Opinion with Respect to Certain Tax Aspects. On the Closing Date, the Owner Participant shall have received the opinion of Winston & Strawn, addressed to the Owner Participant, in form and substance satisfactory to the Owner Participant, containing such counsel's favorable opinion with respect to such tax matters as the Owner Participant may reasonably request. (c) Absence of Change in Tax Laws. No change or proposed change shall have occurred after the execution and delivery of this Agreement in relevant United States tax laws, regulations, or administrative or judicial 43 Participation Agreement (TRLI 2001-1B) interpretation thereof which change would cause an adverse change to the tax assumptions used to calculate Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price, unless the adjustment referred to in Section 2.6(a) is made to the Owner Participant's satisfaction. (d) Absence of Accounting Changes. No change shall have occurred in generally accepted accounting principles which shall, in the opinion of the Owner Participant, adversely affect its Net Economic Return. (e) No Material Adverse Change. No material adverse change shall have occurred in the business, operations or the financial condition of any of Lessee, Manager, the Administrator, the Insurance Manager or Trinity. (f) Absence of Certain Changes. The Owner Participant shall be satisfied that the transaction is consistent in all respects with the Owner Participant's internal approvals, including but not limited to its Investment Committee approval relating to the transaction. Section 4.4 Conditions Precedent to the Obligation of TILC and the Lessee. The obligation of TILC with respect to the sale of the Units to the Lessee on the Closing Date, the obligation of the Lessee with respect to the sale of such Units to the Owner Trustee and the obligation of the Lessee to accept such Units under the Lease as of the Closing Date is subject to the satisfaction or waiver of the following conditions precedent: (a) Corporate Documents. On or before the Closing Date, the Lessee shall have received such documents and evidence with respect to the Participants, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee as the Lessee may reasonably request in order to establish the authorization of the consummation of, or otherwise relating to the ability to consummate, the transactions contemplated by this Agreement and the other Operative Agreements, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth. (b) Operative Agreements. On or before the Closing Date, the Operative Agreements shall have been duly authorized, executed and delivered by the respective party or parties thereto (other than the Lessee, Trinity, TILC and TRMI), and an executed counterpart of each thereof shall have been delivered to the Lessee or its special counsel. (c) Representations and Warranties. On the Closing Date, the representations and warranties of each of the Owner Trustee, the Indenture Trustee and the Participants contained in Section 3 hereof shall be true and correct in all material respects as of the Closing Date as though made on and as of such date, and 44 Participation Agreement (TRLI 2001-1B) the Lessee shall have received an Officer's Certificate to such effect dated such date from each of the Owner Trustee as described in Section 4.1(d), the Owner Participant as described in Section 4.1(k), the Indenture Trustee as described in Section 4.1(m) and the Pass Through Trustee as described in Section 4.1(y). (d) Opinions of Counsel. On the Closing Date, the Lessee shall have received the opinions of counsel referred to in Section 4.1(e) (other than that set forth in clauses (i) and (ii) therein), addressed to the Lessee. (e) No Threatened Proceedings. No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transactions contemplated hereby. (f) No Illegality. No change shall have occurred after the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by regulatory authorities that, in the opinion of the Lessee or its counsel, would make it illegal for the Lessee to enter into any transaction contemplated by the Operative Agreements. (g) Participants' Investments. (i) The Owner Participant shall have made available the Owner Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan Participant shall have made available the Loan Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3. (h) Absence of Change in Rent. No adjustment under Section 2.6(a) would cause an increase in the net present value (expressed as a percentage of Total Equipment Cost) of the Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to exceed 100 basis points. (i) No Adverse Accounting Treatment. The Lessee shall not have been advised by its independent accountants that the Lessee or its affiliates will not be afforded "off-balance sheet" accounting treatment with respect to the Lease and the transactions contemplated by the Operative Agreements; provided, that the Lessee shall not have deliberately caused the loss of "off-balance sheet" accounting treatment to provoke non-satisfaction of such condition precedent pursuant to this Section 4.4(i). 45 Participation Agreement (TRLI 2001-1B) SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE. The Lessee agrees during the Lease Term and (if longer, in the event that the Lessee has assumed all of the rights and obligations of the Lessor under the Indenture in respect of the Equipment Notes) so long as any Equipment Note remains outstanding, that it will furnish directly to each Participant the following: (a) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, a balance sheet of the Lessee as at the end of such quarter, together with the related consolidated statements of income and cash flows of the Lessee for the period beginning on the first day of such fiscal year and ending on the last day of such quarter, setting forth in each case (except for the balance sheet) in comparative form the figures for the corresponding periods of the previous fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles; (b) as soon as available and in any event within 120 days after the last day of each fiscal year, a copy of the Lessee's audited annual report covering the operations of the Lessee including a balance sheet, and related statements of income and retained earnings and statement of cash flows of the Lessee for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles applied on a consistent basis, which statements will have been certified by a firm of independent public accountants of recognized national standing selected by the Lessee; (c) within the time period prescribed in paragraph (a) above, a certificate, signed by the Treasurer or principal financial officer of the General Partner, (i) to the effect that such officer is not aware (without any obligation of due inquiry), as of the date of such certificate, of any Lease Default, and if a Lease Default shall exist, specifying such Lease Default, the nature and status thereof and what action Lessee is taking or plans to take with respect thereto and (ii) setting forth the Historical Coverage Ratio and the Projected Coverage Ratio as of the last Business Day of the immediately preceding calendar quarter; (d) within the time period prescribed in paragraph (b) above, a certificate, signed by the Treasurer or principal financial officer of the General Partner, (i) to the effect that the signer has reviewed the Operative Agreements and activities and records of the Lessee during the immediately preceding fiscal year and that, after due inquiry, such officer is not aware, as of the date of such certificate, of any Lease Default, and if a Lease Default shall exist, specifying such Lease Default, the nature and status thereof and what action Lessee is taking or plans to take with respect thereto, (ii) setting forth the Historical Coverage Ratio and the Projected Coverage Ratio as of the last Business Day of the preceding fiscal year and (iii) setting forth in summary terms the Lessee's compliance with Section 8.3 of the Lease 46 Participation Agreement (TRLI 2001-1B) as to new Subleases entered into by the Lessee, and sub-subleases entered into by any Sublessee, during such fiscal year, including without limitation as to whether such new Subleases are subject and subordinate to the terms of the Lease; (e) within the time periods presented in Section 7 of the Management Agreement, each of the reports referred to therein delivered by the Manager to the Lessee; and (f) promptly after request therefor, such additional information with respect to the financial condition or business of the Lessee as the Owner Participant or the Indenture Trustee may from time to time reasonably request. SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE. Section 6.1 Restrictions on Transfer of Beneficial Interest. The Owner Participant agrees that it shall not, directly or indirectly, sell, convey, assign, pledge, mortgage or otherwise transfer all or any part of the Beneficial Interest (collectively, for purposes of this Section 6.1, a "transfer") prior to the expiration or earlier termination of the Lease Term without the Lessee's prior written consent (which consent shall not be unreasonably withheld); provided, however, no such consent shall be required in connection with any indirect transfer of the Beneficial Interest resulting from (i) any direct or indirect change of control of Philip Morris Capital Corporation or change of control of any direct or indirect parent of Philip Morris Capital Corporation or (ii) any transfer of substantially all of the assets of Philip Morris Capital Corporation as an entirety; provided, further, that no such consent shall be required if the following conditions are satisfied: (a) the Person to whom such transfer is to be made (a "Transferee") is (i) an institutional or corporate investor with tangible net worth or, in the case of a bank or lending institution, combined capital and surplus at the time of such transfer, of at least $75,000,000, determined in accordance with generally accepted accounting principles, as of the date of such transfer, or (ii) an Affiliate of an institutional or corporate investor that satisfies the requirements set forth in clause (i) above if such investor guarantees pursuant to a guaranty in form and substance satisfactory to the Lessee the obligations of the Owner Participant under the Operative Agreements assumed by such Affiliate as required herein or (iii) an Affiliate of the Owner Participant; provided that in the event of a transfer pursuant to clause (iii) which does not qualify under clauses (i) or (ii), the Owner Participant shall remain liable for all of its obligations under this Agreement and the other Operative Agreements; (b) so long as no Lease Event of Default has occurred and is continuing, neither the Transferee nor any of its Affiliates shall compete (directly or 47 Participation Agreement (TRLI 2001-1B) indirectly) (other than as a passive investor or loan participant in the financing of equipment or facilities used in railcar leasing) with the Lessee or TILC (unless such non-competition requirement has been waived in writing by the Lessee and TILC) in any respect material to the full service railcar leasing business of the Lessee or TILC; provided, that no Transferee or Affiliate thereof shall be deemed to (i) be engaged in railcar leasing or (ii) hold (directly or indirectly) any material interest in any business that is competitive with Lessee's or TILC's railcar leasing business, solely by reason of any sale, lease or other disposition (or any actions in furtherance of any of the foregoing) of any of such Person's interest in any equipment or facilities directly or indirectly owned, leased or otherwise controlled pursuant to any such Person's passive investment or loan participation in the financing of any such equipment or facilities used in railcar leasing or any re-leasing or sale of any rail equipment which is returned to or repossessed by or on behalf of such Person from a lessee or borrower in connection with a lease financing or lender transaction entered into by such Person as a passive lessor, investor or lender; (c) each of the Indenture Trustee, the Owner Trustee and the Lessee shall have received 10 days (or, if a Lease Event of Default shall have occurred and is continuing and the proposed Transferee or any of its Affiliates would not, but for the occurrence of such Lease Event of Default, have satisfied the requirements set forth in Section 6.1(b) above or Section 6.1(l) below, fifteen (15) Business Days) prior written notice of such transfer specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this Section 6.1; (d) such Transferee enters into an agreement (i) in the form attached hereto as Exhibit C or (ii) otherwise in form and substance satisfactory to each of the Lessee and the Owner Trustee and not reasonably objected to by the Indenture Trustee whereby such Transferee confirms that it shall be deemed a party to this Agreement and each other Operative Agreement to which the transferring Owner Participant is a party, and agrees to be bound by all the terms of, and to undertake all of the obligations and liabilities of the transferring Owner Participant contained in, this Agreement and such other Operative Agreements and in which the Transferee shall make representations and warranties comparable to those of the Owner Participant contained herein and therein; (e) an opinion of counsel of the Transferee (which counsel shall be reasonably acceptable to the Lessee, the Owner Trustee and the Indenture Trustee and which may be internal counsel of the Transferee), confirming (i) the existence, corporate power and authority of, and due authorization, execution and delivery of all relevant documentation by, the Transferee (with appropriate reliance on certificates of corporate officers or public officials as to matters of fact), (ii) that each agreement referred to in Section 6.1(d) above is the legal, valid, and binding obligation of the Transferee, enforceable against the Transferee in accordance with 48 Participation Agreement (TRLI 2001-1B) its terms (subject to customary qualifications as to bankruptcy and equitable principles) and (iii) compliance of the transfer with applicable requirements of federal securities laws and securities laws of the Transferee's domicile, shall be provided, prior to such transfer, to each of the Lessee, the Owner Trustee and the Indenture Trustee, which opinion shall be in form and substance reasonably satisfactory to the Lessee, the Owner Trustee and the Indenture Trustee; (f) such transfer complies in all respects with and does not violate any applicable provisions of the federal securities laws and the securities law of any applicable state or any other applicable law; (g) except as specifically consented to in writing by each of the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee, the terms of the Operative Agreements shall not be altered; (h) after giving effect to such transfer, the Beneficial Interest and the beneficial interest with respect to the Other Trust shall be held by not more than two Persons in the aggregate; provided that for the purpose of calculating the number of Persons under this Section 6.1(h), Persons that are Affiliates of each other shall be considered to be one Person; (i) all reasonable expenses of the parties hereto (including, without limitation, reasonable legal fees and expenses of special counsel) incurred in connection with each transfer of such Beneficial Interest shall be paid by the transferring Owner Participant; (j) such transfer either (i) does not involve the use of any funds which constitute assets of an employee benefit plan subject to Title I of ERISA or Section 4975 of the Code or (ii) if clause (i) is not applicable, will not constitute a prohibited transaction under ERISA or the Code; (k) as a result of and following such transfer, no Indenture Default attributable to the Owner Participant or the Owner Trustee shall have occurred and be continuing; (l) unless a Lease Event of Default shall have occurred and is continuing, the transfer does not involve the sale of the stock of any Owner Participant, the sole asset of which is all or a portion of the Beneficial Interest, to, or the merger of any such Owner Participant with or into, any Person who is a competitor of the Lessee or TILC as described in Section 6.1(b), provided that the Lessee may waive this requirement in writing; (m) the Transferee (i) is a "United States Person" within the meaning of Section 7701(a)(30) of the Code or (ii) is engaged in a United States trade or business for purposes of Subtitle A, Chapter 1, Subchapter N of the Code 49 Participation Agreement (TRLI 2001-1B) and is acquiring such Beneficial Interest in connection with such trade or business; and (n) the Owner Participant shall deliver to the Lessee an Officer's Certificate certifying as to compliance with the transfer requirements contained herein; provided that no such Officer's Certificate is required in case of a transfer of the Beneficial Interest to the Lessee (or Lessee's designee) pursuant to Section 6.9. Upon any such transfer (i) except as the context otherwise requires, such Transferee shall be deemed the "Owner Participant" for all purposes, and shall enjoy the rights and privileges and perform the obligations of the Owner Participant to the extent of the interest transferred hereunder and under each other Operative Agreement to which the Owner Participant is a party, and, except as the context otherwise requires, each reference in this Agreement and each other Operative Agreement to the "Owner Participant" shall thereafter be deemed to include such Transferee for all purposes to the extent of the interest transferred, and (ii) the transferor, except to the extent provided in Section 6.1(i) hereof and except in the case of a transfer to a Transferee described in the proviso to Section 6.1(a)(iii) hereof, shall be released from all obligations hereunder and under each other Operative Agreement to which such transferor is a party or by which such transferor is bound solely to the extent such obligations are expressly assumed by a Transferee; and provided, further, that in no event shall any such transfer or assignment waive or release the transferor from any liability on account of any breach existing prior to such transfer of any of its representations, warranties, covenants or obligations set forth herein or in any of the other Operative Agreements or for any fraudulent or willful misconduct. Subject to Section 6.1(l), the provisions of this Section 6.1 shall not be construed to restrict the Owner Participant from consolidating with or merging into any other corporation or restricting another corporation from merging into or consolidating with the Owner Participant. Notwithstanding any transfer, the transferor Owner Participant shall be entitled to all benefits accrued and all rights vested prior to such transfer, including, without limitation, rights to indemnification under any of the Operative Agreements. No transfer hereunder shall, by virtue of the Transferee engaging in a business or activity not generally conducted by other institutional or corporate investors in lease transactions, increase the Lessee's indemnification obligations under Section 7.1 or 7.2. The Owner Participant hereby acknowledges and agrees (and each Transferee by virtue of any transfer shall be deemed to have acknowledged and agreed) to the terms of the Collateral Agency Agreement. The Lessee agrees to provide notice to the Rating Agency of any proposed transfer by an Owner Participant no later than 5 days after Lessee's receipt of notice of such proposed transfer from an Owner Participant. 50 Participation Agreement (TRLI 2001-1B) Section 6.2 Lessor's Liens Attributable to the Owner Participant. The Owner Participant hereby unconditionally agrees with and for the benefit of each of the other parties to this Agreement that the Owner Participant shall not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to the Owner Participant on or against all or any portion of the Indenture Estate or the Equipment, and the Owner Participant agrees that it shall, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full any such Lessor's Lien; provided that the Owner Participant may contest any such Lessor's Lien in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest therein or interference with the use, operation, or possession of the Equipment or any portion thereof by the Lessee under the Lease or the rights of the Indenture Trustee under the Indenture. Section 6.3 Lessor's Liens Attributable to Trust Company. Trust Company hereby unconditionally agrees with and for the benefit of each of the other parties to this Agreement that it shall not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to it on or against all or any portion of the Trust Estate or the Equipment, the Trust Company agrees that it shall, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full any such Lessor's Lien; provided that the Trust Company may contest any such Lessor's Lien in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest therein or interference with the use, operation, or possession of the Equipment or any portion thereof by the Lessee under the Lease or the right of the Indenture Trustee under the Indenture. Section 6.4 Liens Created by the Indenture Trustee and the Loan Participant. (a) The Indenture Trustee, in its individual capacity, covenants and agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the Loan Participant that it shall not cause or permit to exist any Lien on or against all or any portion of the Equipment, the Pledged Equipment, the Trust Estate or the Indenture Estate arising as a result of (i) claims against the Indenture Trustee in its individual capacity not related to its interest in the Equipment, the Pledged Equipment and the Trust Estate, or to the administration of the Indenture Estate pursuant to the Indenture, (ii) acts of the Indenture Trustee in its individual capacity not contemplated by, or failure of the Indenture Trustee to take any action it is expressly required to perform by, any of the Operative Agreements, (iii) claims against the Indenture Trustee attributable to the actions of the Indenture Trustee in its individual capacity relating to Taxes or expenses that are not indemnified against by the Lessee pursuant to Section 7 or (iv) claims against the Indenture Trustee arising out of the transfer by the Indenture Trustee of all or any portion of its interest 51 Participation Agreement (TRLI 2001-1B) in the Equipment, the Pledged Equipment, the Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative Agreements and with respect to which the Indenture Trustee will, at its own cost and expense (and without any right of reimbursement from any other party hereto), promptly take such action as may be necessary duly to discharge any such Lien. (b) The Loan Participant covenants and agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee that the Loan Participant shall not cause or permit to exist any Lien on or against all or any portion of the Equipment, the Pledged Equipment, the Trust Estate or the Indenture Estate arising as a result of (i) claims against the Loan Participant not related to its interest in the Equipment, the Pledged Equipment and the Trust Estate, (ii) acts of the Loan Participant not contemplated by, or failure of the Loan Participant to take any action it is expressly required to perform by, any of the Operative Agreements, (iii) claims against the Loan Participant relating to Taxes or expenses that are not indemnified against by the Lessee pursuant to Section 7, or (iv) claims against the Loan Participant arising out of the transfer by the Loan Participant of all or any portion of its interest in the Equipment, the Pledged Equipment, the Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative Agreements and with respect to which the Loan Participant will, at its own cost and expense (and without any right of reimbursement from the Lessee), promptly take such action as may be necessary duly to discharge any such Lien. Section 6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee. Each of the Owner Participant and Trust Company, in its individual and trust capacities, hereby agrees, as to its own actions only and severally and not jointly, with (a) the Loan Participant and the Indenture Trustee (so long as the Equipment Notes remain outstanding), not to amend, supplement, or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of the Loan Participant or the Indenture Trustee without the prior written consent of such party and (b) with the Lessee, not to terminate or revoke the Trust Agreement or the trust created by the Trust Agreement prior to the payment in full and discharge of the Equipment Notes and all other indebtedness secured by the Indenture and the final discharge thereof. Each of the Trust Company and the Indenture Trustee agrees, for the benefit of the Lessee and the Owner Participant, to comply with the provisions of the Indenture and not to amend, supplement, or otherwise modify any provision of the Indenture except in the manner provided in Article IX thereof. Notwithstanding anything to the contrary contained herein or in any of the other Operative Agreements, the Indenture Trustee's obligation to take or refrain from taking any actions, or to use its discretion (including, but not limited to, the giving or withholding of consent or approval and the exercise of any rights or remedies under such Operative Agreement), and any liability therefor, shall, in addition to any other limitations provided herein or in any of the other Operative Agreements, be limited by the provisions of the Indenture. 52 Participation Agreement (TRLI 2001-1B) Section 6.6 Amendments to Operative Agreements That Are Not Lessee Agreements. Unless a Lease Event of Default shall have occurred and be continuing, the Owner Trustee, the Indenture Trustee and the Participants shall not terminate the Operative Agreements to which the Lessee is not or will not be a party, or amend, supplement, waive or modify in any manner such Operative Agreements to which the Lessee is not or will not be a party, (i) except in accordance with such Operative Agreements in effect on the date hereof (as amended, modified or supplemented from time to time in accordance with the terms hereof and of such Operative Agreements), or (ii) adverse to the Lessee or to any of its rights or interests under any of the Operative Agreements, except with the prior written consent of the Lessee. Without limiting the generality of the foregoing, each of the Owner Participant and the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (as applicable) agrees that, in any event, unless a Lease Event of Default shall have occurred and be continuing, it will not amend Section 2.10 or Article IX of the Indenture or Article IX of the Trust Agreement without the prior written consent of the Lessee. Section 6.7 Certain Representations, Warranties and Covenants. The Lessee hereby confirms its representations, warranties and covenants in Article 6 of the Collateral Agency Agreement, which are hereby incorporated in this Agreement by this reference as fully as if set forth herein in their entirety. Section 6.8 Covenants of the Manager. The Manager hereby confirms the covenants in Article 7 of the Management Agreement, which are hereby incorporated in this Agreement by this reference as fully as if set forth herein in their entirety. Section 6.9 Lessee's Purchase in Certain Circumstances. (a) If (A) the Owner Participant or any Affiliate thereof is or acquires, is acquired by, merges or otherwise consolidates with any company or Affiliate thereof who would not be an eligible "Transferee" by reason of Section 6.1(b) (and, in the case of an Affiliate, such entity continues to be an Affiliate of the Owner Participant after such acquisition, merger or consolidation), or (B) the Lessee shall have requested a waiver pursuant to Section 12.3(c) of the Lease and the Lessor and the Owner Participant shall have refused to grant such waiver or shall have granted such waiver but shall have refused to further waive the requirement that amounts be deposited in the Special Insurance Reserves Account pursuant to the Collateral Agency Agreement in connection with the granting of the initial waiver, or (C) the Lessee shall have elected to purchase, or arrange a purchase of, the Beneficial Interest pursuant to Section 22.1 of the Lease, the Lessee may elect either to: 53 Participation Agreement (TRLI 2001-1B) (i) keep the Lease and the Equipment Notes in place and require that the Owner Participant, and the Owner Participant agrees to, transfer its Beneficial Interest in accordance with the terms of Section 6.1 (other than provisions of Sections 6.1(a), (b), (i), (l) and (n)) to the Lessee or such other transferee as the Lessee may designate (such transfer to occur on a Determination Date which is designated by the Lessee by written notice to the Owner Participant not less than 60 days prior to such Determination Date) at a purchase price (the "Beneficial Interest Purchase Price") equal to (1) the Equity Portion of Termination Amount as of the date of such transfer, plus (2) in the case of clause (B) above, the excess, if any, of the Fair Market Sales Value of the Equipment calculated as of such date over the Termination Value as of such date, plus (3) the Equity Portion of Basic Rent accrued and unpaid therefor as of the date of such transfer (exclusive of any Basic Rent payable on such date), plus (4) without duplication or limitation of any amount under clauses (1) to (3) above, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto, plus (5) without duplication or limitation of any amount under clauses (1) to (4) above, that portion of Supplemental Rent due and unpaid on such date that is payable to the Owner Participant; provided, however, that, without regard to such Owner Participant's obligations under the Operative Agreements relating to the period prior to such transfer, any transfer of the Beneficial Interest pursuant to this Section 6.9 shall be without additional representations or warranties of or other liabilities or obligations on such Owner Participant other than those expressly set forth in the Owner Participant Agreements; provided, further, that in case such Owner Participant holds less than 100% of the Beneficial Interest (after excluding any Beneficial Interests held by the Lessee, TILC or any Affiliate of either thereof), the purchase price for such Owner Participant's Beneficial Interest shall be equal to (x) (i) the sum of the amounts calculated under clauses (1), (2), (3) and (4) above multiplied by (ii) a fraction equal to the portion such Owner Participant's Beneficial Interest bears to 100% of the Beneficial Interests, plus (y) without duplication or limitation of any amount under clause (x) above, that portion of Supplemental Rent due and unpaid on such date that is payable to such Owner Participant; or (ii) on a Determination Date which is designated by the Lessee by written notice to the Owner Trustee and the Indenture Trustee not less than 60 days prior to such Determination Date, purchase the Equipment for a purchase price equal to (I) the Termination Amount calculated as of such Determination Date, plus (II) in the case of clause (B) of the lead paragraph of this Section 6.9(a), the excess, if any, of the Fair Market Sales Value of the Equipment calculated as of such date over the Termination Value as of such Determination Date, plus (III) without duplication or limitation, all other amounts due and owing by the Lessee under the Operative Agreements with respect to the Equipment, including, without limitation, all accrued and unpaid Basic Rent therefor as of such Determination Date (exclusive of any Basic Rent payable on such date), Make-Whole Amount then payable on the Equipment Notes pursuant to Section 2.10(c) of the Indenture with respect to the Equipment and Late Payment Premium, if any, due 54 Participation Agreement (TRLI 2001-1B) and owing under the Operative Agreements with respect to the Equipment so that, after receipt and application of all such payments the Owner Participant shall be entitled under the terms of the Collateral Agency Agreement to receive, and does receive, in respect of all such Units, the sum of the Accumulated Equity Deficiency Amount (without duplication of any amount provided under clauses (I) - - (III) above) and Late Payment Interest related thereto and any other amounts of Supplemental Rent due and unpaid on such Determination Date that are payable to the Owner Participant. (b) If the Lessee elects to exercise the option to purchase the Equipment (as opposed to such Owner Participant's Beneficial Interest) as provided in Section 6.9(a), the Lessee shall, as the purchase price therefor pay the purchase price, as specified in Section 6.9(a)(ii), with respect to the Equipment, together with all other amounts due and owing by the Lessee under the Operative Agreements. (c) In connection with any purchase of the Equipment under this Section 6.9, the Lessee will make the payments required by Section 6.9(a)(ii) in immediately available funds against delivery of a bill of sale transferring and assigning to the Lessee all right, title and interest of the Lessor in and to the Equipment on an "as-is" "where-is" basis and containing a warranty with respect to the absence of any Lessor's Lien. In such event, the costs of preparing the bill of sale or other transfer documents and all other documentation relating to such purchase and the costs of any necessary filings related thereto will be borne by the Lessee. If the Lessee shall fail to fulfill its obligations under Sections 6.9(b) and (c), all of the Lessee's obligations under the Lease and the Operative Agreements, including, without limitation, the Lessee's obligation to pay installments of Rent, with respect to the Equipment shall continue. Section 6.10 Owner Participant as Affiliate of Lessee. If at any time the original or any successor Owner Participant shall be an Affiliate of the Lessee, such Owner Participant and the Lessee agree that, notwithstanding Section 9.5 of the Indenture, they will not vote its Beneficial Interest in any respect if there is another Owner Participant not affiliated with the Lessee, and, if there is no such Owner Participant, they will not vote its Beneficial Interest to modify, amend or supplement any provision of the Lease or this Agreement or give, or permit the Owner Trustee to give, any consent, waiver, authorization or approval thereunder if any such action could reasonably be expected to adversely affect in a material manner the Indenture Trustee or any holder of an Equipment Note unless such action shall have been consented to by the Pass Through Trustee. Section 6.11 Records; U.S. Income Tax Information. Each of the Lessee, TRMI and TILC covenants that it will maintain or cause to be maintained and retain 55 Participation Agreement (TRLI 2001-1B) sufficient factual records (to the extent such records are maintained by the Lessee, TRMI and TILC respectively, any sublessee, or any trustee for or Affiliate of any thereof, in the ordinary course of their respective businesses) to enable the Owner Participant to prepare required United States federal, state and local tax returns. Upon request of the Owner Participant, the Lessee, TRMI and TILC, respectively, shall deliver such records to the Owner Participant at the expense of the Owner Participant. In addition, as soon as practicable, the Lessee, TRMI and TILC, respectively, shall provide or cause to be provided (at the expense of the Lessee) to the Owner Participant such information (in form and substance reasonable satisfactory to the Owner Participant) as the Owner Participant may reasonably request from and as shall be reasonably available to the Lessee, TRMI and TILC, respectively, to enable the Owner Participant to fulfill its tax return filing obligations, to respond to requests for information, to verify information in connection with any income tax audit and to participate effectively in any tax contest. Such information may include, without limitation, information as to the location of and use of the Equipment from time to time (to the extent such information is available on the basis of the records regularly maintained by the Lessee, TRMI and TILC, respectively, any sublessee, or any trustee for or Affiliate of any thereof, in the ordinary course of their respective businesses). SECTION 7. LESSEE'S INDEMNITIES. Section 7.1 General Tax Indemnity. (a) Tax Indemnitee Defined. For purposes of this Section 7.1, "Tax Indemnitee" means the Pass Through Trustee, both in its individual capacity and as trustee, the Owner Participant, its Affiliates (including, without limitation, Philip Morris Capital Corporation, Grant Holdings, Inc., Trimaran Leasing Investors, L.L.C.-I, Trimaran Leasing Investors, L.L.C.-II and Trimaran Leasing, L.P.), the Owner Trustee, the Trust Company, the Indenture Trustee, both in its individual capacity and as trustee, each of their successors or assigns permitted under the terms of the Operative Agreements, any officer, director, employee or agent of any of the foregoing, the Trust Estate and the Indenture Estate; "Equity Tax Indemnitee" means the Owner Participant, its Affiliates, the Owner Trustee, the Trust Company, and each of their respective successors, assigns, officers, directors, employees and agents and the Trust Estate; "Lender Tax Indemnitee" means each Tax Indemnitee which is not an Equity Tax Indemnitee. (b) Taxes Indemnified. Except as provided below, all payments by the Lessee to any Tax Indemnitee in connection with the transactions contemplated by the Operative Agreements shall be free of withholdings of any nature whatsoever (and at the time that any payment is made upon which any withholding is required the Lessee shall pay an additional amount such that the net amount actually received will, after such withholding and on an After-Tax Basis, 56 Participation Agreement (TRLI 2001-1B) equal the full amount of the payment then due) and shall be free of expense to each Tax Indemnitee for collection or other charges. Whether or not any Unit is accepted under the Lease, or the Closing occurs, the Lessee shall defend, indemnify and save harmless each Tax Indemnitee from and against, and as between the Lessee and each Tax Indemnitee the Lessee hereby assumes liability with respect to, all fees (including, without limitation, license fees and registration fees), taxes (including, without limitation, income, gross receipts, franchise, sales, use, value added, property and stamp taxes), assessments, levies, imposts, duties, charges or withholdings of any nature whatsoever, together with any and all penalties, additions to tax, fines or interest thereon ("Taxes") imposed against any of the Tax Indemnitees, any item of Equipment or Pledged Equipment or the Lessee, upon, arising from or relating to (i) any item of the Equipment or the Pledged Equipment, (ii) the construction, manufacture, financing, purchase, delivery, ownership, acceptance, rejection, possession, improvement, use, operation, leasing, subleasing, condition, maintenance, repair, refinancing, registration, sale, return, replacement, storage, abandonment or other application or disposition of any item of the Equipment or the Pledged Equipment, (iii) the rental payments, receipts or earnings arising from any item of the Equipment or the Pledged Equipment or payable pursuant to the Operative Agreements, or (iv) the Operative Agreements, the Equipment Note or any Sublease or any Pledged Equipment Lease or otherwise with respect to or in connection with the transactions contemplated thereby. (c) Taxes Excluded. The indemnity provided in Section 7.1(b) shall not include: (i) as to any Equity Tax Indemnitee, any Income Tax imposed by the United States federal government (but not excluding any Income Tax required to make a payment on an After-Tax Basis); (ii) as to any Equity Tax Indemnitee, any Income Tax imposed by any state, local or foreign government or taxing authority or subdivision thereof; provided, however, that this exclusion shall not apply to the extent such Taxes (but not including Income Taxes imposed on net income) are attributable to (I) the use or location of any item of the Equipment or the activities of the Lessee or its Affiliates or any sublessee in the taxing jurisdiction, (II) the presence or organization of the Lessee or any sublessee in the taxing jurisdiction, (III) the status of the Lessee or any sublessee as a foreign entity or as an entity owned by a foreign person or (IV) 57 Participation Agreement (TRLI 2001-1B) Lessee or sublessee having made (or deemed to have made) payments to the Tax Indemnitee from the relevant jurisdiction; provided, further, however, that the preceding proviso shall not apply to any jurisdiction where the Owner Trust, the Owner Trustee (other than in its individual capacity) or the Owner Participant has its legal domicile or principal place of business (determined without regard to the transactions contemplated by the Operative Agreement); (iii) as to any Equity Tax Indemnitee, any Tax that is imposed as a result of the sale, transfer or other disposition, by the Lessor or the Owner Participant of any of its rights with respect to any item of Equipment or the Owner Participant's interest in the Trust Estate unless such sale, transfer or other disposition is a result of an Event of Default, results from any substitution, repair or replacement of any item of Equipment under the Lease, or results from any sale, transfer or disposition required under the Lease (including but not limited to Section 10 of the Lease); (iv) as to any Equity Tax Indemnitee, any Taxes to the extent they exceed the Taxes that would have been imposed had an Equity Tax Indemnitee not transferred, sold or disposed of its interest or rights in any item of the Equipment to a non-U.S. Person; (v) Taxes imposed on a Lender Tax Indemnitee with respect to any period after the payment in full of the Equipment Notes; provided that the exclusion set forth in this clause (v) shall not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to or simultaneously with the applicable time of payment of the Equipment Notes or relate to any payment made by the Lessee after such date; (vi) as to any Tax Indemnitee, Taxes to the extent caused by any misrepresentation or breach of warranty or covenant by such Tax Indemnitee or a Related Party under any of the Operative Agreements or by the gross negligence or willful misconduct of such Tax Indemnitee or a Related Party; (vii) as to any Lender Tax Indemnitee, Taxes which become payable as a result of a sale, assignment, transfer or other disposition (whether voluntary or involuntary) by such Lender Tax Indemnitee of all or any portion of its interest in the Equipment or any part thereof, the Pledged Equipment or any part thereof, the Trust Estate, the Indenture Estate or any of the Operative Agreements or rights created thereunder, other than as a result of (A) the substitution, modification or improvement of the Equipment or any part thereof or the Pledged Equipment or any part thereof, (B) a modification to the Operative Agreements, or (C) a disposition which occurs as the result of the exercise of remedies upon a Lease Event of Default; provided, that, notwithstanding the foregoing, the Lessee shall not be obligated to indemnify any Lender Tax Indemnitee with respect to net income taxes imposed within the United States as the result of a 58 Participation Agreement (TRLI 2001-1B) sale, assignment, transfer or other disposition by such Lender Tax Indemnitee or any Taxes imposed as a result of the status of the Lender Tax Indemnitee as other than a resident of the United States for tax purposes; (viii) as to any Lender Tax Indemnitee, Taxes imposed as the result of such Lender Tax Indemnitee not being a resident of the United States for tax purposes; (ix) as to any Lender Tax Indemnitee, Income Taxes or transfer taxes relating to any payments of principal, interest or Make Whole Amount, if any, on the Equipment Notes or the Pass Through Certificates paid to any such Tax Indemnitee that are imposed by (A) any other jurisdiction in which such Indemnitee is subject to such Taxes as a result of it or an Affiliate being organized in such jurisdiction or conducting activities in that jurisdiction unrelated to the transactions contemplated by the Operative Agreements, (B) the United States federal government or (C) any state or local government within the United States; (x) Taxes to the extent directly resulting from or that would not have been imposed but for (x) in the case of Taxes imposed on or with respect to any Equity Tax Indemnitee, the existence of any Lessor Liens with respect to such Equity Tax Indemnitee, (y) in the case of Taxes imposed on or with respect to any Lender Tax Indemnitee, the existence of any Liens attributable to the Indenture Trustee or Liens attributable to the Pass Through Trustee; (xi) Taxes imposed on a Tax Indemnitee to the extent that such Taxes would not have been imposed upon such Tax Indemnitee but for any failure of such Tax Indemnitee or a Related Party to comply with (x) any certification, information, documentation, reporting or other similar requirements concerning the nationality, residence, identity or connection with the jurisdiction imposing such Taxes, if such compliance is required under the laws or regulations of such jurisdiction to obtain or establish relief or exemption from or reduction in such Taxes and the Tax Indemnitee or such Related Party was eligible to comply with such requirement or (y) any other certification, information, documentation, reporting or other similar requirements under the Tax laws or regulations of the jurisdiction imposing such Taxes that would establish entitlement to otherwise applicable relief or exemption from such Taxes; provided, however, that the exclusion set forth in this clause (xii) shall not apply (I) if such failure to comply was due to a failure of the Lessee to provide reasonable assistance on request in complying with such requirement, (II) if, in the case of Taxes imposed on the Owner Participant, in the good faith judgment of the Owner Participant there is a risk of adverse consequence to the Owner Participant or any Affiliate from such compliance against which the Owner Participant is not satisfactorily indemnified, (III) in the case of Taxes imposed on the Owner Participant, if any such failure to comply on the part of the Owner Trustee was the result of the Owner Trustee's gross negligence or failure to act in accordance with instructions of the Owner Participant, or (IV) in the 59 Participation Agreement (TRLI 2001-1B) case of any Tax Indemnitee, unless Lessee shall have given such Tax Indemnitee prior written notice of such requirements; (xii) Taxes that are imposed with respect to any period after the earlier of (x) return of the Equipment to the Lessor in accordance with, and at a time and place contemplated by the Lease (including the payment of all amounts due at such time) and (y) the termination of the Term pursuant to Section 6, 10, 11, 15 or 22 of the Lease and the discharge in full of Lessee's payment obligation's thereunder unless the Equipment is thereafter required to be returned, in which case, after such return; provided, however, that the exclusion set forth in this clause (xii) shall not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to or simultaneously with such return or termination; (xiii) as to any Lender Tax Indemnitee, Taxes in the nature of an intangible or similar tax upon or with respect to the value of the interest of such Lender Tax Indemnitee in the Indenture Estate, in any Equipment Note or Pass Through Certificate imposed as a result of such Lender Tax Indemnitee or any Affiliate of such Lender Tax Indemnitee being organized in, or conducting activities unrelated to the contemplated transactions in, the jurisdiction imposing such Taxes; (xiv) Taxes imposed on the Owner Trustee or the Indenture Trustee that are on, based on or measured by any trustee fees for services rendered by such Tax Indemnitee in its capacity as trustee under the Operative Agreements; (xv) Taxes imposed on any Tax Indemnitee, or any other person who, together with such Tax Indemnitee, is treated as one employer for employee benefit plan purposes, as a result of, or in connection with, any "prohibited transaction," within the meaning of the provisions of the Code or regulations thereunder or as set forth in Section 406 of ERISA or the regulations implementing ERISA or Section 4975 of the Code or the regulations thereunder; (xvi) Taxes for so long as (x) such Taxes are being contested in accordance with the provisions of Section 7.1(e) hereof, (y) the Lessee is in compliance with its obligations under Section 7.1(e), and (z) the payment of such Taxes is not required pursuant to Section 7.1(e); (xvii) Taxes as to which such Tax Indemnitee is indemnified pursuant to the Tax Indemnity Agreement; (xviii) any Taxes imposed on or with respect to any Certificateholder; and (xix) Taxes imposed as a result of the authorization or giving of any future amendments, supplements, waivers or consents with respect to 60 Participation Agreement (TRLI 2001-1B) any Operative Agreement other than (w) those which are legally required, (x) in connection with the exercise of remedies pursuant to Section 15 of the Lease, (y) such as have been proposed by the Lessee or consented to by the Lessee or (z) those that are required pursuant to the terms of the Operative Agreements. (d) Payments to Tax Indemnitee. The Lessee agrees to pay, on demand, any and all Taxes indemnified under this Section 7.1 ("Indemnified Taxes"), and to keep at all times all and every part of each item of the Equipment and Pledged Equipment free and clear of all Indemnified Taxes which might in any way affect the interest of any Tax Indemnitee therein or result in a Lien upon any such item of the Equipment or Pledged Equipment; provided, however, that the Lessee shall be under no obligation to pay any Tax so long as either the Tax Indemnitee or the Lessee is contesting in good faith and by appropriate legal proceedings such tax and the nonpayment thereof does not, in the reasonable opinion of the Tax Indemnitee, materially adversely affect the interest of any Tax Indemnitee hereunder or under the Indenture. Subject to Section 7.1(e), if any Indemnified Taxes shall have been charged or levied against any Tax Indemnitee directly and paid by such Tax Indemnitee after such Tax Indemnitee shall have given written notice thereof to the Lessee and the same shall have remained unpaid for a period of ten Business Days thereafter, the Lessee shall reimburse such Tax Indemnitee payment. (e) Contests. If a written claim is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which the Lessee may be required to indemnify against hereunder (a "Tax Claim"), such Tax Indemnitee shall give the Lessee written notice of such Tax Claim promptly (but in any event within twenty (20) days) after its receipt, and shall furnish Lessee with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim (but failure to so notify the Lessee shall relieve the Lessee of its obligations hereunder only to the extent it effectively precludes a contest of the claim). The Tax Indemnitee shall not pay such Tax Claim until at least thirty (30) days after providing the Lessee with such written notice, unless (a) the Tax Indemnitee is required to do so by law or regulation and (b) in the written notice described above, the Tax Indemnitee has notified the Lessee of such requirement. If the Lessee shall so request within 30 days after receipt of such notice, then such Tax Indemnitee shall in good faith at Lessee's expense contest such Tax; provided, however, that to the extent the contest involves only Taxes constituting property taxes, sales taxes, or use taxes and does not involve any taxes or other issues relating to a Tax Indemnitee which are unrelated to the transactions contemplated by the Operative Agreements and if no Equity Insufficiency Circumstance exists, such contest shall be undertaken by the Lessee at the Lessee's expense and at no-after-tax cost to the Lessor or the Owner Participant, but if such contest would involve any other type of Tax or any taxes or issues relating to a Tax Indemnitee which are 61 Participation Agreement (TRLI 2001-1B) unrelated to the transactions contemplated by Operative Agreements or if an Equity Insufficiency exists, then such Tax Indemnitee may, in its sole discretion, control such contest (including selecting the forum for such contest, and determining whether any such contest shall be conducted by (i) paying such Tax under protest or (ii) resisting payment of such Tax or (iii) paying such Tax and seeking a refund thereof; provided, further, however, that at such Tax Indemnitee's option, such contest shall be conducted by the Lessee in the name of such Tax Indemnitee). In no event shall such Tax Indemnitee be required or the Lessee be permitted to contest any Tax for which the Lessee is obligated to indemnify pursuant to this Section unless: (i) the Lessee shall have acknowledged in writing its liability to such Tax Indemnitee for an indemnity payment pursuant to this Section as a result of such claim if and to the extent such Tax Indemnitee or the Lessee, as the case may be, shall not prevail in the contest of such claim; provided, however, that the Lessee shall not be required to indemnify for such Taxes to the extent the results of the contest clearly and unambiguously demonstrate that the Tax is not an indemnified Tax; (ii) such Tax Indemnitee shall have received the opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee furnished at the Lessee's sole expense, to the effect that a reasonable basis exists for contesting such claim or, in the event of an appeal of a court decision, that it is more likely than not that an appellate court or an administrative agency with appellate jurisdiction, as the case may be, will reverse or substantially modify the adverse determination; (iii) the Lessee shall have agreed to pay such Tax Indemnitee on demand (and at no after-tax costs to the Lessor and the Owner Participant) all reasonable costs and expenses that such Tax Indemnitee may incur in connection with contesting such claim (including, without limitation, all costs, expenses, reasonable legal and accounting fees, disbursements, penalties, interest and additions to the Tax); (iv) no Lease Default described in Section 14(a), 14(b), 14(g) or 14(h) of the Lease or a Lease Event of Default shall have occurred and shall have been continuing, unless the Lessee shall have posted a satisfactory bond or other security with respect to the costs of such contest and the Taxes which may be required to be indemnified; (v) such Tax Indemnitee shall have determined that the action to be taken will not result in any substantial danger of sale, forfeiture or loss of, or the creation of any Lien, or the Lessee shall have or otherwise made a provision to protect the interest of such Tax Indemnitee (in a manner satisfactory to such Tax Indemnitee), on the Equipment or any portion thereof or any interest therein; (vi) the amount of such claims alone, or, if the subject matter thereof shall be of a continuing or recurring nature, when aggregated with substantially identical potential claims shall be (A) at least $5,000 in the event of a Lessee controlled contest, or (B) $25,000 in the event of a Tax Indemnitee controlled contest; and (vii) if such contest shall be conducted in a manner requiring the payment of the claim, the Lessee shall have paid the amount required (and at no after-tax costs to the Lessor and the Owner Participant). The Lessee shall cooperate with the Tax Indemnitee with respect to any contest controlled and conducted by the Tax Indemnitee and the Tax Indemnitee shall consult with the Lessee regarding the conduct of such contest. The Tax Indemnitee shall cooperate with respect to any contest controlled and conducted by 62 Participation Agreement (TRLI 2001-1B) the Lessee and the Lessee shall consult with the Tax Indemnitee regarding the conduct of such contest. Notwithstanding anything to the contrary contained in this Section 7.1, no Tax Indemnitee shall be required to contest any claim if the subject matter thereof shall be of a continuing or recurring nature and shall have previously been adversely decided to the Tax Indemnitee pursuant to the contest provisions of this Section unless there shall have been a change in the law (including, without limitation, amendments to statutes or regulations, administrative rulings or court decisions) enacted, promulgated or effective after such claim shall have been so previously decided, and such Tax Indemnitee shall have received an opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee, furnished at the Lessee's sole expense, to the effect that such change is favorable to the position which such Tax Indemnitee or the Lessee, as the case may be, had asserted in such previous contest and as a result of such change, there is a reasonable basis to contest such claim. Notwithstanding anything contained in this Section 7.1, a Tax Indemnitee will not be required to contest the imposition of any Tax and shall be permitted to settle or compromise any claim without the Lessee's consent if such Tax Indemnitee (A) shall waive its right to indemnity under this Section 7.1 with respect to such Tax (and any directly related claim and any claim the outcome of which is determined based upon the outcome of such claim) and (B) shall pay to the Lessee any amount previously paid or advanced by the Lessee pursuant to this Section 7.1 with respect to such Tax, plus interest at the rate that would have been payable by the relevant taxing authority with respect to a refund of such Tax. (f) Payments to Lessee. With respect to any payment or indemnity hereunder, such payment or indemnity shall have included an amount payable to the Tax Indemnitee sufficient to hold such Tax Indemnitee harmless on an After- Tax Basis from all Taxes required to be paid by such Tax Indemnitee with respect to such payment or indemnity under the laws of any federal, state or local government or taxing authority in or of the United States, or under the laws of any taxing authority or governmental subdivision in or of a foreign country; provided that, if any Tax Indemnitee realizes and recognizes a permanent tax benefit by reason of such payment or indemnity (whether such tax benefit shall be by means of a foreign tax credit, investment tax credit, depreciation or recovery deduction or otherwise), such Tax Indemnitee shall pay to the Lessee an amount equal to the sum of such tax benefit plus any tax benefit realized as the result of any payment made pursuant to this proviso, when, as, if and to the extent realized; provided further that, (i) if at the time such payment shall be due to the Lessee, a Lease Event of Default shall have occurred and be continuing, such amount shall not be payable until such Lease Event of Default shall have been cured, and (ii) the amount which such Tax Indemnitee shall be required to pay to the Lessee shall not exceed the amounts which 63 Participation Agreement (TRLI 2001-1B) the Lessee has theretofore paid such Tax Indemnitee hereunder with respect to such indemnity or a substantially identical indemnity. For purposes of this Section 7.1, in determining the order in which the consolidated (for federal income tax purposes) group to which such Tax Indemnitee belongs utilizes withholding or other foreign taxes as a credit against such group's United States income taxes, such Tax Indemnitee (and such group) shall be deemed to utilize (i) first, all foreign taxes other than those described in clauses (ii) and (iii) below; provided, however, that such other foreign taxes which are carried back to the taxable year for which a determination is being made pursuant to such clause (i) shall be deemed utilized after the foreign taxes described in clause (ii) below, (ii) then, on a pari passu basis, the foreign taxes indemnified hereunder together with all other foreign taxes (including fees, taxes and other charges hereunder) with respect to which such Tax Indemnitee (or any member of such group) is entitled to obtain indemnification pursuant to an indemnification provision contained in any lease, loan agreement, financing document or participation agreement (including, without limitation, this Agreement) pursuant to which there is an agreement that foreign taxes shall be, or shall be deemed to be, utilized on a basis no less favorable to the indemnitor than those contemplated in this paragraph, and (iii) third, foreign taxes attributable to transactions entered into by such Tax Indemnitee (or any member of such group) which did not provide for foreign taxes to be utilized or deemed utilized on at least a pari passu basis. (g) Reports. In the event any reports with respect to Indemnified Taxes are required to be made, the Lessee will either prepare and file such reports (and in the case of reports which are required to be filed on the basis of individual items of Equipment, such reports shall be prepared and filed in such manner as to show, if required, the interest of each Tax Indemnitee in such items of Equipment) or, if it shall not be permitted to file the same, it will notify each Tax Indemnitee of such reporting requirements, prepare such reports in such manner as shall be satisfactory to each Tax Indemnitee and deliver the same to each Tax Indemnitee within a reasonable period prior to the date the same is to be filed. The Lessee shall provide such information as the Owner Participant or the Lessor may reasonably require from the Lessee to enable the Owner Participant and the Lessor to fulfill their respective tax filing, tax audit, and tax litigation obligations. (h) Survival. In the event that, during the continuance of this Agreement, any Indemnified Tax accrues or becomes payable or is levied or assessed (or is attributable to the period of time during which the Lease is in existence or prior to the return of Equipment in accordance with the provisions of the Lease) which the Lessee is or will be obligated to pay or reimburse, pursuant to this Section 7.1, such liability shall continue, notwithstanding the expiration of the Lease, until all such Taxes are paid or reimbursed by the Lessee. 64 Participation Agreement (TRLI 2001-1B) (i) Affiliated Group. For purposes of applying this Section 7.1 with respect to any Tax, the term "Owner Participant" shall include each member of the affiliated group of corporations with which Grant Holdings, Inc. (and its successors and assigns) files consolidated or combined tax returns relating to such Imposition. (j) Income Tax. For purposes of this Section 7.1, the term "Income Tax" means any Tax based on or measured by or with respect to gross or net income (including without limitation, capital gains taxes, personal holding company taxes, minimum taxes and tax preferences) or gross or net receipts and Taxes which are capital, net worth, conduct of business, franchise or excess profits taxes and interest, additions to tax, penalties, or other charges in respect thereof (provided, however, that Taxes that are, or are in the nature of, sales, use, rental, value-added, excise, ad valorem, or property (whether tangible or intangible) taxes shall not constitute an Income Tax). (k) Certain Withholding. If the Indenture Trustee fails to with hold any Tax required to be withheld with respect to any payment to a Lender Tax Indemnitee or any claim is otherwise asserted by a taxing authority against any Equity Tax Indemnitee for or on account of any amount required to be withheld from any payment to a Lender Tax Indemnitee or Certificateholder, the Lessee will indemnify each Equity Tax Indemnitee (without regard to any exclusions in Section 7.1(c) hereof) on an After-Tax Basis against any Taxes required to be withheld and any interest, penalties, and additions to tax with respect thereto, along with other costs (including attorneys' fees) incurred in connection with such claim. Section 7.2 General Indemnification. (a) Claims Defined. For the purposes of Sections 7.2, 7.3 and 7.4, "Claims" shall mean any and all costs, expenses, liabilities, obligations, losses, damages, penalties, actions or suits or claims of whatsoever kind or nature (whether or not on the basis of negligence, strict or absolute liability or liability in tort) which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, any Unit or any Pledged Unit and, except as otherwise expressly provided in Section 7.2, 7.3 and 7.4, shall include, but not be limited to, all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith or related thereto. (b) Indemnified Person Defined. For the purposes of Sections 7.2, 7.3 and 7.4, "Indemnified Person" means the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee, each of their Affiliates and each of their respective directors, officers, employees, successors and permitted assigns, agents and servants, the Trust Estate and the Indenture Estate (the respective directors, officers, employees, successors and permitted assigns, agents and servants of the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as applicable, together with the Owner Participant, the Owner Trustee, Trust Company, 65 Participation Agreement (TRLI 2001-1B) the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as the case may be, being referred to herein collectively as the "Related Indemnitee Group" of the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Trust Company, respectively). (c) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.2(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.2(g)): (i) this Agreement or any other Operative Agreement or any of the transactions contemplated hereby and thereby or any Unit or Pledged Unit or the ownership, lease, operation, possession, modification, improvement, abandonment, use, non-use, maintenance, lease, sublease, substitution, control, repair, storage, alteration, transfer or other application or disposition, return, overhaul, testing, servicing, replacement or registration of any Unit or Pledged Unit (including, without limitation, injury, death or property damage of passengers, shippers or others, and environmental control, noise and pollution regulations, or the presence, discharge, treatment, storage, handling, generation, disposal, spillage, release, escape of or exposure of any Person or thing to (directly or indirectly) Hazardous Sub stances or damage to the environment (including, without limitation, costs of investigations or assessments, clean-up costs, response costs, remediation costs, removal costs, restoration costs, monitoring costs, costs of corrective actions and natural resource damages)) whether or not in compliance with the terms of the Lease or the Collateral Agency Agreement, as applicable, or by any of the commodities, items or materials from time to time contained in any Unit or Pledged Unit, whether or not in compliance with the terms of the Lease or the Collateral Agency Agreement, as applicable, or by the inadequacy of any Unit or Pledged Unit or deficiency or defect in any Unit or Pledged Unit or by any other circumstances in connection with any Unit or Pledged Unit or by the performance of any Unit or Pledged Unit or any risks relating thereto; (ii) the construction, manufacture, financing, refinancing, design, purchase, acceptance, rejection, delivery, non-delivery or condition of any Unit or any Pledged Unit (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement); (iii) any act or omission (whether negligent or other wise) or any breach of or failure to perform or observe, or any other non- 66 Participation Agreement (TRLI 2001-1B) compliance with, any covenant, condition or agreement to be performed by, or other obligation of, the Lessee or any Affiliate of the Lessee under any of the Operative Agreements, or the falsity of any representation or warranty of the Lessee or any Affiliate of the Lessee in any of the Operative Agreements to which it is a party or in any document or certificate delivered by the Lessee or any Affiliate of the Lessee in connection therewith other than representations and warranties in the Tax Indemnity Agreement; (iv) the offer, sale or delivery of any Equipment Notes or Pass Through Certificates or any interest in the Trust Estate or in connection with a refinancing in accordance with the terms hereof; and (v) any violation of law, rule, regulation or order by the Lessee or any Affiliate of Lessee or any Sublessee or any Pledged Equipment Lessee or their respective directors, officers, employees, agents or servants. (d) Claims Excluded. The following are excluded from the Lessee's agreement to indemnify under this Section 7.2: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to such Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any such Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes, whether or not the Lessee is required to indemnify therefor under Section 7.1 hereof or under the Tax Indemnity Agreement or any loss of tax benefits or increases in tax liability whether or not the Lessee is required to indemnify a Indemnified Person elsewhere in the Operative Agreements; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified 67 Participation Agreement (TRLI 2001-1B) Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claims relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9) or (b) with respect to the Loan Participant, of all or any portion of the Loan Participant's interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount 68 Participation Agreement (TRLI 2001-1B) without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Lease Event of Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) without affecting Lessee's obligations under Section 2.5(b), Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by Lessee or are not specifically required by the Operative Agreements. (e) Insured Claims. In the case of any Claim indemnified by the Lessee hereunder which is covered by a policy of insurance maintained by the 69 Participation Agreement (TRLI 2001-1B) Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified Person agrees to provide reasonable cooperation to the insurers in the exercise of their rights to investigate, defend, settle or compromise such Claim as may be required to retain the benefits of such insurance with respect to such Claim. (f) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify the Lessee of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release the Lessee from any of its obligations under this Section 7.2, except (but only if neither the Lessee nor TILC shall have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on Lessee's ability to defend such Claim or recover proceeds under any insurance policies maintained by the Lessee or to the extent Lessee's indemnification obligations are increased as a result of such failure. The Lessee shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, the Lessee shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that the Lessee shall confirm to such Indemnified Person Lessee's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against Lessee pursuant to this Section 7.2 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against TILC, TRMI and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if Lessee is entitled to control the defense of such Claim pursuant to this Section 7.2 and at the same time TILC, TRMI and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, Lessee's indemnification obligations under this Section 7.2 shall not be reduced as a result of the inability of Lessee to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by TILC, TRMI and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, the Lessee shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable 70 Participation Agreement (TRLI 2001-1B) for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of the Lessee. In addition, any Indemnified Person may participate in any proceeding controlled by the Lessee pursuant to this Section 7.2, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to the Lessee materially interfere with such control, at its own expense, in respect of any such proceeding as to which the Lessee shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.2, and at the expense of the Lessee in respect of any such proceeding as to which the Lessee shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.2. The Lessee may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.2(f) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of the Lessee unless the Indemnified Person waives its rights to indemnification hereunder. (g) Subrogation. If a Claim indemnified by the Lessee under this Section 7.2 is paid in full by the Lessee and/or an insurer under a policy of insurance maintained by the Lessee, the Lessee and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by the Lessee hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount the Lessee or any of its insurers has paid) to the Lessee; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for the Lessee's obligations under the Lease and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.2(f) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. Section 7.3 Indemnification by TILC. (a) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.3(b) below, TILC agrees to indemnify, protect, defend and hold harmless 71 Participation Agreement (TRLI 2001-1B) each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.3(d)): (i) any breach of or any inaccuracy in any representation or warranty made by TILC in this Agreement or any of the other Operative Agreements or in any certificate delivered by TILC pursuant hereto or thereto; (ii) any breach of or failure by TILC to perform any covenant or obligation of TILC set out in or contemplated by this Agreement or any of the other Operative Agreements; and (iii) any violation of law, rule, regulation or order by TILC or its directors, officers, employees, agents or servants. (b) Claims Excluded. The following are excluded from TILC's agreement to indemnify under this Section 7.3: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to such Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes or any loss of tax benefits or increases in tax liability; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; 72 Participation Agreement (TRLI 2001-1B) (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claims relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9), or (b) with respect to the Loan Participant, of all or any portion of its interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any 73 Participation Agreement (TRLI 2001-1B) Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Manager Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by TILC or are not specifically required by the Operative Agreements. (c) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify TILC of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release TILC from any of its obligations under this Section 7.3, except (but only if TILC shall not have actual knowledge of such Claim) to the extent that 74 Participation Agreement (TRLI 2001-1B) failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on TILC's ability to defend such Claim or recover proceeds under any insurance policies maintained by TILC or to the extent TILC's indemnification obligations are increased as a result of such failure. TILC shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, TILC shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that TILC shall confirm to such Indemnified Person TILC's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against TILC pursuant to this Section 7.3 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against Lessee, TRMI and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if TILC is entitled to control the defense of such Claim pursuant to this Section 7.3 and at the same time Lessee, TRMI and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, TILC's indemnification obligations under this Section 7.3 shall not be reduced as a result of the inability of TILC to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by Lessee, TRMI and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, TILC shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of TILC. In addition, any Indemnified Person may participate in any proceeding controlled by TILC pursuant to this Section 7.3, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to TILC materially interfere with such control, at its own expense, in respect of any such 75 Participation Agreement (TRLI 2001-1B) proceeding as to which TILC shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.3, and at the expense of TILC in respect of any such proceeding as to which TILC shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.3. TILC may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.3(c) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of TILC unless the Indemnified Person waives its rights to indemnification hereunder. (d) Subrogation. If a Claim indemnified by TILC under this Section 7.3 is paid in full by TILC and/or an insurer under a policy of insurance maintained by TILC, TILC and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by TILC hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount TILC or any of its insurers has paid) to TILC; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for TILC's obligations under the Management Agreement and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.3(c) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. Section 7.4 Indemnification by TRMI. (a) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.4(b) below, TRMI agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.4(d)): (i) any breach of or any inaccuracy in any representation or warranty made by TRMI in this Agreement or any of the other Operative Agreements or in any certificate delivered by TRMI pursuant hereto or thereto; 76 Participation Agreement (TRLI 2001-1B) (ii) any breach of or failure by TRMI to perform any covenant or obligation of TRMI set out in or contemplated by this Agreement or any of the other Operative Agreements; and (iii) any violation of law, rule, regulation or order by TRMI or its directors, officers, employees, agents or servants. (b) Claims Excluded. The following are excluded from TRMI's agreement to indemnify under this Section 7.4: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to each Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes or any loss of tax benefits or increases in tax liability; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; 77 Participation Agreement (TRLI 2001-1B) (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claim relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9), or (b) with respect to the Loan Participant, of all or any portion of its interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Manager Default; 78 Participation Agreement (TRLI 2001-1B) (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, any Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, any Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, any Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement or Pass Through Trust Supplement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) any Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by TRMI or are not specifically required by the Operative Agreements. (c) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify TRMI of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release TRMI from any of its obligations under this Section 7.4, except (but only if TRMI shall not have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on TRMI's ability to defend such Claim or recover proceeds under any insurance policies maintained by TRMI or to the extent TRMI's indemnification obligations are increased as a result of such failure. TRMI shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, TRMI shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that TRMI shall confirm to such Indemnified Person TRMI's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such 79 Participation Agreement (TRLI 2001-1B) proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against TRMI pursuant to this Section 7.4 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against Lessee, TILC and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if TRMI is entitled to control the defense of such Claim pursuant to this Section 7.4 and at the same time Lessee, TILC and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, TRMI's indemnification obligations under this Section 7.4 shall not be reduced as a result of the inability of TRMI to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by Lessee, TILC and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, TRMI shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of TRMI. In addition, any Indemnified Person may participate in any proceeding controlled by TRMI pursuant to this Section 7.4, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to TRMI materially interfere with such control, at its own expense, in respect of any such proceeding as to which TRMI shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.4, and at the expense of TRMI in respect of any such proceeding as to which TRMI shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.4. TRMI may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.4(c) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of TRMI unless the Indemnified Person waives its rights to indemnification hereunder. 80 Participation Agreement (TRLI 2001-1B) (d) Subrogation. If a Claim indemnified by TRMI under this Section 7.4 is paid in full by TRMI and/or an insurer under a policy of insurance maintained by TRMI, TRMI and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by TRMI hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount TRMI or any of its insurers has paid) to TRMI; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for TRMI's obligations under the Administrative Services Agreement and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.4(c) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT. Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Lease, and expressly, severally and as to its own actions only, agrees that, so long as no Lease Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to the Lessee's rights under the Lease, including, without limitation, the right to possession, use and quiet enjoyment by the Lessee of the Equipment, or by any Sublessee of the Equipment or by any Pledged Equipment Lessee of the Pledged Equipment. SECTION 9. SUCCESSOR INDENTURE TRUSTEE. In the event that the Indenture Trustee gives notice of its resignation pursuant to Section 8.2 of the Indenture, the Owner Trustee shall promptly appoint a successor Indenture Trustee reasonably acceptable to the Lessee. SECTION 10. MISCELLANEOUS. Section 10.1 Consents. Each Participant covenants and agrees (subject, in the case of the Loan Participant, to all of the terms and provisions of the Indenture) that it shall not unreasonably withhold its consent to any consent requested by the Lessee, TILC, TRMI, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, under the terms of the Operative Agreements that by its terms is not to be unreasonably withheld by the Owner Trustee or the Indenture Trustee. 81 Participation Agreement (TRLI 2001-1B) Section 10.2 Refinancing. So long as no Lease Event of Default shall have occurred and be continuing, the Lessee shall have the right, at any time following the fifth anniversary of the Closing Date, and provided that Lessee is simultaneously exercising the refinancing option provided by Section 10.2 of the Other Participation Agreement, to request the Owner Participant and the Owner Trustee to effect an optional prepayment of all, but not less than all, of the Equipment Notes pursuant to Section 2.10(d) of the Indenture as part of a refunding or refinancing operation, provided that the Lessee shall obtain the prior consent of the Owner Participant to be granted in the sole discretion of the Owner Participant acting in good faith if such refinancing imposes any increased risk or liability on or otherwise adversely affects, the Owner Participant; provided further, that the Owner Participant shall not with hold such consent if in its sole judgment (i) any increased risk, or liability is both remote and not material, (ii) the Lessee is at the time at least as creditworthy as on the Closing Date and (iii) Lessee provides an indemnity, in form and substance satisfactory to the Owner Participant, for such increased risk or liability. As soon as practicable after receipt of such request and consent, if required, the Owner Participant and the Lessee will enter into an agreement, in form and substance satisfactory to the parties thereto, as to the terms of such refunding or refinancing as follows: (a) the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee, and any other appropriate parties will enter into a financing or loan agreement (which may involve an underwriting agreement in connection with a public offering), in form and substance reasonably satisfactory to the parties thereto, providing for (i) the issuance and sale by the Owner Trustee or such other party as may be appropriate on the date specified in such agreement (for the purposes of this Section 10.2, the "Refunding Date") of debt securities in an aggregate principal amount (in the lawful currency of the United States) equal to the principal amount of the Equipment Notes outstanding on the Refunding Date, having the same maturity date as said Equipment Notes and having a weighted average life which is not less than or greater than (in either case, by more than three months) the Remaining Weighted Average Life of said Equipment Notes, (ii) the application of the proceeds of the sale of such debt securities to the prepayment of all such Equipment Notes on the Refunding Date, and (iii) payment by Lessee to the Person or Persons entitled thereto of all other amounts, in respect of accrued interest, any Make Whole Amount or other premium, if any, payable on such Refunding Date; (b) the Lessee and the Owner Trustee will amend the Lease in a manner such that (i) if the Refunding Date is not a Rent Payment Date and the accrued and unpaid interest on the Equipment Notes is not otherwise paid pursuant to Section 10.2(a), the Lessee shall on the Refunding Date prepay that portion of the next succeeding installment of Basic Rent as shall equal the aggregate interest accrued on the Equipment Notes outstanding to the Refunding Date, (ii) Basic Rent payable in respect of the period from and after the Refunding Date shall be 82 Participation Agreement (TRLI 2001-1B) recalculated to preserve the Net Economic Return which the Owner Participant would have realized had such refunding not occurred, provided that the net present value of Basic Rent shall be minimized to the extent consistent therewith, and (iii) amounts payable in respect of Stipulated Loss Value, Stipulated Loss Amount, Early Purchase Price, Termination Value and Termination Amount from and after the Refunding Date shall be appropriately recalculated to preserve the Net Economic Return which the Owner Participant would have realized had such refunding not occurred (it being agreed that any recalculations pursuant to subclauses (ii) and (iii) of this clause (b) shall be performed in accordance with the requirements of Section 2.6 hereof); (c) the Owner Trustee will enter into an agreement to provide for the securing thereunder of the debt securities issued by the Owner Trustee pursuant to clause (a) of this Section 10.2 in like manner as the Equipment Notes and/or will enter into such amendments and supplements to the Indenture as may be necessary to effect such refunding or refinancing, which agreements, amendments and/or supplements shall be reasonably satisfactory in form and substance to the Owner Participant; provided that, no such agreement or amendment shall provide for any increase in the security for the new debt securities; and provided further that, notwithstanding the foregoing (but subject to the provisions of clauses (a) and (b) and the lead in paragraph of this Section 10.2 above), the Lessee reserves the right to set the economic terms and other terms not customarily negotiated between an owner participant and a lender of the refunding or refinancing transaction except to the extent adversely affecting cash flow, coverage ratios and reserve accounts as to the Owner Participant to be so offered to the extent that they are passed through to the Lessee in, or define rights or obligations of the Lessee under, the Operative Agreements; provided, further, that no such amendment or supplement will in the sole judgment of the Owner Participant increase its obligations or impair its rights under the Operative Agreements or otherwise adversely affect it without the consent of the Owner Participant; (d) (i) in the case of a refunding or refinancing involving a public offering of debt securities, neither the Owner Trustee nor the Owner Participant shall be an "issuer" for securities law purposes or an "obligor" within the meaning of the Trust Indenture Act of 1939, as amended, the offering materials (including any registration statement) for the refunding or refinancing transaction shall be reason ably satisfactory to the Owner Participant and (ii) the Lessee shall provide satisfactory indemnity to the Owner Trustee and Owner Participant with respect to the refunding or refinancing; (e) unless otherwise agreed by the Owner Participant, the Lessee shall pay to the Owner Trustee as Supplemental Rent an amount, on an After-Tax Basis, equal to any Make-Whole Amount, Late Payment Premium, if any, payable in respect of Equipment Notes outstanding on the Refunding Date pursuant to the Indenture, all interest which is accrued and unpaid in respect of late payments of 83 Participation Agreement (TRLI 2001-1B) Basic Rent or any part thereof, all reasonable fees, costs, expenses of such refunding or refinancing and of the parties hereto incurred in connection with such refunding or refinancing (including all reasonable out-of-pocket legal fees and expenses and the reasonable fees of any financial advisors); (f) the Lessee shall give the Indenture Trustee, the Pass Through Trustee and the Owner Participant not less than 25 days prior written notice of the Refunding Date; (g) the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received (i) such opinions of counsel as they may reasonably request concerning compliance with the Securities Act of 1933, as amended, and any other applicable law relating to the sale of securities and (ii) such other opinions of counsel and such certificates and other documents, each in form and substance reasonably satisfactory to them, as they may reasonably request in connection with compliance with the terms and conditions of this Section 10.2; and (h) all necessary authorizations, approvals and consents shall have been obtained and shall be in full force and effect. The Lessee shall pay to or reimburse the Participants, the Owner Trustee and the Indenture Trustee for all costs and expenses (including reasonable attorneys' and accountants' fees) paid or incurred by them in connection with such refunding or refinancing. Section 10.3 Amendments and Waivers. Except as otherwise provided in the Indenture, no term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party against which enforcement of the termination, amendment or waiver is sought. Section 10.4 Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by facsimile, and any such notice shall become effective (i) upon personal delivery thereof, including, without limitation, by reputable overnight courier, or (ii) in the case of notice by facsimile, upon confirmation of receipt thereof, provided such transmission is promptly further confirmed by any of the methods set forth in clause (i) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: If to the Lessee: 84 Participation Agreement (TRLI 2001-1B) Trinity Rail Leasing I L.P. 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1B) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to TILC: Trinity Industries Leasing Company 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1B) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to TRMI: Trinity Rail Management, Inc. 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1B) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to the Owner Trustee: TRLI 2001-1B Railcar Statutory Trust c/o State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street, Goodwin Square, Hartford, CT 06103 Attention: Corporate Trust Administration Facsimile No.: (860) 244-1889 Confirmation No.: (860) 244-1800 with a copy to: the Owner Participant at the address set forth below 85 Participation Agreement (TRLI 2001-1B) If to the Owner Participant: Trimaran Leasing, L.P. c/o Philip Morris Capital Corporation 225 High Ridge Road, Suite 300 Stamford, CT 06905 Attention: Vice President, Structured Finance Fax No.: (914) 335-8297 Confirmation No.: (914) 335-8204 If to the Indenture Trustee: LaSalle Bank National Association 135 South LaSalle Street Suite 1960 Chicago, IL 60603 Attention: Kristine Schossow, Corporate Trust Services Division Facsimile No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to the Pass Through Trustee: LaSalle Bank National Association 135 South LaSalle Street Suite 1960 Chicago, IL 60603 Attention: Kristine Schossow, Corporate Trust Services Division Facsimile No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to the Rating Agency: Standard & Poor's Corporation 25 Broadway New York, New York 10004 Attention: Stephen F. Rooney Facsimile No.: (212) 438-2646 Confirmation No.: (212) 438-2591 Section 10.5 Survival. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement, 86 Participation Agreement (TRLI 2001-1B) shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby on the Closing Date regardless of any investigation made by any such party or on behalf of any such party. Section 10.6 No Guarantee of Residual Value or Debt. Nothing contained herein or in the Lease, the Indenture, the Trust Agreement or the Tax Indemnity Agreement or in any certificate or other statement delivered by the Lessee in connection with the transactions contemplated hereby shall be deemed to be (i) a guarantee by the Lessee, TILC or TRMI to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Pass Through Trustee or the Loan Participant that the Equipment will have any residual value or useful life, or (ii) a guarantee by the Indenture Trustee, the Owner Trustee, the Owner Participant, the Lessee, TILC or TRMI of payment of the principal of, premium, if any, or interest on the Equipment Notes. Section 10.7 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Beneficial Interest permitted under Section 6.1 hereof and each successive holder of any Equipment Note permitted under the Indenture issued and delivered pursuant to this Agreement or the Indenture. The parties hereto agree that the Collateral Agent shall be a third party beneficiary of this Agreement. Except as expressly provided herein or in the other Operative Agreements, no party hereto may assign their interests herein without the consent of the parties hereto. Section 10.8 Business Day. Notwithstanding anything herein or in any other Operative Agreement to the contrary, if the date on which any payment is to be made pursuant to this Agreement or any other Operative Agreement is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such succeeding Business Day and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. SECTION 10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 87 Participation Agreement (TRLI 2001-1B) Section 10.10 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 10.11 Counterparts. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Section 10.12 Headings and Table of Contents. The headings of the Sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 10.13 Limitations of Liability; Extent of Interest. (a) Liabilities of Participants. Neither the Indenture Trustee, the Owner Trustee nor any Participant shall have any obligation or duty to the Lessee, to TILC, TRMI, to any other Participant or to others with respect to the transactions contemplated hereby, except those obligations or duties of such Participant expressly set forth in this Agreement and the other Operative Agreements, and neither the Indenture Trustee nor any Participant shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Indenture Trustee or any Participant be liable to the Lessee, TILC or TRMI for any action or inaction on the part of the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Owner Trustee, unless such action or inaction is at the direction of the Indenture Trustee or any Participant, as the case may be, and such action or inaction is expressly prohibited hereby. (b) No Recourse to the Owner Trustee. It is expressly understood and agreed by and between Trust Company, the Owner Trustee, the Lessee, the Owner Participant, the Indenture Trustee, and the Loan Participant, and their respective successors and permitted assigns that, subject to the proviso contained in this Section 10.13(b), all representations, warranties and undertakings of the Owner Trustee hereunder shall be binding upon the Owner Trustee only in its capacity as Owner Trustee under the Trust Agreement, and (except as expressly provided herein) Trust Company shall not be liable for any breach thereof, except for its gross negligence or willful misconduct, or for breach of its covenants, representations and warranties contained herein, except to the extent covenanted or made in its individual capacity; provided, however, that nothing in this Section 10.13(b) shall be 88 Participation Agreement (TRLI 2001-1B) construed to limit in scope or substance those representations and warranties of Trust Company made expressly in its individual capacity set forth herein. The term "Owner Trustee" as used in this Agreement shall include any successor trustee under the Trust Agreement, or the Owner Participant if the trust created thereby is revoked. (c) Extent of Interest of Holders of Equipment Notes. No holder of an Equipment Note shall have any further interest in, or other right with respect to, the mortgage and security interests created by the Indenture when and if the principal of and interest on all Equipment Notes held by such holder and all other sums payable to such holder hereunder, under the Indenture and under such Equipment Notes shall have been paid in full. Each holder of the Equipment Notes by its acceptance of an Equipment Note, agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to such holder as provided in Article III of the Indenture and that neither TILC, TRMI, the Lessee, the Owner Participant, the Indenture Trustee nor the Owner Trustee shall be personally liable to any holder of the Equipment Notes for any amounts payable under the Equipment Notes, the Indenture or hereunder, except as expressly provided in the Operative Agreements. (d) Loan Participant's Source of Funds. It is expressly understood and agreed by and between the Owner Trustee, the Lessee, the Owner Participant, the Indenture Trustee and the Loan Participant, and their respective successors and permitted assigns that, subject to the proviso contained in this Section 10.13(d), the undertakings of the Loan Participant hereunder are limited to the application of the proceeds of the sale of the Pass Through Certificates to the purchase by the Pass Through Trustee of the Equipment Notes; provided, however, that nothing in this Section 10.13(d) shall be construed to limit in scope or substance those representations and warranties of the Loan Participant made expressly in its individual capacity set forth herein. Section 10.14 Maintenance of Non-Recourse Debt. The parties hereto agree that if the Owner Trustee becomes a debtor subject to the reorganization provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code") or any successor provision, the parties hereto will make an election under 1111(b)(1)(A)(i) of the Bankruptcy Code. If (a) the Owner Trustee becomes a debtor subject to the reorganization provisions of the Bankruptcy Code or any successor provision, (b) pursuant to such reorganization provisions the Owner Trustee is required, by reason of the Owner Trustee being held to have recourse liability to the Pass Through Trustee or the Indenture Trustee, directly or indirectly, to make payment on account of any amount payable under the Equipment Notes or any of the other Operative Agreements and (c) the Indenture Trustee and/or the Pass Through Trustee actually receives any Excess Amount (as hereinafter defined) which reflects any payment by the Owner Trustee on account of (b) above, then the Indenture Trustee and/or the Pass Through Trustee, as the case may be, shall promptly refund to the Owner Trustee such Excess Amount. For purposes of this Section 10.14, "Excess Amount" 89 Participation Agreement (TRLI 2001-1B) means the amount by which such payment exceeds the amount which would have been received by the Indenture Trustee or the Pass Through Trustee if the Owner Trustee had not become subject to the recourse liability referred to in (b) above. Section 10.15 Ownership of and Rights in Units. The sale of the Units described on Schedule 1 hereto and the Existing Equipment Subleases by TILC contemplated hereby is intended for all purposes to be a true sale of all of TILC's right, title and interest in and to such Units, the Existing Equipment Subleases to the Lessee, which shall be the legal owner thereof upon such sale. Upon consummation of the sale and leaseback transactions contemplated hereby, the Lessee's interest in such Units is intended to be that of a lessee only. It is intended that for federal and state income tax purposes the Owner Participant will be the owner of such Units. The rights of the Indenture Trustee in and to such Units pursuant to the Indenture is intended to be that of a secured party holding a security interest, subject to the Lease and the rights of the Lessee thereunder. No holder of an Equipment Note is intended to have any right, title or interest in or to such Units except as a beneficiary of the Lien granted by the Owner Trustee to the Indenture Trustee pursuant to the Indenture in trust for the equal and ratable benefit of the holders from time to time of the Equipment Notes. Section 10.16 No Petition. Each party hereto agrees that, prior to the date which is one year and one day after payment in full of all outstanding Equipment Notes and all obligations of the Lessee under the Operative Agreements and release of all Collateral held under the Collateral Agency Agreement (i) no party hereto shall authorize the Lessee to commence a voluntary winding-up or other voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Lessee or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect in any jurisdiction or seeking the appointment of an administrator, a trustee, receiver, liquidator, custodian or other similar official of the Lessee or any substantial part of its property or to consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against the Lessee, or to make a general assignment for the benefit of any party hereto or any other creditor of the Lessee, and (ii) none of the parties hereto shall commence or join with any other Person in commencing any proceeding against the Lessee under any bankruptcy, reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction. Each of the parties hereto agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Equipment Notes and all obligations of the Lessee under the Operative Agreements and release of all Collateral held under the Collateral Agency Agreement, it will not institute against, or join any other Person in instituting against, Lessee an action in bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceeding under the laws of the United States or any state of the United States. 90 Participation Agreement (TRLI 2001-1B) Section 10.17 Consent To Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 10.4 hereof, or at such other address of which the other parties shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. SECTION 10.18 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS AGREEMENT. * * * 91 Participation Agreement (TRLI 2001-1B) IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be executed and delivered, all as of the date first above written. Lessee: TRINITY RAIL LEASING I L.P. By TILX GP I, LLC its General Partner By: ----------------------------- Name: Eric Marchetto Title: Vice President TILC: TRINITY INDUSTRIES LEASING COMPANY By: ----------------------------------- Name: Eric Marchetto Title: Vice President TRMI: TRINITY RAIL MANAGEMENT, INC. By: ----------------------------------- Name: Eric Marchetto Title: Vice President Owner Trustee: TRLI 2001-1B RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein but solely as Owner Trustee By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Participation Agreement (TRLI 2001-1B) Owner Participant: TRIMARAN LEASING, L.P. By: Trimaran Leasing Investors, L.L.C.-I, its General Partner By: Grant Holdings, Inc., its sole member By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Indenture Trustee: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee By: ------------------------------------ Name: Sarah H. Webb Title: Senior Vice President Pass Through Trustee: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity except as expressly provided herein but solely as Pass Through Trustee By: ------------------------------------ Name: Sarah H. Webb Title: Senior Vice President Participation Agreement (TRLI 2001-1B) EX-10.16.4 11 d94851ex10-16_4.txt EQUIPMENT LEASE AGREEMENT (TRL 1 2001-1C) EXHIBIT 10.16.4 --------------------------------- EQUIPMENT LEASE AGREEMENT (TRLI 2001-1C) Dated as of December 28, 2001 between TRLI 2001-1C RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein but solely as Owner Trustee, Lessor and TRINITY RAIL LEASING I L.P., Lessee Tank Cars and Covered Hopper 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, LASALLE BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT (TRLI 2001-1C), DATED AS OF DECEMBER 28, 2001 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 --------------------------------- TABLE OF CONTENTS
Page ---- SECTION 1. Definitions 1 SECTION 2. Acceptance and Leasing of Equipment 1 SECTION 3. Term and Rent 1 Section 3.1 Lease Term 1 Section 3.2 Basic Rent 2 Section 3.3 Supplemental Rent 3 Section 3.4 Adjustment of Rent 3 Section 3.5 Manner of Payments 3 SECTION 4. Ownership and Marking of Equipment 4 Section 4.1 Retention of Title 4 Section 4.2 Duty to Number and Mark Equipment 4 Section 4.3 Prohibition Against Certain Designations 5 SECTION 5. Disclaimer of Warranties 6 Section 5.1 Disclaimer of Warranties 6 Section 5.2 Rights Under Existing Equipment Subleases 7 SECTION 6. Return of Equipment; Storage 7 Section 6.1 Return; Holdover Rent 7 Section 6.2 Condition of Equipment 10 SECTION 7. Liens 11 SECTION 8. Maintenance; Possession; Compliance with Laws 11 Section 8.1 Maintenance and Operation 11 Section 8.2 Possession and Use 13 Section 8.3 Sublease 13 SECTION 9. Modifications 16 Section 9.1 Required Modifications 16 Section 9.2 Optional Modifications 17 Section 9.3 Removal of Property; Replacements 17
Page ---- SECTION 10. Voluntary Termination 18 Section 10.1 Right of Termination 18 Section 10.2 Sale of Equipment 19 Section 10.3 Retention of Equipment by Lessor 21 Section 10.4 Termination of Lease 22 Section 10.5 Funding of Accounts on Termination 22 SECTION 11. Loss, Destruction Requisition, Etc 23 Section 11.1 Event of Loss 23 Section 11.2 Replacement or Payment upon Event of Loss 23 Section 11.3 Rent Termination 25 Section 11.4 Disposition of Equipment; Replacement of Unit 26 Section 11.5 Eminent Domain 28 SECTION 12. Insurance 28 Section 12.1 Insurance 28 Section 12.2 Physical Damage Insurance 30 Section 12.3 Public Liability Insurance 31 Section 12.4 Certificate of Insurance 32 Section 12.5 Additional Insurance 33 Section 12.6 Post-Lease Term Insurance 34 SECTION 13. Reports; Inspection 34 Section 13.1 Duty of Lessee to Furnish 34 Section 13.2 Lessor's Inspection Rights 35 SECTION 14. Lease Events of Default 35 SECTION 15. Remedies 39 Section 15.1 Remedies 39 Section 15.2 Cumulative Remedies 42 Section 15.3 No Waiver 43 Section 15.4 Notice of Lease Default 43 Section 15.5 Lessee's Duty to Return Equipment Upon Default 43 Section 15.6 Specific Performance; Lessor Appointed Lessee's Agent 44 SECTION 16. Filings; Further Assurances 45
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Page ---- Section 16.1 Filings 45 Section 16.2 Further Assurances 45 Section 16.3 Other Filings 46 Section 16.4 Expenses 46 SECTION 17. Lessor's Right to Perform 46 SECTION 18. Assignment 47 Section 18.1 Assignment by Lessor 47 Section 18.2 Assignment by Lessee 47 Section 18.3 Sublessee's or Others Performance and Rights 47 SECTION 19. Net Lease, Etc 48 SECTION 20. Notices 49 SECTION 21. Concerning the Indenture Trustee 51 Section 21.1 Limitation of the Indenture Trustee's Liabilities 51 Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease 51 SECTION 22. Purchase Options; Renewal Options 51 Section 22.1 Early Purchase Option 51 Section 22.2 Election to Retain or Return Equipment at End of Basic or Renewal Term 54 Section 22.3 Purchase Option 54 Section 22.4 Renewal Option 55 Section 22.5 Rent Appraisal; Outside Renewal Date 56 Section 22.6 Stipulated Loss Amount and Termination Amount During Renewal Term 57 Section 22.7 Deemed Renewals 57 Section 22.8 Funding of Accounts on Purchase 58 SECTION 23. Limitation of Lessor's Liability 58 SECTION 24. Investment of Security Funds 58 SECTION 25. Miscellaneous 59
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Page ---- Section 25.1 Governing Law; Severability 59 Section 25.2 Execution in Counterparts 59 Section 25.3 Headings and Table of Contents; Section References 59 Section 25.4 Successors and Assigns 59 Section 25.5 True Lease 59 Section 25.6 Amendments and Waivers 60 Section 25.7 Survival 60 Section 25.8 Business Days 60 Section 25.9 Directly or Indirectly; Performance by Managers 61 Section 25.10 Incorporation by Reference 61
iv APPENDICES AND EXHIBITS Exhibit A - Form of Lease Supplement Exhibit B-1 - Form of Net Sublease Exhibit B-2 - Form of Full Service Sublease Appendix A - Definitions v EQUIPMENT LEASE AGREEMENT (TRLI 2001-1C) This Equipment Lease Agreement (TRLI 2001-1C), dated as of December 28, 2001 (this "Lease"), is by and between TRLI 2001-1C Railcar Statutory Trust, a Connecticut statutory trust, by State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein, but solely as trustee under the Trust Agreement, as Lessor, and Trinity Rail Leasing I 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 Basic Term Expiration Date. Subject and pursuant to Section 22.4, Lessee may elect one or more Renewal Terms and, as provided in Lease Agreement (TRLI 2001-1C) Section 22.7 hereof, in certain circumstances a Renewal Term shall be deemed to have occurred with respect to some or all of the Units. Section 3.2 Basic Rent. Lessee hereby agrees to pay 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 such Unit 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). Schedule 3-B to the Participation Agreement sets forth the Basic Rent allocated for Federal income tax purposes to each lease period and calendar year throughout the Basic Term and in addition, sets forth that for certain months, amounts of Basic Rent shall be allocated to the following and/or preceding calendar year. Schedule 3-B to the Participation Agreement also sets forth the application of Basic Rent payments to the calendar year to which such payments relate. It is the intention of Lessor and Lessee that 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 Treas. Reg. Section 1.467-1(c)(2)(ii). 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 be 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. In addition, Lessor and Lessee intend that under no circumstances are any Basic Rents to be considered related to (i) any period after the calendar year succeeding the calendar year in which such Basic Rents are payable or any period before the calendar year preceding the calendar year in which such Basic Rents are payable or (ii) the period beginning on the Closing Date and ending on (but not including) March 28, 2002 (the "Basic Rent Holiday"). 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, any payment of principal of and interest 2 Lease Agreement (TRLI 2001-1C) on the Equipment Notes required to be paid by Lessor pursuant to the Indenture on such due date in accordance with the Scheduled Amortization. Section 3.3 Supplemental Rent. Lessee also agrees to pay to Lessor, or to whosoever shall be entitled thereto, any and all Supplemental Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise as in the case of nonpayment of Basic Rent. 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 10, in the case of the purchase of any Unit (but not in the case of a purchase of the Beneficial Interest or if the Equipment Notes are assumed in accordance with the Operative Agreements) pursuant to Section 22.1 or Section 6.9 of the Participation Agreement, and in the case of any refinancing of the Equipment Notes pursuant to Section 10.2 of the Participation Agreement. All Supplemental Rent to be paid pursuant to this Section 3.3 shall be payable in the type of funds and in the manner set forth in Section 3.5. Section 3.4 Adjustment of Rent. Lessee and Lessor agree that the Basic Rent, Stipulated Loss 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. 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, Goodwin Square, Hartford, CT, 06103, Attention: Corporate Trust Administration, provided, that so 3 Lease Agreement (TRLI 2001-1C) 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 into 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 135 S. LaSalle Street, Suite 1960, Chicago, IL 60603, ABA No. 071000505, Account No. 2090067, Ref: 608775318 TRLI, Attn: Kristine Schossow, Corporate Trust Services Division, Trust TRLI 2001-1C, 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 pursuant to distribution from any of the Accounts (as such term is defined in the Collateral Agency Agreement) 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 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 as soon as practicable after the date on which a Lease Supplement is executed and delivered in respect of a Replacement Unit pursuant to Section 11.4(b), Lessee will cause, each Unit to be numbered with its 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: 4 Lease Agreement (TRLI 2001-1C) "OWNERSHIP SUBJECT TO A SECURITY AGREEMENT FILED WITH THE SURFACE TRANSPORTATION BOARD" with appropriate changes thereof and additions thereto as from time to time may be required by law in order to protect Lessor's right, title and interest in and to such Unit, its rights under this Lease and the rights of 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, 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 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 above provided, Lessee will not allow the name of any Person to be placed on any Unit as a designation that might reasonably be interpreted as a claim of ownership; provided, however, that, subject to the delivery of the statement of new reporting marks specified in Section 4.2, Lessee may cause any Unit to be lettered with the names or initials or other insignia customarily used by Lessee or any Sublessee or any of their respective Affiliates on railroad equipment 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 any Sublessee to use such Unit pursuant to a Permitted Sublease. 5 Lease Agreement (TRLI 2001-1C) 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 NEITHER LESSOR, AS LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF 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 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. Lessor hereby appoints and constitutes Lessee its agent and attorney-in-fact during the Lease Term to assert and enforce, 6 Lease Agreement (TRLI 2001-1C) 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; 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. 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 Under Existing Equipment 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. 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 any 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 for the storage of rolling stock within the Contiguous United States sufficient 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, f.o.b. such location, (i) as may be agreed upon by Lessor and Lessee in writing or (ii) in the absence of such agreement as Lessor may reasonably select by written notice to 7 Lease Agreement (TRLI 2001-1C) 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 60 days thereafter. On or before the 90th 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 wilful 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 8 Lease Agreement (TRLI 2001-1C) 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 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, 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 (provided that such Units shall be transported to no more than ten (10) locations, each having adequate storage capacity) 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 Lessor; provided, however, that any incremental costs associated with movement from the storage facility designated by Lessee pursuant to this clause (iii) over the costs that would be incurred in movement from the storage facility designated by Lessor pursuant to Section 6.1 (a) shall be for the account 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. 9 Lease Agreement (TRLI 2001-1C) (e) In the event any Unit is not (i) returned to Lessor in accordance with the provisions of Section 6.1(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, 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. 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 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, (vi) empty, (vii) unless industry custom or practice indicates to the contrary, steam cleaned or otherwise cleaned in a comparable commercially acceptable manner 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, upon Lessor's request, 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 10 Lease Agreement (TRLI 2001-1C) 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 wilful misconduct; and further provided, that if such Unit is not in compliance with the conditions set forth in this Section 6.2, then 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 to Lessor 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 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 may be 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, or 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 or, with respect to any Equipment subject to an Existing Equipment Sublease that is a Net Sublease, 11 Lease Agreement (TRLI 2001-1C) the applicable Sublessee, as applicable, in respect of railcars owned or managed by the Manager or, with respect to any Equipment subject to an Existing Equipment Sublease that is a Net Sublease, the applicable Sublessee, as applicable, similar in type to such Unit, (iii) in accordance in all material respects with all manufacturer's warranties in effect 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, 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, the applicable Sublessee, as applicable, Lessee may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such standard, rule or regulation in any reasonable manner which does not materially interfere with the use, possession, operation or return of any of the Units or materially adversely affect the rights or interests of Lessor and the Indenture Trustee in the Units or hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant to criminal sanctions or release Lessee from the obligation to return the Units in compliance with the provisions of Section 6.2; provided further, that Lessee shall promptly notify Lessor 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 in all material respects 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 classification in effect for such Unit on the Closing Date, except for any change in tank test pressure rating provided such 12 Lease Agreement (TRLI 2001-1C) 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(i), 11.3 and 11.4. 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 forty percent (40%) of the Units and the Other Units (as determined by mileage records and measured annually on a calendar year basis) be used outside the Contiguous United States at the same time. 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 a sublease, car contract or other contract granting permission for the use of a Unit to: (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 13 Lease Agreement (TRLI 2001-1C) which it owns or manages) (other than railroad companies, Trinity, Affiliates of Trinity or Credit Bankrupts) for use in their business; or (iii) wholly-owned Subsidiaries of Trinity organized under the laws of (x) Canada or any political subdivision thereof (each a "Canadian Affiliate") or (y) Mexico or any political subdivision thereof (each a "Mexican Affiliate") (subleases to any of such sublessees referred to in clauses (i), (ii) or (iii) of this Section 8.3 being herein referred to as "Permitted Subleases"); provided, however, that Lessee shall not (A) sublease to a sublessee organized under the laws of Mexico or any state thereof (a "Mexican Sublessee") if, after giving effect to such sublease, 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 to Mexican Sublessees exceeds the lesser of (I) 7% (or, with Rating Agency Confirmation, 20%) of the Units, Other Units and the Pledged Units in the aggregate, or (II) the percentage of railcars leased or subleased to Mexican Sublessees in the Total Managed Fleet, and (B) sublease more than 50 Units and Other Units to any single Mexican Sublessee (other than (x) with Rating Agency Confirmation, to a Mexican Affiliate or (y) a Mexican Sublessee (I) with a credit rating of at least BBB and Baa2 as determined by S&P and Moody's, respectively (or, in the event that either S&P or Moody's shall not or cease to provide a credit rating for such entity, a credit rating of at least BBB or Baa2 by S&P or Moody's, as the case may be) or (II) with a full, unconditional irrevocable guaranty from such Mexican Sublessee's parent with a credit rating at least BBB and Baa2 as determined by S&P and Moody's, respectively, or (III) with a letter of credit from a provider with a credit rating at least A+ or A1 as determined by S&P and Moody's, respectively), provided, further, that Lessee shall not at any time sublease more than 20% (or, with Rating Agency Confirmation, 30%) of the Units and the Other Units (as measured by number of Units and Other Units and not mileage records) in the aggregate to Canadian Affiliates, provided, further, that any Unit subleased to a Canadian Affiliate or a Mexican Affiliate shall be sub-subleased to Persons of the type described in clause (i) or (ii) above pursuant to a sub-sublease containing terms and conditions similar in all material respects to the applicable sublease between Lessee and the applicable Canadian Affiliate or Mexican Affiliate and, provided, further, that no sub-sublease may provide greater rights to the sub-sublessee than those provided to the sublessee in the related sublease. 14 Lease Agreement (TRLI 2001-1C) Each Sublease (and to the extent permitted, sub-sublease) other than Existing Equipment Subleases shall include appropriate provisions so that such sublease (i) shall require the payment of rent (x) in dollars (y) at Fair Market Rental Value and (z) not disproportionately in the earlier term of the sublease compared to in the later term of the sublease; (ii) shall not permit any sub-subleasing (or in the case of any sub-sublease, any subleasing), other than (A) sub-subleases by Canadian Affiliates or Mexican Affiliates to Persons of the type described in clauses (i) or (ii) of the immediately preceding paragraph containing terms and conditions similar in all material respects to the applicable sublease between Lessee and the applicable Canadian Affiliate or Mexican Affiliate, (B) "single trip" subleases or (C) sub-subleases by Permitted Sublessees so long as such sub-sublease is (X) of a term of not more than one year, (Y) subject and subordinate to the Sublease and (Z) to a sub-sublessee and on terms such that it would be a Permitted Sublease if it were entered into directly by the Partnership and shall not permit any sub-sub-sub leasing, (iii) provide that the rights of the Sublessee to offset or otherwise set-off against amounts due to Lessee from any such Sublessee under the applicable Sublease be limited to matters arising under the Sublease (except that the Sublessee may offset or otherwise set off amounts due to the Marks Company Trustee under the Sublease), (iv) without regard to the payment of Basic Rent or the Lease Term, shall not include any term or provision which is inconsistent with the terms and conditions of this Lease or which could reasonably be expected to result in material adverse consequences to Lessor, any Participant or the Indenture Trustee (it being agreed that a sublease substantially in the form attached as Exhibit B-1 or Exhibit B-2 satisfies the provisions of this sentence) and (v) does not have a term which extends three years beyond the later of (i) the Basic Term Expiration Date or (ii) if applicable, the end of any Renewal Term then in effect. Lessee will use commercially reasonable efforts to have each Sublease other than Existing Equipment Subleases (i) provide that such Sublease and all rights of the Sublessee (and of any other person claiming or who may hereafter claim under or through the Sublessee) under such Sublease, including any purchase options of the Sublessee thereunder, be made subject and subordinate to the terms of this Lease and (ii) be substantially in the form attached as Exhibit B-1 or Exhibit B-2. 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 jurisdiction in which the Partnership's chief 15 Lease Agreement (TRLI 2001-1C) executive office is located and in the Partnership's jurisdiction of formation covering all Subleases generally. 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 such Required Modification at its own expense; provided, however, that Lessee may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such law, regulation, requirement or rule in any reasonable manner which does not materially interfere with the use, possession, operation or return of any Unit or materially adversely affect the rights or interests of Lessor or the Indenture Trustee in the Units or hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant to criminal sanctions or relieve Lessee of the obligation to return the Units in compliance with the provisions of Section 6.2; provided, further, that, with respect to a Unit subject to a Full Service Sublease, the Manager, and with respect to a Unit subject to a Net Sublease, the Sublessee, as applicable, is similarly contesting such law, regulation, requirement or rule with respect to all other similar equipment owned or operated by the Manager or the Sublessee, as applicable. Title to any Required Modification shall immediately vest in Lessor. Notwithstanding anything herein to the contrary, if Lessee, on a non-discriminatory basis, determines in its reasonable judgment (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 and the Manager certifies that it has made a similar determination with respect to similar railcars in similar circumstances which are part of the Manager's Fleet, 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 16 Lease Agreement (TRLI 2001-1C) Unit and in such event the provisions of Sections 11.2(ii), 11.3 and 11.4 shall apply with respect to such Unit except that the amount payable under Section 11.2(ii)(a) as a result of such determination shall be an amount equal to the greater of the Fair Market Sales Value or Stipulated Loss Amount of such Unit; provided that there shall also be included in such Officer's Certificate a statement of how Lessee intends to meet the financial obligations imposed under said Sections 11.2, 11.3 and 11.4 with respect to such Units. 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 shall diminish the fair market value, utility, capacity, residual value or remaining economic useful life of such Unit below the fair market value, utility, capacity, residual value 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. Title to any 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. 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 17 Lease Agreement (TRLI 2001-1C) 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, utility, capacity, residual value 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. 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 (as defined under the Lease Agreement TRLI 2001-1A) to terminate the Lease with respect to any or all of the Units (provided that, if such termination is for less than all Units in a Functional Group across the Partnership Fleet, Lessee shall exercise such termination hereunder and under the comparable provisions contained in the Other Leases (i) with respect to at least 50 railcars in the aggregate of the type included in such Functional Group, (ii) no fewer than 25 railcars of the type included in such Functional Group shall in the aggregate remain subject to this Lease and the Other Leases, (iii) such termination shall be made hereunder and under the Other Leases pro rata in accordance with the number of units in such Functional Group subject to each such lease and (iv) the determination as to which Units are subject to termination shall otherwise be made by Lessee on a random basis without discrimination based on maintenance status, operating condition of the Units in question or otherwise) (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 Managers 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 an Officer's Certificate from each of 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 the Manager's Fleet, and that, 18 Lease Agreement (TRLI 2001-1C) 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 (z) Lessee delivers at least 120 days' prior notice to Lessor and the Indenture Trustee (i) 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, and (ii) if some but less than all of the Units in a Functional Group are designated as Terminated Units, describing in such Officer's Certificate the nondiscriminatory manner in which Lessee proposes to determine which Units in that Functional Group are to be Terminated Units. 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; 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, each Participant and the Indenture Trustee on an After Tax Basis 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 or Affiliates thereof 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 19 Lease Agreement (TRLI 2001-1C) 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 an Affiliate of Lessee (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)), which 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 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 and retained by 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 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 reasonable costs and expenses (including any applicable sales, transfer or similar taxes) of Lessor and Owner Participant in connection with such sale) of the Terminated Units, (C) an amount equal to the Make-Whole Amount and any unpaid Late Payment Premium in respect of 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 (exclusive of any Basic Rent due on such date) then due and payable hereunder (which shall include, without limitation, the Accumulated Equity Deficiency Amount (without duplication of amounts calculated above) and Late Payment Interest related thereto), so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant. 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, each Participant and the Indenture Trustee for all reasonable costs and expenses (including reasonable legal fees and expenses) incurred by any thereof in connection therewith; provided that if such sale shall not 20 Lease Agreement (TRLI 2001-1C) have occurred solely because of Lessee's failure to pay the amounts hereinabove required, Lessee shall have no further right to terminate this Lease with respect to such Units. Lessee, in acting as agent for Lessor, shall have no liability to Lessor for failure to obtain the best price, shall act in its sole discretion and shall be under no duty to solicit bids publicly or in any particular market. Lessee's sole interest in acting as agent shall be to use its reasonable best efforts to sell the Units at the highest price then obtainable consistent with the terms of this Lease. 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, 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 and all Supplemental 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, but inclusive of any Supplemental Rent measured by the Make-Whole Amount and any unpaid Late Payment Interest in respect of the Terminated Units), so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant. 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. If Lessor elects not to sell the Terminated Units as provided in this Section 10.3, then Lessor shall pay, or cause to be paid, to 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 21 Lease Agreement (TRLI 2001-1C) 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. Upon payment by Lessor of the foregoing, Lessee shall pay to Lessor an amount of rent equal to the Make-Whole Amount and any unpaid Late Payment Interest in respect of the principal amount of the Equipment Notes to be prepaid together with all Basic Rent (including Basic Rent due on the Termination Date) and Supplemental Rent due and owing; provided that unless all such amounts shall have been paid to the Indenture Trustee on the Termination Date, this Lease shall continue in full force and effect. 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. 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 10.5 Funding of Accounts on Termination. Lessee will not exercise a termination option under this Section 10 with respect to all of the Units unless either (a) the full amount required to fund the Post Lease Term Reserve Account is (upon consummation of such purchase and distribution of all amounts required to be distributed by the Collateral Agent under the Collateral Agency Agreement) and will be then available to the Collateral Agent to fund such Post 22 Lease Agreement (TRLI 2001-1C) Lease Term Reserve Account or (b) an indemnity pursuant to Section 3.13 of the Collateral Agency Agreement has been provided. 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 be permanently returned to the manufacturer pursuant to any patent indemnity provisions, (iv) shall have title thereto taken or appropriated by any governmental authority, agency or instrumentality under the power of eminent domain or otherwise or (v) shall be taken or requisitioned for use by any governmental authority or any agency or instrumentality thereof under the power of eminent domain or otherwise, and such taking or requisition is for a period that exceeds the remaining Basic Term or any Renewal Term then in effect (unless such taking or requisition is by any governmental authority, agency or instrumentality of Mexico or any state thereof in which case such period shall be the lesser of the period as aforesaid or 365 days) (any such occurrence being hereinafter called an "Event of Loss"), Lessee, in accordance with the terms of Section 11.2, shall promptly and fully inform Lessor and the Indenture Trustee of such Event of Loss. Section 11.2 Replacement or Payment upon Event of Loss. Upon the occurrence of an Event of Loss or the deemed occurrence of an Event of Loss pursuant to Section 9.1 or an election to replace pursuant to Section 8.1(b), Lessee shall as soon as reasonably practical and in any event within 60 days after a Responsible Officer of the Manager shall have actual knowledge of the occurrence of such Event of Loss or election to replace give Lessor and the Indenture Trustee notice thereof (which initial notice shall identify the Unit involved). Thereafter, within the 60-day period following such initial notice, Lessee shall give Lessor and the Indenture Trustee a second notice as to which of the following options Lessee shall elect to perform (it being agreed that, except in the case of an election to replace pursuant to Section 8.1(b) (in which case Lessee will comply with the provisions of Section 8.1(b)), if Lessee shall fail to give such second notice, Lessee shall be deemed to have elected to perform the option set forth in Section 11.2(ii)): 23 Lease Agreement (TRLI 2001-1C) (i) Upon Lessee's election to perform under this clause (i) pursuant to the above-mentioned second notice (or in the circumstances of an election described in Section 8.1(b) with respect to any Unit), as promptly as practicable following such election, and in any event on or before the 60th day following such second notice (or Section 8.1(b) election), Lessee shall comply with Section 11.4(b) and shall convey or cause to be conveyed to Lessor a replacement unit ("Replacement Unit") to be leased to Lessee hereunder, such Replacement Unit to be of the same car type of the same or newer model year (or otherwise approved by Lessor, which approval shall not be unreasonably withheld), and free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) with respect to Permitted Subleases, and in clauses (iv) and (vii) of the definition thereof) and to have a fair market value, utility, residual value, remaining economic useful life and condition at least equal to the Unit so replaced (assuming such Unit was in the condition required to be maintained by the terms of this Lease) and to be (as of the date of conveyance) then subject to a currently effective Permitted Sublease having a remaining term of not less than one year; provided, that, if only railcars of newer age or greater value are available for such replacement, Lessee may on one occasion re-substitute a railcar with a value closer to or equal to that of the Unit which originally suffered the Event of Loss or was replaced (which re-substitution shall occur within twenty-four months of the original replacement (but in no event within the three year period immediately preceding the Basic Term Expiration Date) and shall comply with this Section 11 as if an Event of Loss had occurred); provided also that, if Lessee shall elect the option under this clause (i) but shall fail to perform its obligation to effect such replacement under this clause (i) within the 60-day period hereinabove provided for, then (except in the case of a failure to perform an election to replace pursuant to Section 8.1(b)) at the end of such 60-day period Lessee shall immediately give Lessor and the Indenture Trustee notice of such failure and specify that Lessee shall pay to Lessor on the next succeeding Rent Payment Date that is at least 25 days after the end of such 60-day period, or in the case of Supplemental Rent, to the Person entitled thereto, the amounts specified in clause (ii) below as of such next succeeding Rent Payment Date, and Lessee shall pay such amounts on such Rent Payment Date; provided further that Lessee shall have no right to elect replacement or re-substitution under this clause (i) if, at the time of the notice of the Event of Loss under Section 11.2 above or at the time such replacement or re-substitution is to occur, either (A), a Lease Default pursuant to Section 14(a), 14(b), 14(g) or 14(h) or a Lease Event of Default shall have occurred and be continuing or (B) sufficient cash amounts shall not have been made available to the 24 Lease Agreement (TRLI 2001-1C) Collateral Agent such that all amounts then required to be applied under Section 3.4 of the Collateral Agency Agreement in order to satisfy the amounts referred to in clauses (1) through (11) thereof, inclusive shall have been distributed as specified thereby; or (ii) on the Rent Payment Date which is not less than 25 days nor more than 60 days following the date of notice of Lessee's election to perform under this clause (ii), Lessee shall pay or cause to be paid to Lessor (or in the case of Supplemental Rent, to the Persons entitled thereto) in funds of the type specified in Section 3.5, (a) an amount equal to the Stipulated Loss Amount of each such Unit suffering an Event of Loss or deemed Event of Loss determined as of such Rent Payment Date, (b) all Basic Rent payable on such date in respect of such Unit (exclusive of any Basic Rent due on such date in respect of the Unit or Units suffering the Event of Loss), (c) any unpaid Late Payment Premium in respect of the principal amount of the Equipment Notes to be prepaid in accordance with Section 2.10(b) of the Indenture and (d) all other Rent (exclusive of any Basic Rent due on such date in respect of the Unit or Units suffering the Event of Loss) then due and payable hereunder (including, without limitation, the Accumulated Equity Deficiency Amount (without duplication of amounts calculated above) and Late Payment Interest related thereto) so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 such Unit, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant, it being understood that until such Stipulated Loss Amount and such other sums are paid, there shall be no abatement or reduction of Basic Rent on account of such Event of Loss. Section 11.3 Rent Termination. Upon the replacement of any Unit or Units in compliance with Sections 11.2(i) and 11.4(b) (but only as to replaced Units and not any Replacement Unit) or upon the payment of all sums required to be paid pursuant to Section 11.2 in respect of any Unit or Units, the Lease Term with respect to such Unit or Units and the obligation to pay Basic Rent for such Unit or Units accruing subsequent to the date of payment of Stipulated Loss Amount or date of conveyance of such Replacement Unit or Units pursuant to Section 11.2 shall terminate; provided that Lessee shall be obligated to pay all Rent in respect of such Unit or Units which is payable under Section 11.2 with respect to such payment of 25 Lease Agreement (TRLI 2001-1C) Stipulated Loss Amount or such replacement of such Unit or Units and in respect of all other Units then continuing to remain subject to this Lease. Section 11.4 Disposition of Equipment; Replacement of Unit. (a) Upon the payment of all sums required to be paid pursuant to Section 11.2 in respect of any Unit or Units, Lessor will convey to Lessee or its designee all right, title and interest of Lessor in and to such Unit or Units, "as is", "where is", without recourse or warranty, except for a warranty as to the absence of Lessor's Liens, and shall execute and deliver to Lessee or its designee, at Lessee's cost and expense, such bills of sale and other documents and instruments as Lessee or its designee may reasonably request to evidence such conveyance. As to each separate Unit so disposed of, so long as no Lease Event of Default shall have occurred and be continuing, Lessee or its designee shall (subject to any insurer's right of subrogation, if any) be entitled to any amounts arising from such disposition, plus any awards, insurance or other proceeds and damages received by Lessee, Lessor or the Indenture Trustee by reason of such Event of Loss up to the Stipulated Loss Amount attributable thereto and any remainder shall be divided between Lessee and Lessor, as their respective interests may appear. (b) At the time of or prior to any replacement of any Unit or Replacement Unit, Lessee, at its own expense, will (A) furnish Lessor with a Bill of Sale with respect to the Replacement Unit substantially in the form delivered pursuant to Section 4.1(g) of the Participation Agreement, (B) cause a Lease Supplement substantially in the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease, and duly executed by Lessee, to be delivered to Lessor for execution by the appropriate parties, it being understood that upon such execution (x) Lessee will cause such Lease Supplement to be filed for recordation in the same manner as provided for the original Lease Supplement in Section 16.1 and (y) to the extent that the Indenture has not been satisfied and discharged, Lessor shall deliver possession of the "original" counterpart of such Lease Supplement to the Indenture Trustee, (C) so long as the Indenture shall not have been satisfied and discharged, cause an Indenture Supplement substantially in the form of Exhibit A to the Indenture for such Replacement Unit, to be delivered to Lessor and to the Indenture Trustee for execution and, upon such execution, to be filed for recordation in the same manner and within the same time periods as provided for the original Indenture Supplement in Section 16.1, (D) furnish Lessor with an opinion of Lessee's counsel (which may be the General Counsel or Assistant General Counsel of Trinity), (x) to the effect that the Bill of Sale referred to in clause (A) above constitutes an 26 Lease Agreement (TRLI 2001-1C) effective instrument for the conveyance of title to the Replacement Unit to Lessor, and that legal and beneficial title to the Replacement Unit has been delivered to Lessor and (y) describing all filings and recordings required pursuant to Section 16 with respect to the Replacement Units, (E) furnish to Owner Participant (and its applicable Affiliates) an agreement of Lessee to indemnify Owner Participant (and its applicable Affiliates) against any adverse tax consequences suffered as a result of such replacement that are not otherwise indemnified under the Tax Indemnity Agreement, (F) furnish Lessor with an engineer's certificate (which may be from an employee of the Manager) certifying as to the utility, condition, model year and remaining useful life required under clause (i) of Section 11.2, (G) furnish to Lessor and the Indenture Trustee an Officer's Certificate certifying that the Replacement Unit has a fair market value, utility, residual value, model year and remaining economic useful life and condition at least equal to the Unit being replaced and is free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) with respect to Permitted Subleases, and in clauses (iv) and (vii) of the definition thereof), (H) furnish Lessor with an opinion from independent tax counsel reasonably acceptable to Owner Participant to the effect that Owner Participant should not suffer any adverse consequence as a result of such replacement, (I) furnish Lessor with an opinion of independent transportation counsel or in-house counsel for Manager as to the absence of Liens of record with the STB and as to the completion of all necessary STB filings and deposits with the Registrar General of Canada described in Section 16.1 hereof with respect to such Replacement Unit and (J) furnish such other documents and evidence as any Participant, Lessor or the Indenture Trustee, or their respective counsel, may reasonably request in order to establish the consummation of the transactions contemplated by this Section 11.4. For all purposes hereof, (i) Lessee shall be deemed to have complied with the requirements of this Section 11.4(b) as of the date of its delivery to Lessor, the Participants and the Indenture Trustee of the documents and instruments referred to in the foregoing clauses (A) through (J), signed by Lessee or its counsel, as applicable, in due form for any required filing or recording, and such filing or recording shall have been made if such documents and instruments have been executed and delivered by Lessor or Indenture Trustee or both of them in a timely manner, (ii) title to the Replacement Unit shall be deemed to have been transferred to Lessor as of such date and (iii) upon such passage of title thereto to Lessor the Replacement Unit shall be deemed part of the property leased hereunder and the Replacement Unit shall be deemed a "Unit" as defined herein. Upon such passage of title, Lessor will transfer to Lessee, "as is" and "where is" and without recourse or warranty (except as to Lessor's Liens), all Lessor's right, title and interest in and to the replaced Unit, and upon such transfer, Lessor will request in 27 Lease Agreement (TRLI 2001-1C) writing that the Indenture Trustee execute and deliver to Lessee an appropriate instrument releasing such replaced Unit from the lien of the Indenture. Lessee shall pay all reasonable out-of-pocket costs and expenses (including reasonable legal fees and expenses) incurred by Lessor, any Participant or the Indenture Trustee in connection with any replacement pursuant to this Section 11.4. Lessee further agrees that, upon receipt of fully signed counterparts of the Lease Supplement and Indenture Supplement referred to in clauses (B) and, if applicable, (C) of the first sentence of this Section 11.4(b), it will, at its sole cost and expense, cause such documents to be filed or recorded in the manner contemplated by Section 16.1. Section 11.5 Eminent Domain. In the event that during the Lease Term the use of any Unit is requisitioned or taken by any governmental authority under the power of eminent domain or otherwise for a period which does not constitute an Event of Loss, all of Lessee's obligations under the Operative Agreements, including without limitation, Lessee's obligation to pay all installments of Basic Rent, shall continue for the duration of such requisitioning or taking. Any amount referred to in Section 11.4(a) or in Section 12 which is payable to Lessor shall be deposited in the related Non-Shared Payments Account established under the Collateral Agency Agreement. SECTION 12. Insurance. Section 12.1 Insurance. Lessee will at all times after delivery and acceptance of each Unit, at its own expense, keep or cause the Insurance Manager under the Insurance Agreement to keep such Unit insured with insurers of recognized responsibility with a rating of at least A- by A.M. Best Company (or a comparable rating by a nationally or internationally recognized rating group of comparable stature) or by other insurers approved in writing by Lessor, which approval shall not be unreasonably withheld, in amounts and against risks and with deductibles and terms and conditions not less than the insurance, if any, maintained by the Manager with respect to similar equipment which it owns or leases, but in no event shall such coverage be for amounts or against risks less than the prudent industry standard for companies engaged in leasing of railcars. Without limiting the foregoing, Lessee will in any event: (a) keep each Unit insured against physical damage (which may be accomplished pursuant to a contingent physical damage policy) in an amount not less than the Stipulated Loss Amount attributable thereto as shown on Schedule 4 to 28 Lease Agreement (TRLI 2001-1C) the Participation Agreement, subject to an aggregate limit for all Units of not less than $1,500,000 per occurrence, provided that such coverage may provide for deductible amounts of not more than $50,000 per occurrence; and (b) maintain public liability insurance naming Owner Participant, Lessor, the Trust Company, the Indenture Trustee, the Collateral Agent and Loan Participant as additional insureds (but only with respect to liability arising out of or related to the Operative Agreements and the Units) against bodily injury, death or property damage arising out of the use or operation of the Units with general and excess liability limits of not less than $100,000,000 per occurrence or in the aggregate, provided that such coverage may provide for deductible amounts not exceeding the lesser of (w) $10,000,000 or (x) the difference (not less than zero (0)) between (i) the level of the then current deductible maintained by Manager for the Manager's Fleet (or if Manager, its successors and assigns is no longer engaged in the railcar leasing business, the average level of the then current deductible amounts maintained by the three largest companies engaged in such business in the United States) and (ii) such amount of additional coverage as may be obtained by Lessee in reduction of the then current deductible maintained by Manager for an additional incremental annual premium payable by Lessee in the aggregate in respect of the entire Partnership Fleet of up to $100,000 as adjusted by the Inflation Factor; provided, further, that such policies which are carried on a "claims made" basis shall provide for a retroactive date not more recent than either (y) the Closing Date, or (z) a date seven years prior to the effective date of the policy. (c) It is understood and agreed that the insurance required under this Section 12.1 may be part of a company-wide insurance program of the Insurance Manager or its Affiliates, including risk-retention and self-insurance. Any policy of insurance maintained in accordance with this Section 12.1 and any policy purchased in substitution or replacement for any of such policies shall provide that if any such insurance lapses or is cancelled or terminated for any reason whatever (other than upon normal policy expiration), Lessor, the Indenture Trustee, the Collateral Agent, Loan Participant and Owner Participant shall receive 30 days' prior written notice of such lapse, cancellation or termination. (d) If Lessee or the Insurance Manager shall maintain any liability coverages for the benefit of Lessee in excess of the coverages required hereunder (whether or not such excess coverage complies with the requirements under this Section 12), Lessee will cause all such coverages to name Owner Participant, Lessor, 29 Lease Agreement (TRLI 2001-1C) the Trust Company, the Indenture Trustee and Loan Participant as additional insureds (but only with respect to liability arising out of or related to the Operative Agreements or the Units), provided, however, that, the requirements of this Section 12 shall not otherwise apply to such coverages. Section 12.2 Physical Damage Insurance. (a) The insurance maintained pursuant to Section 12.1(a) shall provide that (i) so long as the Equipment Notes remain outstanding, the proceeds up to the Stipulated Loss Amount for any loss or damage to any Unit shall be paid to the Indenture Trustee under a standard loss payable clause, and thereafter to Lessor and (ii) so long as no Lease Event of Default shall have occurred and be continuing, Lessee will be entitled, at its own expense, to make all proofs of loss and/or take all other steps necessary to collect the proceeds of such insurance. (b) In lieu of maintaining the physical damage insurance required by Section 12.1(a), Lessee may self-insure with respect to the Units for such amounts and against such risks as shall be consented to by Lessor and the Indenture Trustee, which consent shall be based upon reasonable practices then in effect in the railcar leasing and insurance industries and upon the financial condition of Lessee taking into account Lessee's capital structure and that Lessee is a special purpose corporation. (c) The entire proceeds of any property insurance or third party payments for damages to any Unit received by Lessor or the Indenture Trustee shall be held by such party until, with respect to such Unit, the repairs referred to in clause (i) below are made as specified therein or payment of the Stipulated Loss Amount is made, and such entire proceeds will be paid, so long as no Lease Event of Default shall have occurred and be continuing, either: (i) to Lessee promptly following receipt by the Indenture Trustee or Lessor, as the case may be, of a written application signed by Lessee for payment to Lessee for repairing or restoring the Units which have been damaged so long as (1) Lessee shall have complied with the applicable provisions of this Lease, and (2) Lessee shall have certified that any damage to such Units shall have been fully repaired or restored; or (ii) if this Lease is terminated with respect to such Unit because of an Event of Loss and Lessee has paid the Stipulated Loss Amount 30 Lease Agreement (TRLI 2001-1C) and all other amounts due as a result thereof, such proceeds shall be promptly paid over to, or retained by, Lessee. Section 12.3 Public Liability Insurance. (a) The public liability insurance referred to in paragraph 12.1(b) shall (i) provide that in as much as such policies cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, deductibles or retentions and liability for premiums, commissions, assessments or calls (which shall be solely a liability of Lessee), shall operate in the same manner as if there were a separate policy or policies covering each insured, (ii) waive any rights of subrogation of the insurers against Owner Participant, Lessor, the Trust Company, the Indenture Trustee, and Loan Participant (iii) provide that neither Owner Participant, Lessor, the Trust Company, the Indenture Trustee nor Loan Participant shall have any responsibility for any insurance premiums, whether for coverage before or after cancellation or termination of any such policies as to Lessee and (iv) be primary without contribution from any similar insurance maintained by Owner Participant, Lessor, the Trust Company, the Indenture Trustee or Loan Participant. (b) Lessee shall use its reasonable efforts to obtain public liability insurance policies which stipulate that coverage thereunder will not be invalidated (as to Owner Participant, Loan Participant, Lessor, as Lessor of the Units and in its individual capacity, and the Indenture Trustee) by any act or neglect of Lessee, or any breach or violation by Lessee of any warranties, declarations or conditions contained in such policies, but shall be under no obligation to obtain such policies containing such stipulations if they are not available to Lessee at commercially reasonable rates in the markets in which Lessee has then placed its insurance program. (c) In the event any public liability insurance policy or coverage thereunder which are required to be maintained under Section 12.1(b) shall not be available to Lessee in the commercial insurance market on commercially reasonable terms, Lessor shall not unreasonably withhold its agreement to waive such requirement. Lessee shall make written request for any such waiver in writing, accompanied by written reports prepared, at Lessee's option, either by (i) one independent insurance advisor chosen by Lessee and Lessor or (ii) three independent insurance advisors, one chosen by Lessor, one chosen by Lessee and one chosen by the other two advisors (one of which may be the regular insurance broker or brokers of Lessee). The fees and expenses of all such advisors shall be paid by Lessee. The written reports required hereunder shall (x) state that such insurance (or the required 31 Lease Agreement (TRLI 2001-1C) coverage thereunder) is not reasonably available to Lessee at commercially reasonable premiums in the commercial insurance markets within which Lessee or the Manager normally purchases its insurance from insurers, acceptable to Lessee, with a Best's rating of A- or better for railcars of similar type and capacity and (y) explain in detail the basis for such conclusions. Upon the granting of any such waiver, Lessee shall within 15 days thereafter certify to Lessor in writing the cost (on the basis of the Manager's Fleet) of liability insurance premiums for the coverage required by Section 12.1 (b) for the immediately preceding fiscal year; and in the event that any such certificate is not received by Lessor within such 15-day period, any such waiver shall be deemed revoked. At any time after the granting of such waiver, but not more often than once a year, Lessor may make a written request for a supplemental report (in form reasonably acceptable to Lessor) from such insurance advisor(s) updating the prior report and reaffirming the conclusions set forth therein. Lessee shall provide any such required supplemental report within 60 days after receipt of the written request therefor. Any such waiver shall be effective for only as long as such insurance is not reasonably available to Lessee in the commercial markets in which Lessee normally purchases its insurance at commercially reasonable rates, it being understood that the failure of Lessee to furnish timely any such supplemental report shall be conclusive evidence that such condition no longer exists. If such supplemental report shows that such coverage is available, Lessee shall within 90 days of such report obtain such insurance coverage. During any period with respect to which such waiver has been granted and remains in effect under this Section 12.3(c), Lessee shall obtain public liability insurance as set forth in Section 12.1(b) from such carriers, in such amounts and with coverage limits and deductibles as may be reasonable in its judgment under the circumstances, but in any event (i) no less than prudent industry standards and (ii) in an amount that may be purchased for a premium equal to 200% of Lessee's cost (on a fleet-wide basis) of public liability insurance premiums for the coverage on a fleet-wide basis required by Section 12.1(b) for the final year immediately preceding the fiscal year in which such waiver first was granted. Section 12.4 Certificate of Insurance. (a) Lessee shall, prior to the Closing Date and when the renewal certificate referred to below is sent (but in any event not less than annually), furnish (or, in the case of (iii) below, use reasonable efforts to furnish) Lessor, the Indenture Trustee, Owner Participant and the Loan Participant with a certificate signed by the insurer or an independent insurance broker (i) showing the insurance then maintained by Lessee pursuant to Section 12.1, (ii) stating that, except as noted in such certificate, such insurance complies with the 32 Lease Agreement (TRLI 2001-1C) requirements contained in Exhibit B-1 (as to public liability insurance) and/or B-2 (as to physical/damage insurance) to the Participation Agreement, (iii) stating that, except as noted in such certificate, such insurance complies with the requirements contained in this Section 12 and (iv) to the extent that any provision that Lessee is required to use reasonable efforts to obtain is not contained in such insurance, such certificate shall so state and shall confirm that, in such broker's opinion, such provision is not reasonably obtainable. Lessor shall be entitled at its expense to review copies of all applicable insurance policies. With respect to any renewal policy or policies, certificates or binders evidencing such renewal shall be furnished as soon as practicable, but in no event later than 30 days after the earlier of the date such renewal is effected or the expiration date of the original policy or policies. Simultaneously, with the furnishing of such certificate, Lessee will provide appropriate evidence, reasonably satisfactory to Lessor and the Indenture Trustee, that all premiums due on such insurance have been paid. (b) Lessee agrees to use reasonable efforts to cause each of its insurers to agree that, with respect to any policy of insurance maintained pursuant to Section 12.1, such insurer will provide not less than 30 days' prior written notice to Lessor, the Indenture Trustee, Loan Participant and Owner Participant of any non-renewal or material adverse change with respect to such policy. For purposes of this Section 12.4(b), "material adverse change" shall mean a material adverse change in policy limits, exclusions or deductibles or any material adverse change in policy coverage inconsistent with the requirements of Section 12.1(b). If any of Lessee's insurers delivers such notice of non-renewal, Owner Participant may attempt to obtain and provide satisfactory insurance and Lessee shall reimburse Owner Participant for reasonable and prudent expenses incurred (i) during the period 10 days prior to expiration of existing insurance policies, for all Owner Participant's expenses excluding broker fees and commissions and insurance premiums, and (ii) on and after the expiration of existing insurance policies, for all Owner Participant's expenses including broker fees and commissions and insurance premiums. Section 12.5 Additional Insurance. In the event that Lessee shall fail to maintain insurance as herein provided in Section 12.1 or, if applicable, Section 12.3, Lessor may at its option, upon prior written notice to Lessee, provide such insurance and, in such event, Lessee shall, upon demand from time to time reimburse Lessor for the cost thereof together with interest from the date of payment thereof at the Late Rate, on the amount of the cost to Lessor of such insurance which Lessee shall have failed to maintain. If after Lessor has provided such insurance, Lessee then obtains 33 Lease Agreement (TRLI 2001-1C) the coverage provided for in Section 12.1 which was replaced by the insurance provided by Lessor, and Lessee provides Lessor with evidence of such coverage reasonably satisfactory to Lessor, Lessor shall cancel the insurance it has provided pursuant to the first sentence of this Section 12.5. In such event, Lessee shall reimburse Lessor for all costs to Lessor of cancellation, including without limitation any short rate penalty, together with interest from the date of Lessor's payment thereof at the Late Rate. In addition, at any time Lessor (either directly or in the name of Owner Participant) may at its own expense carry insurance with respect to its interest in the Units, provided that such insurance does not interfere with Lessee's ability to insure the Units as required by this Section 12 or adversely affect Lessee's insurance or the cost thereof, it being understood that all salvage rights to each Unit shall remain with Lessee's insurers at all times. Any insurance payments received from policies maintained by Lessor pursuant to the previous sentence shall be retained by Lessor without reducing or otherwise affecting Lessee's obligations hereunder, other than with respect to Unit(s) with respect to which such payments have been made. Section 12.6 Post-Lease Term Insurance. Lessee agrees that upon the expiration or earlier termination of the Lease Term, Lessee will, with respect to the public liability insurance otherwise required to be carried under this Section 12, either: (A) purchase a seven year extended reporting period for Owner Participant, Lessor and Owner Trustee, or (B) obtain the written agreement of the Manager in form and substance satisfactory to Owner Participant to carry or cause to be carried for such seven year period public liability insurance which satisfies the requirements of this Section 12 and which names Owner Participant, Lessor, the Collateral Agent and Owner Trustee as additional insureds. SECTION 13. Reports; Inspection. Section 13.1 Duty of Lessee to Furnish. On or before April 30, 2002, and on or before each April 30 thereafter, Lessee will furnish (or cause the Manager under the Management Agreement to furnish) to Lessor, Owner Participant, Loan Participant, the Indenture Trustee and the Rating Agency an accurate statement, as of the preceding December 31, (a) showing the amount, description and reporting marks of the Units then leased hereunder, the amount, description and reporting marks of all Units that may have suffered an Event of Loss during the 12 months ending on such December 31 (or since the Closing Date, in the case of the first such statement), and such other information regarding the condition or repair of the Units as Lessor may 34 Lease Agreement (TRLI 2001-1C) reasonably request, (b) stating that, in the case of all Units repainted during the period covered by such statement, the markings required by Section 4.2 hereof shall have been preserved or replaced, (c) showing the percentage of use in the United States and in each of Canada and Mexico based on the total mileage traveled by all railcars in the Total Managed Fleet (or by the Units, if and to the extent generally made available to the Manager in the ordinary course with respect to railcars in general interchange service similar to the Units) for the prior calendar year as reported to the Manager by railroads (provided, that Lessee shall cooperate with Owner Participant and Lessor and shall provide such additional information on such matters as Owner Participant or Lessor may reasonably request to enable Owner Participant and Lessor to pursue or fulfill their respective tax audit and tax litigation rights and obligations) and (d) stating that Lessee is not aware of any condition of any Unit which would cause such Unit not to comply in any material respect with the rules and regulations of the FRA and the interchange rules of the Field Manual of the AAR as they apply to the maintenance and operation of the Units in interchange and any other requirements hereunder. Section 13.2 Lessor's Inspection Rights. Lessor, Owner Participant and the Indenture Trustee each shall have the right, but not the obligation, at their respective sole cost and expense, unless a Lease Event of Default shall have occurred and be continuing, by their respective authorized representatives, to inspect the Units, all subleases thereof and Lessee's records with respect thereto. All inspections shall be conducted during Lessee's normal business hours, on the Manager's premises or in areas that are not the premises of a Sublessee to which Lessee has reasonable access, and upon reasonable prior notice to Lessee. Lessee shall not be liable for any injury to, or the death of, any Person exercising, either on behalf of Lessor, Owner Participant, the Indenture Trustee or any prospective user, the rights of inspection granted under this Section 13.2 unless caused by Lessee's gross negligence or wilful misconduct. Except following the occurrence and continuance of a Lease Event of Default, no inspection pursuant to this Section 13.2 shall interfere with the use, operation or maintenance of the Units or the ordinary course of Lessee's or any Sublessee's business, and except as provided herein, Lessee shall not be required to undertake or incur any additional liabilities in connection therewith. SECTION 14. Lease Events of Default. The following events shall constitute Lease Events of Default hereunder (whether any such event shall be voluntary or involuntary or come about 35 Lease Agreement (TRLI 2001-1C) or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and each such Lease Event of Default shall be deemed to exist and continue so long as, but only as long as, it shall not have been remedied: (a) Lessee shall fail to (i) make or (ii) be deemed by virtue of the last sentence of Section 3.5 hereof to have made any payment of Basic Rent, Early Purchase Price, any other purchase price to be paid by Lessee for any Units pursuant to this Lease or the Participation Agreement, Stipulated Loss Amount or Termination Amount within 10 Business Days after the same shall have become due; provided, however, that so long as any Equipment Notes remain outstanding, failure to make (or be deemed to have made) any portion of Basic Rent on any Rent Payment Date shall not be a Lease Event of Default so long as the amounts applied under Section 3.4, clause (4), of the Collateral Agency Agreement are sufficient to make the distributions required under such clause (4) with respect to the obligations owed under this Lease; or (b) Lessee shall fail to (i) make or (ii) be deemed by virtue of payments made by the Collateral Agent to have made any payment of Supplemental Rent; including indemnity or tax indemnity payments, but not including Stipulated Loss Amount, Termination Amount, Early Purchase Price, or any other purchase price to be paid by Lessee for any Units pursuant to this Lease or the Participation Agreement after the same shall have become due and such failure shall continue unremedied for 10 Business Days after receipt by Lessee of written notice of such failure from Lessor, Owner Participant or the Indenture Trustee; provided, however, that so long as any Equipment Notes remain outstanding, failure to make (or be deemed to have made) payment of any of the amounts referred to in or to be applied pursuant to clauses (5) through (14) of Section 3.4 of the Collateral Agency Agreement shall not be a Lease Event of Default; or (c) Lessee shall fail to maintain in effect the insurance required by Section 12 or Section 6.4 of the Collateral Agency Agreement and such failure shall not have been waived as provided for therein; or (d) Lessee shall use or permit the use of the Units or the Pledged Units or any portion thereof in a way which is not permitted by this Lease (with respect to the Units) or the Collateral Agency Agreement (with respect to the Pledged Units), provided that such unauthorized use shall not constitute a Lease Event of 36 Lease Agreement (TRLI2001-1C) Default for a period of 45 days after the occurrence thereof so long as (i) such unauthorized use is not the result of any willful action of Lessee and (ii) such unauthorized use is capable of being cured and Lessee diligently pursues such cure throughout such 45-day period; or Lessee shall make or permit any unauthorized assignment or transfer of this Lease in violation of Section 18.2; or (e) Lessee shall fail to observe or perform in any material respect any of the covenants or agreements to be observed or performed by Lessee in Section 6.2 or 6.3 of the Collateral Agency Agreement; or (f) Any representation or warranty made by Lessee in any Lessee Agreement or any representation or warranty made by TILC or TRMI in any Operative Agreement to which any such Person is a party is untrue or incorrect in any material respect as of the date of making thereof and such untruth or incorrectness shall continue to be material and unremedied; provided that, if such untruth or incorrectness is capable of being remedied, no such untruth or incorrectness shall constitute a Lease Event of Default hereunder for a period of 30 days after receipt of notice from Lessor, Owner Participant or the Indenture Trustee so long as Lessee, TILC or TRMI, as the case may be, is diligently proceeding to remedy such untruth or incorrectness and shall in fact remedy such untruth or incorrectness within such period; provided that such untrue or incorrect representation or warranty shall be deemed to be remediable or remedied only after all adverse consequences thereof, if any, can be and have been remedied as applicable; or (g) Lessee or the General Partner shall (i) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to any such relief or to the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, or (iii) admit in writing its inability to pay its debts generally as they come due, or (iv) make a general assignment for the benefit of creditors, or (v) take any corporate action to authorize any of the foregoing; or (h) An involuntary case or other proceeding shall be commenced against Lessee or the General Partner seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar 37 Lease Agreement (TRLI2001-1C) law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (i) Lessee shall fail to observe or perform any other of the covenants or agreements to be observed or performed by Lessee under any Lessee Agreement or any certificate and such failure shall continue unremedied for 30 days after notice from Lessor, Owner Participant or the Indenture Trustee to Lessee, specifying the failure and demanding the same to be remedied; provided that, if such failure is capable of being remedied, and the remedy requires an action other than, or in addition to, the payment of money, no such failure (other than one relating to the payment of such money) shall constitute a Lease Event of Default hereunder for a period of 90 days after receipt of such notice so long as Lessee is diligently proceeding to remedy such failure and shall in fact remedy such failure within such period; or (j) A Manager Default shall have occurred and be continuing under the Management Agreement, and Lessee shall have failed to exercise its rights under the Management Agreement in respect of such Manager Default for a period of 30 days after receipt by Lessee of written notice from Lessor, Owner Participant or the Indenture Trustee demanding that such action be taken; or (k) An Insurance Manager Default shall have occurred and be continuing under the Insurance Agreement, and Lessee shall have failed to exercise its rights under the Insurance Agreement in respect of such Insurance Manager Default for a period of 30 days after receipt by Lessee of written notice from Lessor, Owner Participant or the Indenture Trustee demanding that such action be taken; (l) The Administrator shall have defaulted in any material respect in the performance of any of its obligations under the Administrative Services Agreement, and Lessee shall have failed to exercise its rights under the Administrative Services Agreement in respect of such default for a period of 30 days after receipt by Lessee of written notice from Lessor, Owner Participant or the Indenture Trustee , demanding that such action be taken; or (m) A "Lease Event of Default" (as defined in the applicable Other Lease) shall have occurred and be continuing with respect to any Other Lease. 38 Lease Agreement (TRLI2001-1C) Notwithstanding anything to the contrary contained in this Lease, any failure of Lessee to perform or observe any covenant or agreement herein shall not constitute a Lease Event of Default if such failure is caused solely by reason of an event which constitutes an "Event of Loss" so long as Lessee is continuing to comply with the applicable terms of Section 11. SECTION 15. Remedies. Section 15.1 Remedies. Upon the occurrence of any Lease Event of Default and at any time thereafter so long as the same shall be continuing, Lessor may, at its option, declare this Lease to be in default by a written notice to Lessee (except that this Lease shall, without any action on the part of Lessor, be automatically deemed to have been declared in default upon the occurrence of a Lease Event of Default described in Section 14(g) or (h)); and at any time thereafter, unless Lessee shall have remedied all outstanding Lease Events of Default prior to the commencement of the exercise by Lessor of any of its remedies hereunder, Lessor may do one or more of the following as lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, applicable law then in effect: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by Lessee of the applicable covenants of this Lease or to recover damages for the breach thereof; (b) by notice in writing to Lessee, Lessor may demand that Lessee, and Lessee shall, upon written demand of Lessor and at Lessee's expense (but subject to the rights of any Sublessee which has been granted the right of quiet enjoyment of the Unit by Lessee pursuant to a Sublease, so long as no event of default by the Sublessee shall have occurred and be continuing under the relevant Sublease), (i) forthwith return all or any part of the Units so demanded to Lessor or its order in the manner and condition required by, and otherwise in accordance with all of the provisions of, Section 15.5; or Lessor with or without notice or judicial process may by its agents enter upon the premises of Lessee or other premises where any of the Units may be located and take possession of and remove all or any of the Units , and Lessor may use and employ in connection with such removal any services, aids, equipment, trackage and other facilities of Lessee as is reasonably required to remove such Units and thenceforth hold, possess and enjoy the same free from any right of 39 Lease Agreement (TRLI2001-1C) Lessee, or its successor or assigns, to use such Units for any purpose whatever and (ii) with respect to any Unit which is then subject to a Sublease, assign all of Lessee's right, title and interest in such Sublease to Lessor; (c) sell any Unit and/or assign any Sublease at public or private sale in such manner as Lessor may determine, free and clear of any rights of Lessee (but subject to the rights of any Sublessee which has been granted the right of quiet enjoyment of the Unit by Lessee pursuant to a Sublease, so long as no event of default by the Sublessee shall have occurred and be continuing under the relevant Sublease) and without any duty to account to Lessee or any Sublessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if Lessor elects to exercise its rights under said paragraph), in which event Lessee's obligation to pay Basic Rent with respect to such Unit hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Rent is to be included in computations under paragraph (e) or (f) below if Lessor elects to exercise its rights under either of said paragraphs); (d) hold, keep idle or lease to others any Unit not then subject to a Sublease as Lessor in its sole discretion may determine, free and clear of any rights of Lessee and without any duty to account to Lessee or any Sublessee with respect to such action or inaction or for any proceeds with respect thereto, except that Lessee's obligation to pay Basic Rent with respect to such Unit due for any periods subsequent to the date upon which Lessee shall have been deprived of possession and use of such Unit pursuant to this Section 15 shall be reduced by the net proceeds, if any, received by Lessor from leasing such Unit to any Person other than Lessee; (e) whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (a), (b), (c) or (d) above with respect to any Unit, Lessor, by written notice to Lessee specifying a payment date (which date shall be a Determination Date for the purposes of computing Stipulated Loss Amount) which shall be not less than 10 days after the date of such notice, may demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent for such Unit due after the payment date specified in such notice), all Rent, other than Stipulated Loss Amount and Termination Amount or amounts calculated by reference thereto, due and payable, or accrued, in respect of such Unit as of the payment date specified in such notice (exclusive of any Basic Rent due on such date) plus whichever of the following amounts Lessor, in its 40 Lease Agreement (TRLI2001-1C) sole discretion, shall specify in such notice: (i) an amount with respect to each such Unit which represents the excess of the present value, as of such payment date, of all rentals for such Unit which would otherwise have accrued hereunder from such payment date for the remainder of the Basic Term or any Renewal Term then in effect over the then present value of the then Fair Market Rental Value of such Unit (taking into account its actual condition) for such period discounted from the end of such Term to such payment date, such present value to be computed in each case using a per annum discount rate equal to the Debt Rate, compounded monthly from the respective dates upon which rentals would have been payable hereunder had this Lease not been terminated; or (ii) an amount equal to the excess, if any, of the Stipulated Loss Amount for such Unit computed as of the payment date specified in such notice over the Fair Market Sales Value of such Unit (taking into account its actual condition) as of the payment date specified in such notice; or (iii) if Lessor shall not have sold such Unit pursuant to the exercise of its rights under paragraph (c) above with respect to such Unit, an amount equal to the higher of Stipulated Loss Amount for such Unit computed as of the payment date specified in such notice or the Fair Market Sales Value of such Unit (assuming it is in the condition required by this Lease) as of the payment date specified in such notice; and upon payment by Lessee pursuant to said clause (iii) of such Stipulated Loss Amount or Fair Market Sales Value, as the case may be, any Late Payment Premium and of all other amounts (other than Basic Rent due on such date) payable by Lessee under this Lease and under the other Operative Agreements in respect of such Unit, Lessor shall transfer "as is" and "where is" and without recourse or warranty all right, title and interest of Lessor in and to such Unit to Lessee or as it may direct, and Lessor shall execute and deliver such documents evidencing such transfer as Lessee shall reasonably request; (f) if Lessor shall have sold any Unit pursuant to paragraph (c) above, Lessor, in lieu of exercising its rights under paragraph (e) above with respect to such Unit may, if it shall so elect, demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent for such Unit due subsequent to the Rent Payment Date next preceding such sale), any accrued and unpaid Rent for such Unit as of the date of such sale (Basic Rent for this purpose accruing at a per diem rate equal to the monthly amount due on the next following Rent Payment Date divided by 30) (exclusive of any Basic Rent due on such date), plus the amount, if any, by which the Stipulated Loss Amount of such Unit computed as of the Rent Payment Date next preceding the date of such sale or, if such sale occurs on a Rent Payment Date, then computed as of such Rent Payment Date, plus the amount of any Late Payment 41 Lease Agreement (TRLI2001-1C) Premium, exceeds the net proceeds of such sale (taking into account for this purpose all costs and expenses, including legal fees and expenses, incurred by Lessor in connection with such sale or otherwise exercising remedies hereunder) plus interest on such excess from the date of such sale to the date of payment at the Late Rate; and (g) Lessor may terminate the leasing of any or all Units under this Lease and/or any Sublease (except with respect to a Sublease which grants the Sublessee thereunder the right of quiet enjoyment with respect to the Unit, so long as no event of default by the Sublessee shall have occurred and be continuing under the relevant Sublease) or may exercise any other right or remedy that may be available to it under applicable law. In addition, Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due hereunder before or during the exercise of any of the foregoing remedies (including, without limitation, Late Payment Interest, but exclusive of any Basic Rent due on such date), and for legal fees and other costs and expenses incurred by reason of the occurrence of any Lease Event of Default or the exercise of Lessor's remedies with respect thereto, including without limitation the repayment in full of any costs and expenses necessary to be expended in repairing any Unit in order to cause it to be in compliance with all maintenance and regulatory standards imposed by this Lease. In the event Lessor terminates this Lease pursuant to any provision of this Section 15.1, and the Stipulated Loss Amount is not payable, the amounts otherwise payable by Lessee hereunder shall be increased by any positive amount (as a payment for accrued but unpaid Basic Rent) of the Basic Rent Adjustment set forth on Schedule 4-A of the Participation Agreement opposite the relevant Rent Payment Date or decreased by the absolute value of any negative amount (as a rebate of prepaid Basic Rent) of the Basic Rent Adjustment set forth on Schedule 4-A of the Participation Agreement opposite the relevant Rent Payment Date; provided, however, that to the extent that such payment or refund does not precisely reflect the difference between Basic Rent allocated and Basic Rent paid as of the date Basic Rent ceases to accrue, the amounts due hereunder shall be further adjusted to ensure that the aggregate amount of Basic Rent paid equals the aggregate amount of Basic Rent allocated as of the date Basic Rent ceases to accrue. Section 15.2 Cumulative Remedies. The remedies in this Lease provided in favor of Lessor shall not be deemed exclusive, but shall be cumulative 42 Lease Agreement (TRLI2001-1C) and shall be in addition to all other remedies in its favor existing at law or in equity. Lessee hereby waives any mandatory requirements of law, now or hereafter in effect, which might limit or modify any of the remedies herein provided, to the extent that such waiver is permitted by law. Except to the extent provided in the operative agreements, Lessee hereby waives any and all existing or future claims of any right to assert any offset or counterclaim against the rent payments due hereunder, and agrees to make the rent payments regardless of any offset or counterclaim or claim which may be asserted by lessee on its behalf in connection with the lease of the Units. Lessee further agrees that Lessee's obligations to pay all rent (including, without limitation, all basic rent and supplemental rent) and its obligations to maintain the Units pursuant to Section 8 hereof and to maintain the insurance pursuant to Section 12 hereof shall constitute monetary obligations of lessee for all purposes of section 365 of the bankruptcy code. To the extent permitted by applicable law, Lessee hereby waives any rights now or hereafter conferred by statute or otherwise that may require lessor to sell, lease or otherwise use the units in mitigation of Lessor's damages as set forth in Section 15.1 or that may otherwise limit or modify any of Lessor' rights and remedies provided in this Section 15. Section 15.3 No waiver. No delay or omission to exercise any right, power or remedy accruing to Lessor upon any breach or default by Lessee under this Lease shall impair any such right, power or remedy of Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. Section 15.4 Notice of Lease Default. Lessee agrees to furnish to Lessor, owner participant and the indenture trustee, promptly upon any officer acquiring actual knowledge of any condition which constituted or constitutes a Lease Default under this Lease, written notice specifying such condition and the nature and status thereof. Section 15.5 Lessee's Duty to Return Equipment Upon Default. If Lessor or any assignee of Lessor shall terminate this Lease pursuant to this Section 15 and shall have provided to Lessee the written demand specified in Section 15.1(b), Lessee shall forthwith deliver possession of the units not then subject to a Sublease to Lessor (except where Lessor has received all amounts payable by Lessee pursuant to any notice provided by Lessor under Section 15.1(e)(iii)). For the purpose of delivering possession of any unit not then subject to a Sublease to Lessor 43 Lease Agreement (TRLI2001-1C) as above required, Lessee shall at its own cost, expense and risk (except as hereinafter stated): (a) forthwith place such Units upon such storage tracks of Lessee or any of its Affiliates or, at the expense of Lessee, on any other storage tracks, as Lessor may designate or, in the absence of such designation, as Lessee may select; (b) permit Lessor to store such Units on such tracks without charge for insurance, rent or storage until such Units have been sold, leased or otherwise disposed of by Lessor and during such period of storage Lessee shall continue to maintain all insurance required by Section 12.1 hereof; and (c) transport the Units to any place on any lines of railroad or to any connection carrier for shipment, all as Lessor may direct in writing. All such Units not then subject to a Sublease returned shall be in the condition required by Section 6.2 hereof. All amounts earned in respect of the Units after the date of termination of this Lease pursuant to this Section 15, but not exceeding amounts actually received therefor, shall be paid to Lessor or, so long as the Indenture shall not have been discharged pursuant to its terms, the Indenture Trustee, and, if received by Lessee, shall be promptly turned over to Lessor or the Indenture Trustee as aforesaid. In the event any Unit not then subject to a Sublease is not assembled, delivered and stored as hereinabove provided within 15 days after the termination of the leasing of such Unit pursuant to Section 15, Lessee shall, in addition, pay to Lessor or the Indenture Trustee as aforesaid as liquidated damages and not as a penalty, for each day thereafter an amount equal to the amount, if any, by which the daily equivalent of the average Basic Rent for the term in effect immediately prior to the expiration of the Lease for such Unit exceeds the amount, if any, received by Lessor or the Indenture Trustee as aforesaid (either directly or from Lessee) for such day for such Unit pursuant to the preceding sentence. Section 15.6 Specific Performance; Lessor Appointed Lessee's Agent. The assembling, delivery, storage and transporting of the Units not then subject to a Sublease as provided in Section 15.5 are of the essence of this Lease, and upon application to any court of equity having jurisdiction in the premises, Lessor shall be entitled to a decree against Lessee requiring specific performance of the covenants of Lessee so to assemble, deliver, store and transport the Units not then subject to a 44 Lease Agreement (TRLI2001-1C) Sublease. Without in any way limiting the obligation of Lessee under the provisions of Section 15.5, Lessee hereby irrevocably appoints Lessor as the agent and attorney of Lessee, with full power and authority, at any time while Lessee is obligated to deliver possession of any Units not then subject to a Sublease to Lessor pursuant to this Section 15, to demand and take possession of such Unit in the name and on behalf of Lessee from whosoever shall be at the time in possession of such Unit. SECTION 16. Filings; Further Assurances. Section 16.1 Filings. This Lease or a counterpart or copy hereof or evidence hereof may be filed or recorded in any public office in the United States as may be necessary or appropriate to protect the interest of Lessor, Owner Participant or the Indenture Trustee herein or in the Units. On or prior to the Closing Date Lessee will (i) cause each of (A) a memorandum of this Lease and the Lease Supplements dated the Closing Date, (B) a memorandum of the Indenture and the Indenture Supplements dated the Closing Date, (C) a memorandum of the Collateral Agency Agreement, (D) the TILC Bill of Sale, (E) the Bill of Sale, (F) the TILC Assignment and (G) the Assignment (x) to be duly filed and recorded with the STB in accordance with 49 U.S.C. Section 11301 and (y) to be deposited with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act (and all necessary actions shall have been taken for publication of such deposit in the Canada Gazette in accordance with said Section 105), (ii) cause precautionary UCC-1 financing statements to be filed in appropriate jurisdictions as reasonably requested by Lessor naming Lessor as "lessor" and Lessee as "lessee" of the Equipment and (iii) will furnish Lessor, the Indenture Trustee and Owner Participant proof thereof. 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 jurisdiction in which the Partnership's chief executive office is located and in the Partnership's jurisdiction of formation covering all Subleases generally. Section 16.2 Further Assurances. Lessee will duly execute and deliver to Lessor such further documents and assurances and take such further action as Lessor may from time to time reasonably request or as may be required by applicable law or regulation in order to effectively carry out the intent and purpose of this Lease and to establish and protect the rights and remedies created or intended to be created in favor of Lessor, the Participants and the Indenture Trustee hereunder, including, 45 Lease Agreement (TRLI 2001-1C) without limitation, the execution and delivery of supplements or amendments hereto, in recordable form, subjecting to this Lease any Replacement Unit and the recording or filing of counterparts hereof or thereof or Uniform Commercial Code financing statements in accordance with the laws of such jurisdiction as Lessor may from time to time deem advisable; provided, that 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 jurisdiction in which the Partnership's chief executive office is located and in the Partnership's jurisdiction of formation covering all Subleases generally. Section 16.3 Other Filings. If, at any time after the Closing Date and during the Lease Term, Mexico, or one or more states in Mexico, establishes a state or other system for filing and perfecting the ownership and/or security interests of entities such as Lessor and/or the Indenture Trustee, at the time that Lessee or the Manager takes such action with respect to other equipment similar to the Units (whether owned or leased by Lessee) and also upon the request of Lessor, any Participant, or the Indenture Trustee, Lessee shall cause any and all of the Operative Agreements to be recorded with or under such system and shall cause all other filings and recordings and all such other action required under such system to be effected and taken, in order to perfect and protect the respective right, title and interests of Lessor, Owner Participant, Loan Participant and the Indenture Trustee; provided, that 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. Section 16.4 Expenses. Lessee will pay all costs, charges and expenses (including reasonable attorneys fees) incident to any such filing, refiling, recording and rerecording or depositing and re-depositing of any such instruments or incident to the taking of such action. SECTION 17. Lessor's Right to Perform. If Lessee fails to make any payment required to be made by it hereunder or fails to perform or comply with any of its other agreements contained herein, Lessor may itself make such payment or perform or comply with such agreement, after giving not less than five Business Days' prior notice thereof to Lessee (except in the event that an Indenture Default resulting from a Lease Default or a Lease Event of Default shall have occurred and be continuing, in which event Lessor may effect 46 Lease Agreement (TRLI 2001-1C) such payment, performance or compliance to the extent necessary to cure such Indenture Default with notice given concurrently with such payment, performance or compliance), but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of Lessor incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the Late Rate from such date of payment, to the extent permitted by applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to Lessor on demand. SECTION 18. Assignment. Section 18.1 Assignment by Lessor. Lessee and Lessor hereby confirm that concurrently with the execution and delivery of this Lease, Lessor has executed and delivered to the Indenture Trustee the Indenture, which assigns as collateral security and grants a security interest in favor of the Indenture Trustee in, to and under this Lease and certain of the Rent payable hereunder (excluding Excepted Property), all as more explicitly set forth in the Indenture. Lessor agrees that it shall not otherwise assign or convey its right, title and interest in and to this Lease or any Unit, except as expressly permitted by and subject to the provisions of the Participation Agreement, the Trust Agreement and the Indenture. Section 18.2 Assignment by Lessee. Except in the case of any requisition for use by any governmental authority or any agency or instrumentality thereof referred to in Section 11.1, Lessee will not, except as expressly permitted in the Operative Agreements, without the prior written consent of Lessor and the Indenture Trustee, assign any of its rights hereunder. Section 18.3 Sublessee's or Others Performance and Rights. Any obligation imposed on Lessee in this Lease shall require only that Lessee perform or cause to be performed such obligation, even if stated herein as a direct obligation, and the performance of any such obligation by the Manager under the Management Agreement, the Insurance Manager under the Insurance Agreement or any Sublessee under a Sublease then in effect and permitted by the terms of this Lease shall constitute performance by Lessee and discharge such obligation by Lessee. Except as otherwise expressly provided herein, any right granted to Lessee in this Lease shall grant Lessee the right to (a) exercise such right or permit such right to be exercised by the Manager or the Insurance Manager or (b) in Lessee's capacity as sublessor pursuant to any Permitted Sublease permit any Sublessee to exercise substantially 47 Lease Agreement (TRLI 2001-1C) equivalent rights under any such sublease as are granted to Lessee under this Lease; provided, however, that Lessee's right to terminate this Lease pursuant to Section 10 and Lessee's purchase and renewal options set forth in Section 22 may be exercised only by Lessee; provided, further, that nothing in this Section 18.3 shall or shall be deemed to (i) create any privity of contract between any such Sublessee, on the one hand, and any of Lessor, Owner Participant or any subsequent transferee or Affiliate of any such Person, on the other hand, (ii) create any duty or other liability of any nature whatsoever on the part of any of Lessor, Owner Participant or any subsequent transferee or Affiliate of any such Person, to any such Sublessee or any Affiliate thereof or (iii) modify or waive any term or provision of Section 8.3 hereof, which Section 8.3 shall control if any conflict arises between any of the provisions thereof and this Section 18.3. The inclusion of specific references to obligations or rights of any such Sublessee in certain provisions of this Lease shall not in any way prevent or diminish the application of the provisions of the two sentences immediately preceding with respect to obligations or rights in respect of which specific reference to any such Sublessee has not been made in this Lease. SECTION 19. Net Lease, Etc. This Lease is a net lease and Lessee's obligation to pay all Rent payable hereunder shall be absolute, unconditional and irrevocable and shall not be affected by any circumstance of any character including, without limitation, (i) any set-off, abatement, counterclaim, suspension, recoupment, reduction, rescission, defense or other right that Lessee may have against Lessor, Owner Participant, the Indenture Trustee or any holder of an Equipment Note or Pass Through Certificate, any vendor or manufacturer of any Unit, or any other Person for any reason whatsoever, (ii) any defect in or failure of title, merchantability, condition, design, compliance with specifications, operation or fitness for use of all or any part of any Unit, (iii) any damage to, or removal, abandonment, requisition, taking, condemnation, loss, theft or destruction of all or any part of any Unit or any interference, interruption, restriction, curtailment or cessation in the use or possession of any Unit by Lessee or any other Person for any reason whatsoever or of whatever duration, (iv) any insolvency, bankruptcy, reorganization or similar proceeding by or against Lessee, Lessor, Owner Participant, the Indenture Trustee, Loan Participant, any holder of an Equipment Note or Pass Through Certificate or any other Person, (v) the invalidity, illegality or unenforceability of this Lease, any other Operative Agreement, or any other instrument referred to herein or therein or any other infirmity herein or therein or any lack of right, power or authority of Lessee, Lessor, Owner Participant, the 48 Lease Agreement (TRLI 2001-1C) Indenture Trustee, any holder of an Equipment Note or Pass Through Certificate or any other Person to enter into this Lease or any other Operative Agreement or to perform the obligations hereunder or thereunder or consummate the transactions contemplated hereby or thereby or any doctrine of force majeure, impossibility, frustration or failure of consideration, (vi) the breach or failure of any warranty or representation made in this Lease or any other Operative Agreement by Lessee, Lessor, Owner Participant, Loan Participant, the Indenture Trustee, any holder of an Equipment Note or Pass Through Certificate or any other Person, (vii) the requisitioning, seizure or other taking of title to or use of such Unit by any government or governmental authority or otherwise, whether or not by reason of any act or omission of Lessor, Lessee or the Indenture Trustee, or any other deprivation or limitation of use of such Unit in any respect or for any length of time, whether or not resulting from accident and whether or not without fault on the part of Lessee or (viii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. To the extent permitted by applicable law, Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Lease with respect to any Unit, except in accordance with the express terms hereof. If for any reason whatsoever this Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, Lessee nonetheless agrees, to the maximum extent permitted by law, to pay to Lessor or to the Indenture Trustee, as the case may be, an amount equal to each installment of Basic Rent and all Supplemental Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Lease not been terminated in whole or in part. Each payment of Rent made by Lessee hereunder shall be final and Lessee shall not seek or have any right to recover all or any part of such payment from Lessor or any Person for any reason whatsoever. Nothing contained herein shall be construed to waive any claim which Lessee might have under any of the Operative Agreements or otherwise or to limit the right of Lessee to make any claim it might have against Lessor or any other Person or to pursue such claim in such manner as Lessee shall deem appropriate. SECTION 20. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by facsimile capable of creating a written record, and any such notice shall become effective (i) upon personal delivery thereof, including, without limitation, by 49 Lease Agreement (TRLI 2001-1C) reputable overnight courier or (ii) in the case of notice by facsimile, upon confirmation of receipt thereof, provided such transmission is promptly further confirmed in writing by the method set forth in clause (i) addressed to the following Person at its respective address set forth below or at such other address as such Person may from time to time designate by written notice to the other Persons listed below: If to Lessor:. TRLI 2001-1C Railcar Statutory Trust . c/o State Street Bank and Trust Company of . Connecticut, National Association . 225 Asylum Street . Goodwin Square . Hartford, CT 06103 . Attention: Corporate Trust Administration . Fax No.: (617) 662-1465 . Confirmation No.: (617) 662-1680 . With copies to Owner Participant. If to Owner Participant: Trimaran Leasing, L.P. . c/o Philip Morris Capital Corporation . 225 High Ridge Road, Suite 300 . Stamford, CT 06905 Attention: Vice President, Structured Finance . Fax No.: (914) 335-8297 . Confirmation No.: (914) 335-8204 If to the Indenture Trustee: LaSalle Bank National Association 135 S. LaSalle Street, Suite 1960 . Chicago, IL 60603 Attention: Kristine Schossow Fax No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to Lessee: . Trinity Rail Leasing I L.P. . 2525 Stemmons Freeway . Dallas, TX 75207 . Attention: Vice President Leasing Operations
50 Lease Agreement (TRLI 2001-1C) . Re: TRLI 2001-1C . Fax No.: (214) 589-8271 . Confirmation No.: (214) 631-4420 SECTION 21. Concerning the Indenture Trustee. Section 21.1 Limitation of the Indenture Trustee's Liabilities. Notwithstanding any provision to the contrary contained herein or in any of the Operative Agreements, the Indenture Trustee's obligation to take or refrain from taking any actions, or to use its discretion (including, but not limited to, the giving or withholding of consent or approval and the exercise of any rights or remedies under such Operative Agreements), and any liability therefor, shall, in addition to any other limitations provided herein or in the other Operative Agreements, be limited by the provisions of the Indenture, including, but not limited to, Article VI thereof. Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease. It is understood and agreed that the right, title and interest of the Indenture Trustee in, to and under this Lease and the Rent due and to become due hereunder shall by the express terms granting and conveying the same be subject to the interest of Lessee in and to the Units as created pursuant to and governed by the terms of this Lease. SECTION 22. Purchase Options; Renewal Options. Section 22.1 Early Purchase Option. In addition to the option granted Lessee pursuant to Section 6.9 of the Participation Agreement and provided that Lessee shall have duly given the notice required by the next succeeding sentence and the corresponding notices under the Other Leases and shall concurrently purchase all (but not less than all) of the Other Units then subject to the Other Leases, Lessee shall have the right and, upon the giving of such notices, the obligation to purchase all (but not less than all) of the Units leased hereunder (as specified in such notice) on the Early Purchase Date for such Units at a price equal to the Early Purchase Price of such Units plus the other amounts specified below. Lessee shall give Lessor written notice not less than 90 days and not more than 180 days prior to the Early Purchase Date of its election to exercise the purchase option provided for in this Section 22.1, which notice shall be irrevocable. Payment of the Early Purchase Price, together with (w) all unpaid Basic Rent therefor due and payable, or accrued, prior to the Early Purchase Date, (x) any Make-Whole Amount and Late Payment 51 Lease Agreement (TRLI 2001-1C) Interest with respect to the Equipment Notes then being prepaid, (y) the Accumulated Equity Deficiency Amount (without duplication of amounts calculated above) and any Late Payment Interest related thereto and (z) any other Supplemental Rent due and owing by Lessee under the Operative Agreements (so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant 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 the Units, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant) shall be made on the Early Purchase Date at the place of payment specified in Section 3.5 hereof in immediately available funds against delivery of a bill of sale transferring and assigning to Lessee all right, title and interest of Lessor in and to such Units on an "as-is" "where-is" basis and containing a warranty as to the absence of Lessor's Liens. Lessor shall not be required to make any other representation or warranty as to the condition of such Units or any other matters, and may specifically disclaim any such representations or warranties. The costs of preparing the bill of sale and all other documentation relating to any purchase by Lessee pursuant to this Section 22.1 and the costs of all necessary filings relating to such purchase will be borne by Lessee. In the event of any such purchase and receipt by Lessor of all of the amounts provided in this Section 22.1, the obligation of Lessee to pay Basic Rent hereunder shall cease and the Lease Term shall end. If Lessee elects to exercise the purchase option provided for in this Section 22.1, Lessee shall, as the purchase price therefor, in the sole discretion of Lessee, either (i) pay the Early Purchase Price, together with all other amounts due and owing by Lessee under the Operative Agreements, as specified in the paragraph above or (ii) pay the difference between the amount specified in clause (i) and the outstanding principal amount of the Equipment Notes as of the Early Purchase Date and assume on a full recourse basis all of the Owner Trustee's obligations under the Indenture in respect of the indebtedness evidenced by such Equipment Notes related to such Units as provided in Section 3.6 of the Indenture; provided, that, following such assumption, the purchased Units shall remain subject to the Lien of a separate indenture similar to the Indenture pursuant to Section 3.6 of the Indenture. Lessee will make the payments required by foregoing clause (i) or assume the indebtedness evidenced by the Equipment Notes as provided in foregoing clause (ii) on the Early Purchase Date in immediately available funds against delivery of a bill of sale transferring and assigning to Lessee all right, title and interest of Lessor in and to the Units on an "as-is" "where-is" basis and containing a warranty as to the absence of 52 Lease Agreement (TRLI 2001-1C) Lessor's Liens; provided, however, that Lessee shall have the option of specifying in such notice under this Section 22.1 its election to defer payment of a portion of the Early Purchase Price for such Units in four (4) installments in the amounts and on the dates set forth on Schedule 6 to the Participation Agreement so long as the portion of the Early Purchase Price payable by Lessee on the Early Purchase Date in the event of any such election by Lessee, under any circumstances and in any event, together with other amounts of Supplemental Rent payable by Lessee on such date, will be at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal and accrued interest of the Equipment Notes together with any Make Whole Amount, Late Payment Interest and all other amounts owed to the holders of the Equipment Notes under the Operative Agreements; and provided further, that such deferred portion (i) may be prepaid by Lessee at any time in whole and (ii) will be secured in favor of Lessor by a letter of credit by a bank or financial institution acceptable to Owner Participant in its sole discretion or if acceptable to Owner Participant in its sole discretion a guaranty of Trinity in form and substance reasonably satisfactory to Lessor. If Lessee shall fail to fulfill its obligations under this second paragraph of Section 22.1, all of Lessee's obligations under this Lease and the Operative Agreements, including, without limitation, Lessee's obligation to pay installments of Rent, shall continue and Lessee shall be obligated to pay all costs and expenses, including legal fees and expenses, incurred by Lessor, Owner Participant and Indenture Trustee as a result of the notice given by Lessee pursuant to this Section. Listed on Schedule 6 to the Participation Agreement as the Basic Rent Adjustment for the Early Purchase Date is the amount of Basic Rent that, as of the Early Purchase Date, has been paid for periods after the Early Purchase Date (based upon the assumption that all prior amounts of Basic Rent due have been paid) or the amount of Basic Rent that, as of the Early Purchase Date, is the amount of Basic Rent that has accrued but has not been paid for periods prior to the Early Purchase Date. If Lessee exercises its Early Purchase Option and the Basic Rent Adjustment is negative and Lessee pays all other amounts due in relation to such exercise, then Lessee shall pay an amount equal to the Early Purchase Price less the absolute value of the amount of such Basic Rent Adjustment listed on Schedule 6 to the Participation Agreement (as a rebate of such Basic Rent and not as a reduction in Early Purchase Price). If Lessee exercises the Early Purchase Option and the Basic Rent Adjustment is positive, Lessee shall pay an amount equal to the Early Purchase Price plus the Basic Rent Adjustment (as a payment of accrued, but unpaid Basic Rent and not an increase in the Early Purchase Price). If Lessee 53 Lease Agreement (TRLI 2001-1C) elects to pay the Early Purchase Price in installments, then the amount of Basic Rent Adjustment listed on Schedule 6 to the Participation Agreement shall increase or decrease, as the case may be, the amount of Early Purchase Price payable by Lessee on the Early Purchase Date. Notwithstanding the foregoing provisions of this Section 22.1 to the contrary, Lessee may purchase or cause an Affiliate of Lessee to purchase the Beneficial Interest in lieu of Lessee purchasing the Units pursuant to this Section 22.1 for a purchase price equal to the Beneficial Interest Purchase Price and may keep this Lease (and the Equipment Notes) in place; provided, that Lessee shall remain liable under this Lease to pay Basic Rent and all other payments hereunder in full, provided, further, that such purchase shall be made in all respects in accordance with Section 6.9 of the Participation Agreement. Section 22.2 Election to Retain or Return Equipment at End of Basic or Renewal Term. Not less than 180 days and not more than 360 days prior to the end of the Basic Term or any Renewal Term, Lessee shall give Lessor a preliminary notice of its decision to return or retain the Units and the Other Units subject to the Other Leases (it being understood that at the end of the Basic Term or any Renewal Term Lessee must return all (and not less than all) such Units and Other Units if it returns any, or retain all (and not less than all) such Units and Other Units if it retains any) at the end of the Basic Term or such Renewal Term and not less than 120 days prior to the end of the Basic Term or the end of any Renewal Term, Lessee shall give Lessor irrevocable written notice of its decision to return or retain the Units at the end of the Basic Term or such Renewal Term and such corresponding notices pursuant to the Other Leases. If Lessee elects to retain Units, Lessee shall comply with Section 22.3 and/or 22.4 hereof, as it may elect in accordance with the provisions thereof including the notice requirements stated therein. If Lessee fails to give the 120 days' notice required by this Section 22.2 and such corresponding notices pursuant to the Other Leases, or a subsequent notice required by Section 22.3 or 22.4 and such corresponding notices pursuant to the Other Leases, Lessee shall be deemed to have irrevocably elected to return all of the Units at the end of the Basic Term or the applicable Renewal Term, as the case may be, in accordance with Section 6. Section 22.3 Purchase Option. Provided that Lessee shall have duly given the notice required by Section 22.2 and by the next succeeding sentence of this Section 22.3 and, in the case of a purchase, Lessee shall have given the 54 Lease Agreement (TRLI 2001-1C) corresponding notices under the Other Leases and shall upon the purchase of the Units hereunder concurrently purchase the Other Units under the Other Leases, Lessee shall have the right and, upon the giving of such notice under this Section 22.3, the obligation to purchase all of the Units at a price equal to the Fair Market Sales Value of such Units, at the expiration of the Basic Term, or, if a Renewal Term is then in effect, at the end of such Renewal Term, plus all other amounts due and owing by Lessee under the Operative Agreements, including, without limitation, Late Payment Interest and any unpaid Rent (so that, after receipt and application of all such payments, but without withdrawal from any Reserve Account, Owner Participant shall be entitled under the terms of the Collateral Agency Agreement to receive, and does receive, taking into account all Basic Rent payments in respect of the Units, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto and any other amounts then due to Owner Participant). Lessee shall give Lessor written notice not less than 90 days and not more than 360 days prior to the end of the Basic Term or any Renewal Term, as the case may be, of its election to exercise the purchase option provided for in this Section 22.3, which notice shall be irrevocable. Payment of the purchase price, together with all other amounts due and owing by Lessee under the Operative Agreements shall be made at the place of payment specified in Section 3.5 hereof in immediately available funds against delivery of a bill of sale transferring and assigning to Lessee all right, title and interest of Lessor in and to such Units on an "as-is" "where-is" basis and containing a warranty as to the absence of Lessor's Liens. Lessor shall not be required to make any other representation or warranty as to the condition of such Units or any other matters, and may specifically disclaim any such representations or warranties. Section 22.4 Renewal Option. Provided no Event of Default shall have occurred and be continuing and Lessee shall have duly given the notice required by Section 22.2, and the corresponding notices under the Other Leases and shall upon the renewal of the Units hereunder concurrently renew the Other Units under the Other Leases and Lessee has not exercised its option to purchase the Units pursuant to Section 22.3, Lessee shall have the right and, upon the giving of a notice under this Section 22.4 as below provided, the obligation to lease pursuant to this Lease all (but not less than all) of the Units at the expiration of the Basic Term or any applicable Renewal Term. Lessee may exercise this renewal option by giving Lessor written notice not less than 90 days and not more than 360 days prior to the end of the Basic Term (or, in the circumstances described below the then Renewal Term) that Lessee elects to renew this Lease with respect to all, but not less than all, of the 55 Lease Agreement (TRLI 2001-1C) Units then leased hereunder at a rental payment calculated by reference to the then fair market rental value (a "Fair Market Renewal") or a fixed rental (a "Fixed Rate Renewal"). At Lessee's option, such renewal may, in the case of a Fair Market Renewal, be for a renewal term of one or more years or, in the case of a Fixed Rate Renewal, be for an initial renewal term of three years (but not to extend beyond the Outside Renewal Date) and in connection with any renewal term following the initial renewal term, a term of one year or more expiring not later than the Outside Renewal Date, in each case as Lessee shall specify in such notice, which notice shall be irrevocable. The Basic Rent for each Unit during any Renewal Term (the "Renewal Rent") shall (a) in the case of any Fixed Rate Renewal, be 1/12th of 100% of the average annual Basic Rent allocated over the period from the end of the Basic Rent Holiday through the Basic Term Expiration Date, payable monthly in arrears and (b) in the case of any Fair Market Renewal, be 100% of the Fair Market Rental Value determined as of the commencement of the applicable Renewal Term; provided, however, that in the case of the first two years of the Fair Market Renewal period(s) that immediately follow the Basic Term Expiration Date (whether under Section 22.4 or Section 6.1), be 105% of the Fair Market Rental Value determined as of the commencement of the applicable Renewal Term; provided further, however, that the preceding proviso shall not apply in the event that the Lessee provides the Lessor, at the Lessee's sole cost and expense, with an opinion of independent tax counsel selected by Lessor (which counsel shall be selected by Lessor from among four nationally recognized law firms proposed by Lessee, each of which must be experienced in leveraged leasing transactions similar to the transactions contemplated herein) to the effect that applicable Treasury Regulations (or other administrative pronouncements upon which taxpayers may rely for Federal income tax purposes) will permit rent for such Renewal Term at a rate equal to 100% of the fair market rent determined as of the time of such Renewal Term without resulting in any adverse Federal income tax consequences to the Owner Participant Parent (within the meaning of the Tax Indemnity Agreement) under Code Section 467 or any successor provision thereto. Each Renewal Term shall commence immediately upon the expiration of the Basic Term or the preceding Renewal Term, as the case may be. Lessee shall not be entitled to enter any Fixed Rate Renewal following the expiry of any Fair Market Renewal. Section 22.5 Rent Appraisal; Outside Renewal Date. Promptly following Lessee's irrevocable written notice pursuant to Section 22.2 of its election to retain the Units at the end of the Basic Term or any Renewal Term (and, in any event, if it is anticipated that there will be any Extended Units at the end of the Basic 56 Lease Agreement (TRLI 2001-1C) Term or such Renewal Term), Lessor and Lessee shall determine (a) if Lessee shall have exercised a Fixed Rate Renewal, (i) the remaining useful life and Fair Market Sales Value (based on the actual condition of a reasonable sampling of such Units and determined pursuant to the appraisal procedure set forth in the definition of Fair Market Sales Value) of the Units, and (ii) the latest date such that (1) the period from the Closing Date to such date would not exceed 80% of the useful life of any Unit (as determined in subclause (i) above) from and after the Closing Date, and (2) the Fair Market Sales Value of each Unit (determined without regard to inflation or deflation from the Closing Date) on such date would not be less than 20% of the Equipment Cost of such Unit (such date determined under this subclause (ii) shall thereafter be the latest date to which this Lease may be renewed pursuant to a Fixed Rate Renewal under Section 22.4 (the "Outside Renewal Date")), (b) if Lessee shall have exercised the purchase option under Section 22.3(i) or any renewal option under Section 22.4, the Fair Market Sales Value of the applicable Units as of the end of the then existing Basic Term or Renewal Term, as applicable, in each case assuming such Units are at least in the condition required by this Lease, and (c) if Lessee shall have exercised a Fair Market Renewal (or if it is anticipated that there will be any Extended Units at the end the Basic Term or such Renewal Term), the Fair Market Rental Value of the applicable Units as of the end of the then existing Basic Term or Renewal Term, as applicable, in each case assuming such Units are at least in the condition required by this Lease. Section 22.6 Stipulated Loss Amount and Termination Amount During Renewal Term. All of the provisions of this Lease, other than Section 10, shall be applicable during any Renewal Term for such Units, except as specified in the next sentence. During any Renewal Term, the Stipulated Loss Amount and Termination Amount of any Unit shall be determined on the basis of the Fair Market Sales Value of such Unit as of the first day of such Renewal Term, reduced in equal monthly increments to the Fair Market Sales Value of such Unit as of the last day of such Renewal Term; provided that in no event during any Fixed Rate Renewal shall the Stipulated Loss Amount and Termination Amount of any Unit be less than 20% of the Equipment Cost of such Unit. Section 22.7 Deemed Renewals. If Lessee does not exercise its purchase option under Section 22.3 or its renewal option under Section 22.4 at the end of the Basic Term or any Renewal Term, then the Lease for any Unit subject to a Sublease at the end of the Basic Term or such Renewal Term shall be deemed automatically renewed for a Renewal Term expiring at the expiration of such 57 Lease Agreement (TRLI 2001-1C) Sublease's term (but in no event later than three years following the expiry of the Basic Term or such Renewal Term, as applicable) (such Unit, an "Extended Unit"). The terms and conditions of any such deemed renewal of a Unit under this Section 22.7 including rent shall otherwise be those generally provided in Section 22.4 in respect of a Fair Market Renewal for the period thereof (which shall be considered a Renewal Term). Section 22.8 Funding of Accounts on Purchase. Lessee will not exercise the purchase option under this Section 22 unless either (a) the full amount required to fund the Post Lease Term Reserve Account is (upon consummation of such purchase and distribution of all amounts required to be distributed by the Collateral Agent under the Collateral Agency Agreement) and will be then available to the Collateral Agent to fund such account or (b) an indemnity pursuant to Section 3.13 of the Collateral Agency Agreement has been provided. SECTION 23. Limitation of Lessor's Liability. It is expressly agreed and understood that all representations, warranties and undertakings of Lessor hereunder (except as expressly provided herein) shall be binding upon Lessor only in its capacity as Owner Trustee under the Trust Agreement and in no case shall the Trust Company be personally liable for or on account of any statements, representations, warranties, covenants or obligations stated to be those of Lessor hereunder, except that the Trust Company shall be personally liable for its gross negligence or wilful misconduct and for its breach of its covenants, representations and warranties contained herein to the extent covenanted or made in its individual capacity. SECTION 24. Investment of Security Funds. Any moneys received by Lessor or the Indenture Trustee pursuant to Section 12.2 which are required to be paid to Lessee after completion of repairs to be made pursuant to Section 12.2 or pursuant to Section 11.4(a) or 11.5, as the case may be, shall be paid directly to the appropriate Non-Shared Payments Account established under the Collateral Agency Agreement. 58 Lease Agreement (TRLI 2001-1C) SECTION 25. Miscellaneous. Section 25.1 Governing Law; Severability. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible, each provision of this Lease shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Lease shall be prohibited by or invalid under the laws of any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Lease in any other jurisdiction. Section 25.2 Execution in Counterparts. This Lease may be executed in any number of counterparts, each executed counterpart constituting an original and in each case such counterparts shall constitute but one and the same instrument; provided, however, that to the extent that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code) no security interest in this Lease may be created through the transfer or possession of any counterpart hereof other than the counterpart bearing the receipt therefor executed by the Indenture Trustee on the signature page hereof, which counterpart shall constitute the only "original" hereof for purposes of the Uniform Commercial Code. Section 25.3 Headings and Table of Contents; Section References. The headings of the sections of this Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. All references herein to numbered sections, unless otherwise indicated, are to sections of this Lease. Section 25.4 Successors and Assigns. This Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective permitted successors and permitted assigns. Section 25.5 True Lease. It is the intent of the parties to this Lease that it will be a true lease and not a "conditional sale", that Lessor shall at all times be considered to be the owner of each Unit which is the subject of this Lease for the purposes of all federal, state, city and local income taxes, that this Lease conveys to Lessee no right, title or interest in any Unit except as lessee and that the Lease will be a finance lease under the provisions of Article 2A of the New York Uniform 59 Lease Agreement (TRLI 2001-1C) Commercial Code. Nothing contained in this Section 25.5 shall be construed to limit Lessee's use or operation of any Unit or constitute a representation, warranty or covenant by Lessee as to tax consequences. The parties hereto hereby agree that Lessee's obligation to make payments of the type described in the definition of "Excepted Property" is a separate and independent obligation from its obligation to make other Rent payments, and that Lessee's obligation to make payments of the type described in the definition of "Excepted Property" may be independently enforced and may be assigned, pledged or otherwise transferred separately from Lessee's obligations to make other Rent payments. The obligation to make such payments has been included herein for the convenience of the parties. Section 25.6 Amendments and Waivers. No term, covenant, agreement or condition of this Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto and except as may be permitted by the terms of the Indenture. Section 25.7 Survival. All warranties, representations, indemnities and covenants made by either party hereto, herein or in any certificate or other instrument delivered by such party or on the behalf of any such party under this Lease, shall be considered to have been relied upon by the other party hereto and shall survive the consummation of the transactions contemplated hereby on the Closing Date regardless of any investigation made by either such party or on behalf of either such party, and to the extent having accrued and not been paid or relating to or otherwise arising in connection with the transactions contemplated by the Operative Agreements during the Lease Term, shall survive the expiration or other termination of this Lease or any other Operative Agreement. Section 25.8 Business Days. If any payment is to be made hereunder or any action is to be taken hereunder on any date that is not a Business Day, such payment or action otherwise required to be made or taken on such date shall be made or taken on the immediately succeeding Business Day with the same force and effect as if made or taken on such scheduled date and as to any payment (provided any such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. 60 Lease Agreement (TRLI 2001-1C) Section 25.9 Directly or Indirectly; Performance by Managers. Where any provision in this Lease refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. In this regard, it is understood and agreed that Lessee has entered into the Management Agreement with the Manager and the Insurance Agreement with the Insurance Manager, under which agreements certain rights and obligations of Lessee hereunder will be exercised and performed by such Persons on behalf of Lessee. Lessee agrees to instruct the Manager and the Insurance Manager to take such actions as shall be necessary or appropriate under such agreements so that Lessee shall be in compliance in all material respects with its obligations hereunder and under the other Operative Agreements. Section 25.10 Incorporation by Reference. The payment obligations set forth in Sections 7.1 and 7.2 of the Participation Agreement are hereby incorporated by reference. * * * 61 Lease Agreement (TRLI 2001-1C) IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly executed and delivered on the day and year first above written. Lessor: TRLI 2001-1C RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as otherwise expressly provided but solely as Owner Trustee By: _________________________________ Name:_______________________________ Title:________________________________ Lessee: TRINITY RAIL LEASING I L.P. By TILX GP I, LLC, its General Partner By:________________________________ Name: Eric Marchetto Title: Vice President Lease Agreement (TRLI 2001-1C) Receipt of this original counterpart of the foregoing Lease is hereby acknowledged on the ___ day of December, 2001. LASALLE BANK NATIONAL ASSOCIATION, Indenture Trustee By: _________________________________ Name: Title: Lease Agreement (TRLI 2001-1C) EXHIBIT A LEASE SUPPLEMENT NO. _____ (TRLI 2001-1C) This Lease Supplement No. ___, dated as of ____________, between TRLI 2001-1C Railcar Statutory Trust by State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Owner Trustee under the Trust Agreement ("Lessor"), and Trinity Rail Leasing I L.P., a Texas limited partnership ("Lessee"); Witnesseth: Lessor and Lessee have heretofore entered into that certain Equipment Lease Agreement (TRLI 2001-1C) dated as of December 28, 2001 (the "Lease"). The terms used herein are used with the meanings assigned to such terms in the Lease. The Lease provides for the execution and delivery of one or more Lease Supplements substantially in the form hereof for, among other things, the purpose of particularly describing all or a portion of the Units to be leased to Lessee under the Lease. Now, therefore, in consideration of the premises and other good and sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and Lessee hereby agree as follows: 1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts and leases from Lessor, under the Lease as herein supplemented, the Units described in Schedule 1 hereto. 2. All of the terms and provisions of the Lease are hereby incorporated by reference in this Lease Supplement to the same extent as if fully set forth herein. 3. To the extent that this Lease Supplement constitutes chattel paper (as such term is defined in the Uniform Commercial Code) no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart hereof other than the counterpart bearing the receipt therefor executed by Lease Agreement (TRLI 2001-1C) the Indenture Trustee on the signature page hereof, which counterpart shall constitute the only "original" hereof for purposes of the Uniform Commercial Code. 4. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 5. This Lease Supplement may be executed in any number of counterparts, each executed counterpart constituting an original but all together constituting one and the same instrument. * * * A-2 Lease Agreement (TRLI 2001-1C) IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to be duly executed as of the day and year first above written and to be delivered as of the date first above written. Lessor: TRLI 2001-1C RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Owner Trustee By:_________________________________ Name:_______________________________ Lessee:______________________________ TRINITY RAIL LEASING I L.P. By TILX GP I, LLC, its General Partner By:______________________________ Name:____________________________ Title:___________________________ (1) Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged on this ___ day of ____, 20___. LASALLE BANK NATIONAL ASSOCIATION, as Indenture Trustee By:_________________________________ Name:_______________________________ Title:______________________________ - -------- (1) This language contained in the original counterpart only. EX-10.16.5 12 d94851ex10-16_5.txt PARTICIPATION AGREEMENT (TRL 1 2001-1C) Exhibit 10.16.5 PARTICIPATION AGREEMENT (TRLI 2001-1C) Dated as of December 28, 2001 among TRINITY RAIL LEASING I L.P., as Lessee, TRINITY RAIL MANAGEMENT, INC., TRINITY INDUSTRIES LEASING COMPANY, as Manager, TRLI 2001-1C RAILCAR STATUTORY TRUST, BY STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as Owner Trustee, TRIMARAN LEASING, L.P., as Owner Participant and LASALLE BANK NATIONAL ASSOCIATION, as Indenture Trustee and Pass Through Trustee Tank Cars and Covered Hopper Cars Participation Agreement (TRLI 2001-1C) TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT.........................................................................4 SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS.................................................................4 Section 2.1 Sale and Purchase of Equipment......................................4 Section 2.2 Participation in Equipment Cost.....................................5 Section 2.3 Closing Date; Procedure for Participation...........................5 Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions..........................................7 Section 2.5 Expenses............................................................7 Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and Verification......................................11 Section 2.7 Postponement of Closing Date.......................................14 SECTION 3. REPRESENTATIONS AND WARRANTIES...................................................16 Section 3.1 Representations and Warranties of the Trust Company............................................................16 Section 3.2 Representations and Warranties of the Lessee.......................19 Section 3.3 Representations and Warranties of the Indenture Trustee............26 Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest, Equipment Note and Pass Through Certificates......................................27 Section 3.5 Representations and Warranties of the Owner Participant............29 Section 3.6 Representations and Warranties of TILC.............................31 Section 3.7 Representations and Warranties of TRMI.............................36 Section 3.8 Representations and Warranties of the Pass Through Trustee.........38 Section 3.9 Opinion Acknowledgment.............................................39 SECTION 4. CLOSING CONDITIONS...............................................................40 Section 4.1 Conditions Precedent to Investment by Each Participant.............40
Participation Agreement (TRLI 2001-1C) i
Page ---- Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant............................................48 Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant...........................................48 Section 4.4 Conditions Precedent to the Obligation of TILC and the Lessee................................................50 SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE........................................51 SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE..............53 Section 6.1 Restrictions on Transfer of Beneficial Interest....................53 Section 6.2 Lessor's Liens Attributable to the Owner Participant...............56 Section 6.3 Lessor's Liens Attributable to Trust Company.......................57 Section 6.4 Liens Created by the Indenture Trustee and the Loan Participant...............................................57 Section 6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee..................................58 Section 6.6 Amendments to Operative Agreements That Are Not Lessee Agreements.....................................59 Section 6.7 Certain Representations, Warranties and Covenants..................59 Section 6.8 Covenants of the Manager...........................................59 Section 6.9 Lessee's Purchase in Certain Circumstances.........................59 Section 6.10 Owner Participant as Affiliate of Lessee...........................61 Section 6.11 Records; U.S. Income Tax Information...............................62 Section 6.12 Replacement of Manager.............................................62 Section 6.13 Acknowledgment of Equity Collateral Security Documents.............65 SECTION 7. LESSEE'S INDEMNITIES.............................................................65 Section 7.1 General Tax Indemnity..............................................65 Section 7.2 General Indemnification............................................75 Section 7.3 Indemnification by TILC............................................81 Section 7.4 Indemnification by TRMI............................................86 SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT................................................91 SECTION 9. SUCCESSOR INDENTURE TRUSTEE......................................................91 SECTION 10. MISCELLANEOUS....................................................................91
Participation Agreement (TRLI 2001-1C) ii
Page ---- Section 10.1 Consents...........................................................91 Section 10.2 Refinancing........................................................92 Section 10.3 Amendments and Waivers.............................................94 Section 10.4 Notices............................................................94 Section 10.5 Survival...........................................................97 Section 10.6 No Guarantee of Residual Value or Debt.............................97 Section 10.7 Successors and Assigns.............................................97 Section 10.8 Business Day.......................................................97 Section 10.9 GOVERNING LAW......................................................98 Section 10.10 Severability.......................................................98 Section 10.11 Counterparts.......................................................98 Section 10.12 Headings and Table of Contents.....................................98 Section 10.13 Limitations of Liability...........................................98 Section 10.14 Maintenance of Non-Recourse Debt...................................99 Section 10.15 Ownership of and Rights in Units..................................100 Section 10.16 No Petition.......................................................100 Section 10.17 Consent To Jurisdiction...........................................101 Section 10.18 WAIVER OF JURY TRIAL..............................................102
EXHIBITS AND SCHEDULES Exhibit A-1 - Form of Certificate of Insurance Broker Confirming Insurance Coverage (Primary Liability) Exhibit A-2 - Form of Certificate of Insurance Broker Confirming Insurance Coverage (Excess Liability) Exhibit B-1 - Insurance Requirements as to Public Liability Insurance Exhibit B-2 - Insurance Requirements as to Physical Damage Insurance Exhibit C - Form of Transfer Agreement Exhibit D - Form of Notice of Assignment of Sublease Exhibit E-1 - Form of Skadden, Arps, Slate, Meagher & Flom (Illinois) Opinion Exhibit E-2 - Form of Trinity Rail Leasing I L.P., Trinity Industries Leasing Company and Trinity Rail Management, Inc. Opinion Exhibit E-3 - Form of Bingham Dana LLP Opinion Exhibit E-4 - Form of Winston & Strawn Opinion
Participation Agreement (TRLI 2001-1C) iii EXHIBITS AND SCHEDULES Exhibit E-5 - Form of Philip Morris Capital Corporation Legal Department Opinion Exhibit E-6 - Form of Opinion of in-house counsel for the Indenture Trustee Exhibit E-7 - Form of Alvord & Alvord Opinion Exhibit E-8 - Form of McCarthy Tetrault Opinion Exhibit E-9 - Form of Andrews & Kurth L.L.P. Opinion Exhibit E-10 - Form of Opinion of in-house counsel for the Pass Through Trustee Exhibit E-11 - Form of Morris, James, Hitchens & Williams Opinion Exhibit F - Form of Officer's Solvency Certificate Exhibit G - Form of Officer's Accounts Balance Certificate Schedule 1 - Description of Equipment, Designation of Basic Groups, Designation of Functional Groups and Equipment Cost Schedule 1-B - List of Existing Subleases Schedule 2 - Commitment Percentage and Payment Information for Participants Schedule 3-A - Schedule of Basic Rent Payments Schedule 3-B - Basic Rent Allocation Schedule Schedule 4-A - Schedule of Stipulated Loss Value and Termination Value Schedule 4-B - Termination Amount Schedule Schedule 5 - Terms of Equipment Note Schedule 6 - Purchase Information Schedule 3.2(m) - Written Information Provided by Trinity Rail Leasing I L.P., Trinity Industries Leasing Company and Trinity Rail Management, Inc.
Participation Agreement (TRLI 2001-1C) iv PARTICIPATION AGREEMENT (TRLI 2001-1C) This PARTICIPATION AGREEMENT (TRLI 2001-1C), dated as of December 28, 2001 (this "Agreement"), is by and among (i) Trinity Rail Leasing I L.P., a Texas limited partnership (together with its permitted successors and assigns, the "Lessee"), (ii) Trinity Rail Management, Inc., a Delaware corporation ("TRMI"), (iii) Trinity Industries Leasing Company, a Delaware corporation ("TILC"), (iv) TRLI 2001-1C Railcar Statutory Trust, a Connecticut statutory trust, by State Street Bank and Trust Company of Connecticut, National Association, a national banking association, ("Trust Company"), not in its individual capacity except as expressly provided herein but solely as trustee (together with its permitted successors and assigns, the "Owner Trustee") under the Trust Agreement (such term and other defined terms used herein shall have the meanings assigned thereto in Section 1 below), (v) Trimaran Leasing, L.P., a Delaware limited partnership (together with its permitted successors and assigns, the "Owner Participant") and (vi) LaSalle Bank National Association, a national banking association, not in its individual capacity except as expressly provided herein but solely as pass through trustee under the Pass Through Trust Agreement (in such capacity, together with its permitted successors and assigns, the "Pass Through Trustee" or the "Loan Participant"), and as trustee under the Indenture (in such capacity, together with its permitted successors and assigns, the "Indenture Trustee"). The Owner Participant and the Loan Participant are sometimes hereinafter referred to collectively as the "Participants." WITNESSETH: WHEREAS, on or prior to the date hereof, the Owner Participant and the Trust Company have entered into the Trust Agreement pursuant to which the Owner Trustee has agreed, among other things, to hold the Trust Estate for the benefit of the Owner Participant thereunder on the terms specified in the Trust Agreement, subject, however, to the Lien created under the Indenture and, subject to the terms and conditions hereof, to purchase on the Closing Date the Equipment described in Schedule 1 hereto from the Lessee and concurrently therewith to lease such Equipment to the Lessee; WHEREAS, on or prior to the date hereof and pursuant to the Pass Through Trust Agreement a grantor trust was created to facilitate the financing contemplated hereby; WHEREAS, on the Closing Date, the Owner Trustee and the Indenture Trustee will enter into the Indenture, pursuant to which the Owner Trustee will agree, among other things, to borrow from the Loan Participant the loan in connection with Participation Agreement (TRLI 2001-1C) the financing of the Total Equipment Cost and to issue to the Loan Participant the Equipment Note as evidence of such loan; WHEREAS, TILC will, on the Closing Date, pursuant to the Transfer and Assignment Agreement (i) sell to the Partnership all of TILC's right, title and interest in and to the Equipment described on Schedule 1 hereto and (ii) assign and transfer to the Partnership all of TILC's right, title and interest in and to any Existing Equipment Subleases; WHEREAS, pursuant to the Pledged Equipment Transfer and Assignment Agreements, TILC (i) sold to the Partnership all of TILC's right, title and interest in and to the Pledged Equipment and (ii) assigned and transferred to the Partnership all of TILC's right, title and interest in and to any Existing Pledged Equipment Leases,; WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, and the Owner Trustee will, among other things and subject to the terms and conditions of the Operative Agreements, (i) purchase the Equipment described in Schedule 1 hereto from the Lessee and accept delivery from the Lessee of the Bill of Sale evidencing the purchase and transfer of title of each Unit to the Owner Trustee, (ii) own the Equipment described in Schedule 1 hereto as provided in the Operative Agreements, (iii) accept pursuant to the Assignment the assignment and transfer from the Lessee of all Lessee's right, title and interest in and to the Existing Equipment Subleases and (iv) execute and deliver the Lease, pursuant to which, subject to the terms and conditions set forth therein, the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease from the Owner Trustee, each Unit to be delivered on the Closing Date, such lease to be evidenced by the execution and delivery of the Lease Supplement covering such Units, and to assign the Existing Equipment Subleases to the Lessee, such assignment to be evidenced by the execution and delivery of the Assignment covering such Existing Equipment Subleases; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, TILC, TRMI, the Owner Trustee, the Other Owner Trustees, the Indenture Trustee, the Other Indenture Trustees and the Collateral Agent have entered into the Second Amended and Restated Collateral Agency Agreement to amend and restate the Original Collateral Agency Agreement, pursuant to which the Lessee will agree, among other things, (i) to grant to the Collateral Agent for the security and the benefit of the parties specified therein a security interest in the Collateral to secure the performance by the Lessee of its obligations under the Lease and the Other Leases, and (ii) to exclude certain Pledged Equipment previously designated as Special Collateral from the definition of Special Collateral under the Original Collateral Agency Agreement so that such Pledged Equipment will not be subject to release provisions of Section 2.8 of the Collateral Agency Agreement; Participation Agreement (TRLI 2001-1C) 2 WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, and the Owner Trustee will, among other things and subject to the terms and conditions of the Operative Agreements, grant to the Indenture Trustee for the security and the benefit of the holder of the Equipment Note a security interest in the Indenture Estate; WHEREAS, concurrently with the execution and delivery of this Agreement, Lessee, Trinity and the Owner Participant (or an Affiliate of the Owner Participant) will enter into the Tax Indemnity Agreement; WHEREAS, the proceeds from the sale of the Equipment Note to the Loan Participant will be applied, together with the equity contribution made by the Owner Participant pursuant to this Agreement, to effect the purchase of the Equipment described on Schedule 1 hereto by the Owner Trustee from the Lessee as contemplated hereby; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, the Owner Trustee, the Other Owner Trustees and the Equity Collateral Agent have entered into the Equity Collateral Security Agreement, pursuant to which the Lessee will agree, among other things, to grant to the Equity Collateral Agent for the security and the benefit of the parties specified therein a security interest in the Equity Collateral to secure the performance by the Lessee of its obligations under the Lease and the Other Leases; WHEREAS, prior to the Closing Date, the Partners made capital contributions to the Lessee in accordance with the Partnership Agreement (as amended prior to the Closing Date) and on the Closing Date the proceeds of such capital contributions will be applied to fund certain reserve accounts of the Lessee as contemplated hereby and by the Collateral Agency Agreement, and to fund the Equity Collateral Account as contemplated hereby and by the Equity Collateral Security Documents; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee and TILC have entered into an amendment to the Management Agreement, pursuant to which TILC will provide management services with respect to the Equipment and the Pledged Equipment; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee and TILC have entered into an amendment to the Insurance Agreement, pursuant to which TILC will provide services to the Lessee in connection with obtaining, managing and maintaining insurance with respect to the Equipment and the Pledged Equipment required under the Operative Agreements; Participation Agreement (TRLI 2001-1C) 3 WHEREAS, on or prior to the date hereof, the General Partner and the Limited Partner have entered into the First Amendment to Limited Partnership Agreement of the Lessee in connection with the transactions contemplated hereby, and each of the General Partner and the Limited Partner has similarly amended its respective limited liability company agreement; WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, the General Partner, the Limited Partner and TRMI have entered into an amendment to the Administrative Services Agreement, pursuant to which TRMI agrees to provide certain administrative services with respect to the Partnership, the General Partner and the Limited Partner; WHEREAS, concurrently with the execution and delivery of this Agreement, Trinity Industries, Inc. has issued the Trinity Guaranty in favor of the beneficiaries named therein, pursuant to which Trinity Industries, Inc. will guarantee performance of the obligations of TILC and TRMI under the Operative Agreements to which TILC or TRMI is a party, respectively; and WHEREAS, concurrently with the execution and delivery of this Agreement, TILC and the Marks Company have entered into the Second Supplement to the Marks Company Trust Supplement to allocate all Marks relating to the Units to the 2001-1A SUBI Portfolio, and the relevant parties thereto have entered into the Amended Marks Trust Documents in relation to such allocation. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT. Unless otherwise defined herein or unless the context shall otherwise require, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Appendix A to the Equipment Lease Agreement (TRLI 2001-1C), dated as of December 28, 2001, between the Owner Trustee and the Lessee. Unless other wise indicated, all references herein to Sections, Schedules and Exhibits refer to Sections, Schedules and Exhibits of this Agreement. SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS. Section 2.1 Sale and Purchase of Equipment. Subject to the terms and conditions hereof and on the basis of the representations and warranties set forth Participation Agreement (TRLI 2001-1C) 4 herein, the Lessee agrees to sell to the Owner Trustee, and the Owner Trustee agrees to purchase from the Lessee, on the Closing Date and immediately following consummation of the transactions described in the third and fourth recital clauses above, the Equipment described in Schedule 1, and, in connection therewith, the Owner Trustee agrees to pay to the Lessee the cost for each Unit as specified in Schedule 1. On the Closing Date, the Lessee shall deliver each Unit described on Schedule 1 to the Owner Trustee, and the Owner Trustee shall accept such delivery. Section 2.2 Participation in Equipment Cost. (a) Equity Participation. On the Closing Date, subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Owner Participant agrees to participate in the payment of the Total Equipment Cost for the Units delivered on the Closing Date by making an equity investment in the beneficial ownership of such Units in the amount equal to the product of the Total Equipment Cost for such Units delivered on the Closing Date and the percentage set forth opposite the Owner Participant's name in Schedule 2 (the "Owner Participant's Commitment"). The aggregate amount of the Owner Participant's Commitment plus the aggregate amount of Transaction Costs payable by the Owner Participant shall not exceed the sum of (x) the Owner Participant's Commitment and (y) 1.94% of the Total Equipment Cost. The Owner Participant's Commitment shall be paid to the Indenture Trustee to be held (but not as part of the Indenture Estate) and applied on behalf of the Owner Trustee toward payment of the Total Equipment Cost as provided in Section 2.3. (b) Debt Participation. On the Closing Date, subject to the terms and conditions hereof and on the basis of the representations and warranties set forth herein, the Loan Participant agrees to participate in the payment of the Total Equipment Cost for the Units delivered on the Closing Date by making a secured loan, not from its own funds but solely from funds available to it for such purposes under the Pass Through Trust Agreement, to be evidenced by the Equipment Note, to the Owner Trustee in the amount equal to the product of the Total Equipment Cost for the Units delivered on the Closing Date and the percentage set forth opposite the Loan Participant's name in Schedule 2 (the "Loan Participant's Commitment"). The Equipment Note shall bear interest at the Debt Rate. Section 2.3 Closing Date; Procedure for Participation. (a) Notice of Closing Date. Not later than three Business Days' prior to the Closing Date (or such lesser notice as may be agreed upon by the Lessee, the Owner Participant and the Loan Participant), the Lessee shall give the Owner Participant, the Indenture Trustee, the Owner Trustee and the Loan Participant a notice (a "Notice of Delivery") by facsimile or other form of telecommunication or Participation Agreement (TRLI 2001-1C) 5 telephone (to be promptly confirmed in writing) of the Closing Date, which Notice of Delivery shall specify in reasonable detail the number and type of Units to be delivered on such date, the Total Equipment Cost of such Units, and the respective amounts of the Owner Participant's Commitment and the Loan Participant's Commitment required to be paid with respect to the Units. Prior to 11:00 a.m., Chicago time, on the Closing Date, subject to the satisfaction (or waiver) of the respective conditions specified in Section 4, the Owner Participant shall make the amount of the Owner Participant's Commitment required to be paid on the Closing Date available to the Indenture Trustee, and immediately prior to the delivery and acceptance of the Units as specified in Section 2.3(b), the Loan Participant shall make the amount of the Loan Participant's Commitment for the Total Equipment Cost required to be paid on the Closing Date available to the Indenture Trustee, in either case, by transferring or delivering such amounts, in funds immediately available on the Closing Date, to the Indenture Trustee, either directly to, or for deposit in, the Indenture Trustee's account at LaSalle Bank National Association, ABA No. 071000505, Att.: Kristine Schossow, Corporate Trust Services Division, Trust TRLI 2001-1C, Account No. 2090067, Ref: 608775318 TRLI. The making available by the Owner Participant of the amount of the Owner Participant's Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Owner Participant and the Owner Trustee. The making available by the Loan Participant of the amount of the Loan Participant's Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Loan Participant and the Indenture Trustee. (b) Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place on or before 2:00 p.m., Chicago time, on the Closing Date at the offices of Skadden, Arps, Slate, Meagher & Flom (Illinois), or at such other place or time as the parties hereto shall agree. Upon receipt by the Indenture Trustee on the Closing Date of the full amount of the Owner Participant's Commitment and the Loan Participant's Commitment in respect of the Units delivered on the Closing Date, TILC shall pursuant to the Transfer and Assignment Agreement deliver the Units described on Schedule 1 hereto to the Lessee by delivery of the TILC Bill of Sale and shall make an assignment of the Existing Equipment Sub leases to the Lessee by delivery of the TILC Assignment, and immediately thereafter, (i) the Indenture Trustee, on behalf of the Owner Trustee, shall, subject to the conditions set forth in Sections 4.1, 4.2 and 4.3 having been fulfilled to the satisfaction of the Participants or waived by the Participants, pay to the Lessee from the funds then held by it, in immediately available funds, an amount equal to the Total Equipment Cost for the Units delivered on the Closing Date, (ii) the Lessee shall pay to TILC pursuant to the Transfer and Assignment Agreement an amount equal to the Total Equipment Cost for the Units delivered on the Closing Date, (iii) the Lessee shall deliver the Units described on Schedule 1 hereto by delivery of the Bill of Sale, (iv) the Owner Trustee shall, pursuant to the Lease, lease and deliver the Participation Agreement (TRLI 2001-1C) 6 Units listed on Schedule 1 hereto to the Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of the Units described on Schedule 1 hereto under the Lease, such lease, delivery and acceptance of such Units under the Lease shall be conclusively evidenced by the execution and delivery by the Lessee and the Owner Trustee of the Lease Supplement covering the Equipment so delivered as described in Schedule 1 and (v) the Owner Trustee shall execute and deliver the Equipment Note relating to such Lease Supplement to the Loan Participant. Each of the Lessee, the Owner Participant, the Owner Trustee, TILC, the Loan Participant and the Indenture Trustee hereby agrees to take all actions required to be taken by it in connection with the Closing as contemplated by this Section 2.3(b). Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions. (a) The Owner Participant agrees that the making available to the Indenture Trustee of the amount of the Owner Participant's Commitment for the Units delivered on the Closing Date in accordance with the terms of this Section 2 shall constitute, without further act, authorization and direction by the Owner Participant to the Owner Trustee, subject, on the Closing Date, to the conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the satisfaction of the Owner Participant or waived by the Owner Participant, to take the actions specified in Section 2.04 of the Trust Agreement with respect to the Units on the Closing Date. (b) The Owner Participant agrees that the authorization by the Owner Participant or its counsel to the Indenture Trustee to release to the Lessee the Owner Participant's Commitment with respect to the Units delivered on the Closing Date shall constitute, without further act, notice and confirmation that all conditions to closing set forth in Sections 4.1 and 4.3 were either met to the satisfaction of the Owner Participant or, if not so met, were waived by the Owner Participant. (c) The Loan Participant agrees that the authorization by the Loan Participant or its counsel to the Indenture Trustee to release to the Lessee the Loan Participant's Commitment with respect to the Units delivered on the Closing Date shall constitute, without further act, notice and confirmation that all conditions to closing set forth in Sections 4.1 and 4.2 were either met to the satisfaction of the Loan Participant or, if not so met, were waived by the Loan Participant. Section 2.5 Expenses. (a) If the Owner Participant shall have made its investment provided for in Section 2.2 and the transactions contemplated by this Agreement are consummated, either the Owner Participant will promptly pay, or the Owner Trustee will promptly pay, with funds the Owner Participant hereby agrees to pay (which, Participation Agreement (TRLI 2001-1C) 7 together with the Owner Participant's Commitment, shall not exceed the amount set forth in the second sentence of Section 2.2(a)) to the Owner Trustee, the following (collectively referred to as the "Transaction Costs") if evidenced by an invoice delivered to the Owner Participant within four (4) months after the Closing Date and approved by the Lessee and the Owner Participant (such approval not to be unreasonably withheld or delayed): (i) the cost of reproducing, printing and filing the Operative Agreements, the Equipment Note, the Pass Through Documents and all amendments and supplements to the foregoing, including all costs and fees in connection with the initial filing and recording of the Lease, the Indenture and any other document required to be filed or recorded pursuant to the provisions hereof or of any other Operative Agreement and the fees and expenses of the Rating Agency in connection with the rating of the Pass Through Certificates; (ii) the reasonable out-of-pocket expenses of the Owner Participant and the reasonable fees of Winston & Strawn, special counsel for the Owner Participant, plus disbursements, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; (iii) the reasonable out-of-pocket expenses of the Collateral Agent and the Equity Collateral Agent and the reasonable fees and expenses of Andrews & Kurth L.L.P., special counsel for the Collateral Agent and Equity Collateral Agent, for their services rendered in connection with the negotiation, execution and delivery of the Operative Agreements; (iv) the reasonable fees and expenses of Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel for TILC, the Lessee and TRMI, for their services rendered in connection with the preparation of documentation, negotiation, execution and delivery of this Agreement and the other Operative Agreements; (v) the reasonable fees and expenses of Vinson & Elkins L.L.P., special counsel for the Initial Purchasers, for their services rendered in connection with the preparation of documentation, negotiation, execution and delivery of the Pass Through Documents, this Agreement and the other Operative Agreements; (vi) the reasonable fees and expenses of (x) Alvord & Alvord, special STB counsel and (y) McCarthy Tetrault, special Canadian rail counsel; Participation Agreement (TRLI 2001-1C) 8 (vii) the reasonable fees and expenses of Bingham Dana LLP, special counsel for the Owner Trustee, for their services rendered in connection with the negotiation, execution and delivery of this Agreement and the other Operative Agreements; (viii) the reasonable fees and expenses of Schwartz, Cooper, Greenberger & Krauss, special counsel for the Indenture Trustee and the Pass Through Trustee, for their services rendered in connection with the negotiation, execution and delivery of the Pass Through Documents, this Agreement and the other Operative Agreements; (ix) the reasonable fees and expenses payable to the Arranger for its services rendered as advisor to the Lessee; (x) the initial fees and reasonable out-of-pocket expenses of the Owner Trustee; (xi) the initial fees and reasonable out-of-pocket expenses of the Indenture Trustee; (xii) the initial fees and reasonable out-of-pocket expenses of the Pass Through Trustee; (xiii) the reasonable fees of Rail Solutions, Inc. (which fees shall in no event exceed $10,000.00 in the aggregate in respect of the amounts payable hereunder), plus disbursements, for their services rendered in connection with delivering the Appraisal required by Section 4.3(a) and for other consulting services; (xiv) [intentionally omitted]; (xv) the costs incurred in connection with any adjustment pursuant to Section 2.6(a); and (xvi) all costs and fees in connection with the qualification of the Pass Through Certificates under federal or state securities laws or Blue Sky laws in accordance with the provisions of the Certificate Purchase Agreement. Except as expressly provided above, Transaction Costs shall not include internal costs and expenses such as salaries and overhead of whatsoever kind or nature of, or costs incurred by, parties to this Agreement pursuant to arrangements with third parties for services (other than those expressly referred to above). Participation Agreement (TRLI 2001-1C) 9 (b) Upon the consummation of the transactions contemplated by this Agreement, the Lessee agrees to be responsible for, and will pay when due as Supplemental Rent: (i) the reasonable expenses (including reasonable legal fees and expenses) of the Owner Trustee, the Indenture Trustee, the Participants and the Certificateholders (but only to the extent their consent or approval is required under the Operative Agreements in connection with such supplements, amendments, modifications, alterations, waivers or consents described below) incurred subsequent to the delivery of the Equipment on the Closing Date, in connection with any supplements, amendments, modifications, alterations, waivers or consents (whether or not consummated) of any of the Operative Agreements which are either (1) requested by the Lessee or (2) required by any applicable law or regulation (other than laws or regulations solely relating to the business of the Lessor, the Indenture Trustee, the Trust Company, the Pass Through Trustee, the Initial Purchasers, the Collateral Agent, the Equity Collateral Agent, any Participant or any Certificateholder) or (3) entered into in connection with, or as a result of, a Lease Default or (4) required pursuant to the terms of the Operative Agreements (including such reasonable expenses incurred in connection with any adjustment pursuant to Section 2.6), (ii) the ongoing fees of the Owner Trustee under the Trust Agreement; (iii) the ongoing fees of the Indenture Trustee under the Operative Agreements, (iv) the ongoing fees of the Collateral Agent under the Collateral Agency Agreement and the ongoing fees of the Equity Collateral Agent under the Equity Collateral Security Agreement, (v) the ongoing fees of the Pass Through Trustee under the Pass Through Trust Agreement and (vi) the ongoing fees of the Deposit Account Bank under the Blocked Account Agreement; provided that, the fees referred to in clauses (iv) and (vi) immediately above shall be allocated between the transactions contemplated hereby and the transactions contemplated by the Other Participation Agreements on a pro rata basis based on the aggregate commitments of the Participants hereunder as compared with the aggregate commitments of the participants under the Other Participation Agreements. (c) If the transactions contemplated hereby are not consummated as a result of a default by the Owner Participant in its obligations to consummate the transactions contemplated hereby, the Owner Participant shall pay those Transaction Costs referred to in Sections 2.5(a)(ii) and (xiii) above and the Lessee shall pay the remainder. If the transactions contemplated hereby are not consummated due to any other reason, the Lessee shall pay all Transaction Costs. (d) Notwithstanding the foregoing provisions of this Section 2.5, the Lessee shall have no liability for (i) any costs or expenses relating to any voluntary transfer of the Owner Participant's interest in the Equipment pursuant to Section 6.1 other than during the continuance of a Lease Event of Default and no such costs or expenses shall constitute Transaction Costs, (ii) any costs or expenses Participation Agreement (TRLI 2001-1C) 10 relating to any voluntary transfer of any Loan Participant's interest in the Equipment Note and (iii) any costs or expenses relating to any voluntary transfer of any Certificateholder's interest in the Pass Through Certificates, and in each case no such costs or expenses shall constitute Transaction Costs. (e) To the extent Transaction Costs exceed 1.94% of the Total Equipment Cost, Lessee shall pay the Transaction Costs specified in Sections 2.5(a) (iv) and (ix) above up to an amount equal to the amount of such excess. Section 2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and Verification. (a) Calculation of Adjustments. In the event that (A) the Closing Date is other than December 28, 2001, (B) the actual interest rate on the Equipment Note is different from the Debt Rate or the amortization of the Equipment Note is different from that set forth on Schedule 5, (C) a refinancing contemplated by Section 10.2 occurs, (D) the actual aggregate Equipment Cost or composition of the Units is different from that set forth on Schedule 1, (E) the actual aggregate amount of Transaction Costs paid pursuant to Section 2.5(a) is other than an amount equal to 1.94% of the Total Equipment Cost, (F) there is any change in, or cost relating to a revision in, the structure of the transaction contemplated hereby as required by the Rating Agency, (G) there is any change in the Code or in the regulations promulgated thereunder or other official administrative pronouncement, which change is enacted or effective after the execution of this Agreement and prior to the Closing Date (provided that the Owner Participant or the Lessee, as the case may be, shall have provided notice to the other prior to the Closing Date), and which change alters or eliminates any tax assumption used in calculating Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, Early Purchase Price, or (H) there is any change in, or cost relating to revision in, the structure of the transaction contemplated hereby as a result of any change in generally accepted accounting principles affecting the accounting treatment of the transaction by the Owner Participant then, in each such case, the Owner Participant shall recalculate the payments or amounts, as the case may be, of Basic Rent, the allocation of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, Early Purchase Price, Scheduled Amortization and Scheduled Amortization Amount (and the corresponding Rated Amortization and Rated Amortization Amount), (i) to preserve the Net Economic Return that the Owner Participant would have realized had such event not occurred, and (ii) to minimize to the greatest extent possible, consistent with the foregoing clause (i), the present value (discounted monthly at an interest rate per annum equal to the Debt Rate) of the sum of the payments of Basic Rent to the Early Purchase Date and the Early Purchase Price; provided, however, that in no event shall the Early Purchase Price be less than the expected fair market value of the Equipment on Participation Agreement (TRLI 2001-1C) 11 the Early Purchase Date and the Basic Term Expiration Date, respectively, as determined by the Appraisal. Any such recalculation performed due to the occurrence of any one or more of the events described in clause (A), (B), (D), (E), (F), (G) or (H) above shall be made prior to the Closing Date. In performing any such recalculation and in determining the Owner Participant's Net Economic Return, the Owner Participant shall utilize the same methods and assumptions originally used in making the computations of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price initially set forth in Schedules 3-A, 3-B, 4-A, 4-B and 6 (other than those assumptions changed as a result of any of the events described in clauses (A) through (H) of the preceding sentence necessitating such recalculation; it being agreed that such recalculation shall reflect solely any changes of assumptions or facts resulting directly from the event or events necessitating such recalculation). Such adjustments shall comply (to the extent the original structure complied) with Section 467 of the Code and the requirements of Sections 4.02(5), 4.07(1) and (2) of Revenue Procedure 2001-28 calculated, except in the case of a refinancing pursuant to Section 10.2, without taking into account any change after the Closing Date in or to Section 467 of the Code (and any regulations thereunder). (b) Confirmation and Verification. Upon completion of any recalculation described in Section 2.6(a), a duly authorized officer of the Owner Participant shall provide a certificate to the Lessee either (x) stating that the amounts of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price as are then set forth in Schedules 3-A, 3-B, 4-A, 4-B and 6 do not require change, or (y) setting forth such adjustments to the amounts of Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts or Early Purchase Price as have been calculated by the Owner Participant in accordance with Section 2.6(a). Such certificate shall describe in reasonable detail the basis for any such adjustments, and any such adjustment and corresponding adjustments to the Stipulated Loss Values, Termination Values and Early Purchase Price will be computed on a basis consistent with that used by the Owner Participant in the original calculation of Basic Rent. Any such adjustment shall be deemed approved upon notice of such approval by the Lessee to the Owner Participant or on the thirty-first (31st) day following delivery of such certificate by the Owner Participant to the Lessee unless the Lessee, prior to such day, requests verification pursuant to the following sentence, and shall become effective, in the case of adjustments made pursuant to clause (A), (B), (D), (E), (F), (G) or (H) of the first sentence of Section 2.6(a), as of the earlier of (i) the first Rent Payment Date and (ii) the date the Lessee approves or has been deemed to have approved such adjustment, and, in the case of an adjustment made pursuant to clause (C) of the first sentence of Section 2.6(a), as of the date of the refinancing. If the Lessee shall so request, the recalculation of any such adjustments described in this Section 2.6 shall be verified by a nationally recognized firm of independent Participation Agreement (TRLI 2001-1C) 12 accountants selected by the Owner Participant and reasonably acceptable to the Lessee, and any such recalculation of such adjustment as so verified shall be binding on the Lessee and the Owner Participant. Such accounting firm shall be requested to make its determination within 30 days. The Owner Participant shall provide to a representative of such accounting firm, on a confidential basis, such information as it may reasonably require, including the original assumptions used by the Owner Participant and the methods used by the Owner Participant in the original calculation of, and any recalculation of, Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts, Early Purchase Price, Scheduled Amortization and Scheduled Amortization Amount (and the corresponding Rated Amortization and Rated Amortization Amount) and such other information as is necessary to determine whether the computation is accurate and in conformity with the provisions of this Agreement, provided that in no event shall the Owner Participant have any obligation to provide the Lessee with any such information; and provided, further, that the Owner Participant shall have no obligation to disclose to the Lessee, such accounting firm or any other Person, or to permit the Lessee, such accounting firm or any other Person, to examine any federal, state or local income tax returns of the Owner Participant, or books or accounting records related thereto, for any taxable year. Subject to the immediately following sentence, the costs of such verification shall be borne by the Lessee. If such accounting firm's verification shall result in a decrease in the net present value (expressed as a percentage of Total Equipment Cost, discounted monthly at a rate per annum equal to the Debt Rate) of the sum of the Basic Rent to the Early Purchase Date and the Early Purchase Price, calculated as of the Closing Date, as compared to the net present value of the sum of the Basic Rent to the Early Purchase Date and the Early Purchase Price, proposed by the Owner Participant, by more than the greater of (i) ten basis points or (ii) 5% of the proposed adjustment, then the Owner Participant agrees to reimburse the Lessee for any amounts paid for such verification. Any revised adjustment resulting from such verification shall become effective on the next Rent Payment Date after such verification has been concluded (except that, in the case of an adjustment pursuant to clause (C) of the first sentence of Section 2.6(a), such adjustment shall be effective as of the date of the refinancing), and shall take into account any underpayment or overpayment, together with interest thereon at the Debt Rate, resulting from an earlier effective ness of the original calculation. (c) Compliance. Notwithstanding the foregoing, any adjustment made to the payments of Basic Rent, Stipulated Loss Amounts, Termination Amounts or Early Purchase Price, pursuant to the foregoing, shall comply with the following requirements: (i) each installment of Basic Rent, as so adjusted, under any circumstances and in any event, will be in an amount at least sufficient for the Owner Trustee to pay in full as of the due date of such installment any payment of principal of and interest on the Equipment Note required to be paid on the due date of such installment of Basic Rent in accordance with the Scheduled Amortization, and (ii) Participation Agreement (TRLI 2001-1C) 13 Stipulated Loss Amount, Termination Amount and Early Purchase Price, as so adjusted, under any circumstances and in any event, will be an amount which, together with any other amounts required to be paid by the Lessee under the Lease in connection with an Event of Loss or a termination of the Lease, as the case may be, will be at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal of and all unpaid interest on the Equipment Note in accordance with the Scheduled Amortization accrued to the date on which Stipulated Loss Amount, Termination Amount or Early Purchase Price, as the case may be, is paid in accordance with the terms of the Lease. (d) Invoices. All invoices in respect of Transaction Costs to the extent not delivered on the Closing Date shall be directed to the Owner Participant at the address set forth in Section 10.4, with a copy to the Lessee. Section 2.7 Postponement of Closing Date. (a) If for any reason whatsoever the Closing is not consummated on the Closing Date provided for pursuant to Section 2.3 (the "Scheduled Closing Date"), the Closing shall be deemed postponed to the next Business Day or to such other Business Day on or prior to December 31, 2001 as the Lessee shall specify by facsimile or telephonic (confirmed in writing) notice to the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Initial Purchasers, in which case the Participants will keep their funds available, provided that the notice of postponement shall be received by each party no later than 4:30 p.m.,Chicago time, on the originally scheduled Closing Date, and the term "Closing Date" as used in this Agreement shall mean the postponed "Closing Date." (b) If the closing fails to occur on the Scheduled Closing Date, the Indenture Trustee shall promptly return to each Participant that makes funds avail able to it in accordance with this Section 2 such funds, together with interest or income earned thereon. (c) If the Closing fails to occur on the Scheduled Closing Date and funds are not returned to each Participant that made funds available by the Indenture Trustee as provided by Section 2.7(b) above, the Indenture Trustee shall, if so instructed by the Lessee in the facsimile or telephonic (confirmed in writing) notice from the Lessee (which notice shall specify the Specified Investments to be purchased), use reasonable best efforts to invest, at the risk of the Lessee (except as provided below with respect to the Indenture Trustee's gross negligence or willful misconduct), the funds received by the Indenture Trustee from the Participants in Specified Investments in accordance with the Lessee's instructions. Any such Specified Investments purchased by the Indenture Trustee upon instructions from the Lessee shall be held in trust by the Indenture Trustee (but not as part of the Indenture Participation Agreement (TRLI 2001-1C) 14 Estate under the Indenture) for the benefit of the Participants that provided such funds. In order to obtain funds for the payment of the Equipment Cost for the Units on the Closing Date or to return funds to the Participants pursuant to Section 2.7(b), the Indenture Trustee is authorized to sell any Specified Investments purchased as aforesaid. The Indenture Trustee shall not be liable for failure to invest such funds or for any losses incurred on such investments except for losses resulting from its own willful misconduct or gross negligence. (d) If the Closing fails to occur on the Scheduled Closing Date, unless the Indenture Trustee returns all funds to the Participants by 2:00 p.m., Chicago time, on the Scheduled Closing Date, the Lessee shall reimburse each Participant that has made funds available pursuant to this Section 2 for the loss of the use of its funds an amount equal to the excess, if any, of (x) interest on such funds at the Debt Rate for the period from and including the Scheduled Closing Date to but excluding the actual Closing Date or, if earlier, the day on which such Participant's funds are returned if such return is made by 2:00 p.m., Chicago time (or to but excluding the next following Business Day if such return is not made by such time); provided that with respect to the Owner Participant such period shall in any case be at least one day, unless the Owner Participant shall have received, prior to 12:00 noon (Chicago time) on the Business Day preceding the Scheduled Closing Date, a notice of postponement of the Scheduled Closing Date pursuant to Section 2.7(a), over (y) any amount paid to such Participant in respect of interest or income earned by the Indenture Trustee on such funds pursuant to Section 2.7(c) above. (e) If the Closing fails to occur on the Scheduled Closing Date, the Lessee shall, on the Closing Date or on the date funds are required to be returned to the Participants pursuant to Section 2.7(b) above, reimburse the Indenture Trustee, for the benefit of the Participants that provided funds which are invested by the Indenture Trustee pursuant to this Section 2.7 for any losses incurred on such investments (except with respect to any Participant, if the Closing failed to occur as a result of default by such Participant, or with respect to the Owner Participant, as result of default of the Owner Trustee (acting pursuant to instructions from the Owner Participant)). All income and profits on the investment of such funds shall be for the respective accounts of such Participants, and the Indenture Trustee shall not be liable for failure to invest such funds or for any losses incurred on such investments, except for its willful misconduct or gross negligence. (f) Notwithstanding the provisions of Section 2.7(a), the Participants shall not be under any obligation to make their respective commitments available beyond 2:00 p.m. (Chicago time) on December 31, 2001. Participation Agreement (TRLI 2001-1C) 15 SECTION 3. REPRESENTATIONS AND WARRANTIES. Section 3.1 Representations and Warranties of the Trust Company. Trust Company, in its individual capacity (except with respect to clauses (c), (k) and (m) (to the extent applicable to Trust Company in its capacity as Owner Trustee) below) and as Owner Trustee with respect to clauses (c), (f) and (k) (to the extent applicable to Trust Company in its capacity as Owner Trustee) below, represents and warrants to each of the Owner Participant, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee, notwithstanding the provisions of Section 10.13 or any similar provision in any other Operative Agreement, that, as of the date hereof: (a) Trust Company (i) is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States of America, (ii) has the full corporate power, authority and legal right under the laws of the State of Connecticut and the United States pertaining to its banking, trust and fiduciary powers to carry on its business as now conducted and execute, deliver and perform its obligations hereunder and under the Trust Agreement and (iii) assuming due authorization, execution and delivery of the Trust Agreement by the Owner Participant, has full power and authority, as Owner Trustee and/or, to the extent expressly provided herein or therein, in its individual capacity, to execute, deliver and perform its obligations under each of the Owner Trustee Agreements; (b) (i) Trust Company has duly authorized, executed and delivered the Trust Agreement, (ii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, Trust Company in its trustee capacity and, to the extent expressly provided therein, in its individual capacity, has, or on or prior to the Closing Date will have, duly authorized, executed and delivered each of the other Owner Trustee Agreements and, as of the Closing Date, the Equipment Note, the Lease Supplement and the Indenture Supplement to be delivered on the Closing Date, (iii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust is a Connecticut statutory trust duly organized and validly existing in good standing under the laws of the State of Connecticut and (iv) the Trust Agreement constitutes a legal, valid and binding obligation of Trust Company enforceable against it in accordance with the terms thereof except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, each of the Owner Trustee Agreements (other than the Trust Agreement) to which it is a party constitutes, or when entered into will constitute, a legal, valid and binding obligation of the Owner Trustee, enforceable against it in accordance with the terms thereof, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Participation Agreement (TRLI 2001-1C) 16 similar laws affecting the rights of creditors generally and by general principles of equity; (d) neither the execution and delivery by Trust Company or Owner Trustee, as the case may be, of the Owner Trustee Agreements or the Equipment Note to be delivered on the Closing Date, nor the consummation by Trust Company or Owner Trustee, as the case may be, of any of the transactions contemplated hereby or thereby, nor the compliance by Trust Company or Owner Trustee, as the case may be, with any of the terms and provisions hereof and thereof, (i) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it in its individual capacity, or (ii) violates or will violate its articles of association or bylaws, or contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, any indenture, mortgage, chattel mortgage, deed of trust, conditional sale contract, bank loan or credit agreement, license or other agreement or instrument to which Trust Company is a party or by which it or any of its properties may be bound or affected, or contravenes or will contravene any law, governmental rule or regulation of the United States of America or the State of Connecticut governing the banking, trust or fiduciary powers of Trust Company, or any judgment or order applicable to or binding on it; (e) there are no Taxes payable by Trust Company or the Owner Trustee, imposed by the State of Connecticut or any political subdivision thereof in connection with the execution and delivery by Trust Company of the Trust Agreement, and, as Trust Company or Owner Trustee, as the case may be, of this Agreement, the other Owner Trustee Agreements (other than the Trust Agreement) or the Equipment Note to be delivered on the Closing Date solely because Trust Company is a national banking association with its principal place of business in Connecticut and performs certain of its duties as Owner Trustee in the State of Connecticut; and there are no Taxes payable by Trust Company or the Owner Trustee, as the case may be, imposed by the State of Connecticut or any political subdivision thereof in connection with the acquisition of its interest in the Equipment (other than franchise or other taxes based on or measured by any fees or compensation received by Trust Company or the Owner Trustee for services rendered in connection with the transactions contemplated hereby) solely because Trust Company is a national banking association with its principal place of business in Connecticut and performs certain of its duties as Owner Trustee in the State of Connecticut; (f) there are no pending or, to its knowledge, threatened actions or proceedings against Trust Company or the Owner Trustee, before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of Trust Company or the Owner Participation Agreement (TRLI 2001-1C) 17 Trustee, as the case may be, to perform its obligations under the Trust Agreement, the other Owner Trustee Agreements or the Equipment Note to be delivered on the Closing Date; (g) both its chief executive office, and the place where its records concerning the Equipment and all its interest in, to and under all documents relating to the Trust Estate, are located in Hartford, Connecticut, and Trust Company agrees to give the Owner Participant, the Indenture Trustee and the Lessee written notice within 30 days following any relocation of said chief executive office or said place from its present location; (h) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut state or local governmental authority or agency or any United States federal governmental authority or agency regulating the banking or trust powers of Trust Company is required for the execution and delivery of, or the carrying out by, Trust Company or the Owner Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust Agreement or of any of the transactions contemplated by any of the other Owner Trustee Agreements, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken; (i) on the Closing Date, the Owner Trustee's right, title and interest in and to the Equipment delivered on the Closing Date shall be free and clear of any Lessor's Lien attributable to Trust Company; (j) proceeds received by the Owner Trustee from the Owner Participant pursuant to the Trust Agreement will be administered by it in accordance with Article III of the Trust Agreement; (k) the Owner Trustee shall receive from the Lessee such title as was conveyed to it by the Lessee, subject to the rights of the Owner Trustee and the Lessee under the Lease and the Lien created pursuant to the Indenture and the Indenture Supplement in respect of the Equipment delivered on the Closing Date, and there will be no Lessor's Liens attributable to the Owner Trustee on the Equipment or any interest therein or on the Trust Estate; (l) to its knowledge, no Indenture Default has occurred and is continuing; and (m) the Owner Trustee is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by Participation Agreement (TRLI 2001-1C) 18 this Agreement and the other Operative Agreements will be used by the Owner Trustee for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.1(m) with such meanings. Section 3.2 Representations and Warranties of the Lessee. The Lessee represents and warrants to the Owner Trustee, the Indenture Trustee and the Participants, as of the date hereof: (a) as to organization, powers and partnership organizational documents: (i) the Lessee is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Texas, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to enter into and perform its obligations under the Lessee Agreements, is a special purpose limited partnership organized to enter into the transactions contemplated by this Agreement, the Lessee Agreements, the Lessee Agreements (as defined in each Other Participation Agreement), the Pass Through Documents to which it is a party and the Other Pass Through Documents to which it is a party, has the limited partnership power and authority to sell the Equipment described on Schedule 1 hereto to the Owner Trustee and to assign the Existing Equipment Subleases, as contemplated by this Agreement, to pledge the Equity Collateral to the Equity Collateral Agent as contemplated hereunder and under the Equity Collateral Security Documents, and had the limited partnership power and authority to pledge the Pledged Equipment to the Collateral Agent and to assign the Existing Pledged Equipment Leases, as contemplated by the Participation Agreement TRLI 2001-1A, and to carry on its business as now conducted, has the requisite limited partnership power and authority to execute, deliver and perform its obligations under the Lessee Agreements and has conducted no business or operations prior to the date hereof (other than those associated with its organization and capitalization or as contemplated by the Operative Agreements or the Other Operative Agreements); (ii) the General Partner is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to execute, deliver and perform its obligations under the Partnership Agreement and each other organizational document of the Partnership to which the General Partner is a party; Participation Agreement (TRLI 2001-1C) 19 (iii) the Limited Partner is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to execute, deliver and perform its obligations under the Partnership Agreement and each other organizational document of the Partnership to which the Limited Partner is a party; (iv) the General Partner and the Limited Partner are the only partners of the Partnership; (v) the execution, delivery and performance by each Partner of the Partnership Agreement and each other organizational document of the Partner ship to which such Partner is a party (A) have been duly authorized by all requisite limited liability company or member action of such Partner and (B) did not and do not (x) violate (i) any provision of law, statute, rule or regulation, or of the certificate of formation or limited liability company agreement or other constitutive documents of such Partner, (ii) any order of any governmental authority or (iii) any provision of any indenture, agreement or other instrument to which such Partner is a party or by which it or any of its property is or may be bound, (y) conflict with, result in a breach of or constitute (alone or with notice, or lapse of time or both) a default under any such indenture, agreement or other instrument or (z) result in the creation or imposition of any Lien upon any property or assets of such Partner; (vi) each of the Partnership Agreement and each other organizational document of the Partnership has been duly executed and delivered by each party thereto and constitutes a legal, valid and binding obligation of each such party enforceable against such party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (b) each of the Lessee Agreements and the Pass Through Documents to which the Lessee is a party has been duly authorized by all necessary limited partnership action of the Lessee and, if required, limited liability company action of each Partner, this Agreement has been duly executed and delivered (and in the case of the other Lessee Agreements, such other Lessee Agreements will on the Closing Date have been duly executed and delivered) by the General Partner in its capacity as the general partner of the Lessee, and constitutes (and in the case of the other Lessee Agreements, such other Lessee Agreements will on the Closing Date constitute) the legal, valid and binding obligations of the Lessee (assuming the due authorization, execution and delivery by each other party thereto), enforceable against the Lessee in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; Participation Agreement (TRLI 2001-1C) 20 (c) the execution, delivery and performance by the Lessee of each Lessee Agreement and each Pass Through Document to which Lessee is a party and compliance by the Lessee with all of the provisions thereof do not and will not contravene any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on the Lessee or any of its properties, or contravene the provisions of, or constitute a default by the Lessee under, or result in the creation of any Lien (except for Permitted Liens) upon the property of the Lessee under its organizational documents or any indenture, mortgage, contract or other agreement or instrument to which the Lessee is a party or by which the Lessee or any of its properties may be bound or affected; (d) there are no proceedings pending or, to the knowledge of the Lessee, threatened against the Lessee or any Partner in any court or before any governmental authority or arbitration board or tribunal. The Lessee and each Partner are not subject to any order of any court or governmental authority or arbitration board or tribunal; (e) the unaudited balance sheet of the Lessee as of the Closing Date fairly presents, in conformity with generally accepted accounting principles applied on a pro forma basis, the pro forma financial position of the Lessee as of such date; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebted ness of the Lessee or any governmental authority on the part of the Lessee is required in the United States or Canada in connection with the execution and delivery by the Lessee of the Lessee Agreements or in order for the Lessee to perform its obligations thereunder in accordance with the terms thereof, other than (i) notices required to be filed with the STB and the Registrar General of Canada as described in Section 3.2(g), which notices shall have been filed on the Closing Date, (ii) as may be required under existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing Date in connection with the operation and maintenance of the Equipment, the Pledged Equipment and the Subleases and the Pledged Equipment Leases in accordance with the Operative Agreements which are routine in nature and are not normally applied for prior to the time they are required, and which the Lessee has no reason to believe will not be timely obtained, (iii) as may be required under the Operative Agreements in connection with any refinancing of the Equipment Notes, (iv) as may be required under the Operative Agreements in consequence of any transfer of the Beneficial Interest or any transfer of ownership of the Equipment or the Pledged Equipment and (v) filing and recording to perfect the Liens under the Indenture, the Collateral Participation Agreement (TRLI 2001-1C) 21 Agency Agreement and the Equity Collateral Security Agreement as required thereunder; (g) the Lease, the Lease Supplement, the Indenture and the Indenture Supplement (each in respect of the Units delivered on the Closing Date), the Collateral Agency Agreement (or a memorandum with respect to any or all of such documents), the TILC Bill of Sale, the Bill of Sale, the TILC Assignment and the Assignment will on or before the Closing Date be duly filed with the STB pursuant to 49 U.S.C. Section 11301 and deposited with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act, and such filing with the STB pursuant to 49 U.S.C. Section 11301 and such deposit with the Registrar General of Canada will under the laws of the United States and Canada perfect the Owner Trustee's, the Indenture Trustee's and the Collateral Agent's rights in such Operative Agreements and in the Units described on Schedule 1 hereto and the Pledged Units and no other filing, recording or deposit with, or giving of notice to any other U.S. federal, state or local government or Canadian national or provincial government or agency thereof, or any other action, is necessary in order to protect the rights of the Owner Trustee, the Indenture Trustee and the Collateral Agent in such Operative Agreements or in such Units in the United States, any state thereof or the District of Columbia or Canada or any province thereof; (h) the Equipment described on Schedule 1 hereto is covered by the insurance required by Section 12 of the Lease and the Pledged Equipment is covered by the insurance required by Section 6.4 of the Collateral Agency Agreement, and all premiums due prior to the Closing Date in respect of such insurance shall have been paid in full and such insurance is in full force and effect; (i) (x) no Lease Default has occurred and is continuing and, to the knowledge of the Lessee, no Event of Loss, Pledged Unit Event of Loss or event which, with the giving of notice, the passage of time or both, would constitute an Event of Loss or a Pledged Unit Event of Loss, has occurred; (y) no Lease Default (as defined in the Lease Agreement TRLI 2001-1A) has occurred and is continuing and (z) no Lease Default (as defined in the Lease Agreement TRLI 2001-1B) has occurred and is continuing; (j) neither the Lessee nor any Partner is an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (k) the acquisition by the Owner Participant of the Beneficial Interest for its own account will not constitute a prohibited transaction within the meaning of Section 4975(c)(1)(A) through (D) of the Code or Section 406(a)(1)(A) through (D) of ERISA. The representation made by the Lessee in the preceding Participation Agreement (TRLI 2001-1C) 22 clause is made in reliance upon and subject to the accuracy of the representation of the Owner Participant in Section 3.5(h) and the accuracy of the representation of the Initial Purchasers set forth in Section 4(e) of the Certificate Purchase Agreement; (l) on the Closing Date, (i) the Lessee shall have and shall pursuant to the Bill of Sale relating to the Equipment described on Schedule 1 hereto convey to the Owner Trustee, all legal and beneficial title to such Equipment free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyance will not be void or voidable under any applicable law; (ii) the Lessee shall have, and the Assignment to be delivered on the Closing Date shall assign to the Owner Trustee, all legal and beneficial title to the Existing Equipment Subleases, free and clear of all Liens (other than in each case Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; (iii) all of the Units delivered on the Closing Date are subject to sublease by Sublessees under the Existing Equipment Subleases on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; and (iv) the Lessee has all legal and beneficial title to the Pledged Equipment and the Pledged Equipment Leases free and clear of all Liens (other than Permitted Liens of the type described in clauses (ii), (iii), (iv) and (v) of the definition thereof). In addition, all of the Pledged Units under the Existing Pledged Equipment Leases delivered pursuant to the Pledged Equipment Transfer and Assignment Agreements (x) were, as of the date of the respective Pledged Equipment Transfer and Assignment Agreement, subject to lease by Pledged Equipment Lessees on rental and other terms which were no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet, as of such date, and (y) as of the Closing Date, are subject to the Existing Pledged Equipment Leases as assigned pursuant to the Pledged Equipment Transfer and Assignment Agreements. As of the Closing Date, the Lessee is not in default under any Existing Pledged Equipment Leases, and, to the best of the Lessee's knowledge, there are no defaults by any Pledged Equipment Lessee thereunder existing as of the Closing Date under the Existing Pledged Equipment Leases, except such defaults as are not material; (m) the written information provided by the Lessee or on behalf of the Lessee to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto (with respect to each document set forth in Part I of Schedule 3.2(m), as of the date such information was provided to the Owner Participant and/or the Loan Participant, and with respect to each document set forth in Part II of Schedule 3.2(m), as of the Closing Date) does not contain any untrue statement of a material fact and does not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were Participation Agreement (TRLI 2001-1C) 23 made, not misleading. The assumptions and related financial information relating to the proposed business and operations of the Lessee and the Partnership Fleet which are contained in the information on Schedule 3.2(m) have been prepared in good faith based upon information that the Lessee deems fair and reasonable, and there are no statements or conclusions therein which are based on or include information known to the Lessee to be misleading in any material respect or which fail to take into account material information known to the Lessee regarding the matters stated therein (with respect to the information set forth in Part I of Schedule 3.2(m), as of the date such statements or conclusions were made to the Owner Participant and/or the Loan Participant, and with respect to the information set forth in Part II of Schedule 3.2(m), as of the Closing Date). Certain information contained in the information on Schedule 3.2(m) (e.g. statistical information relating to renewal and remarketing of railcars, potential increases in absolute or nominal railcar lease rates, anticipated utilization, and maintenance costs) is based on the historical experience of TILC. Subject to the foregoing, there can be no assurance that past experience will be indicative of future performance with respect to these or other operating and marketing factors set forth in the information on Schedule 3.2(m); (n) the Lessee and the Partners are not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by the Lessee or any Partner for a purpose which violates, or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.2(n) with such meanings; (o) the Lessee is not in violation of any term of any of its organizational documents or any other agreement or instrument to which it is a party or by which it may be bound. The Lessee is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject and the Lessee has obtained all required licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (p) on the Closing Date, all sales, use or transfer taxes, if any, due and payable upon the purchase of the Equipment described on Schedule 1 hereto by the Lessee from TILC and by the Owner Trustee from the Lessee and upon the lease thereof by the Owner Trustee to the Lessee and, if applicable, upon the assignment of the Existing Equipment Subleases from TILC to the Lessee and by the Lessee to the Owner Trustee and upon the purchase of the Pledged Equipment by the Lessee from TILC and, if applicable, upon the assignment of the Existing Pledged Equipment Participation Agreement (TRLI 2001-1C) 24 Leases from TILC to the Lessee, have been paid or will have been paid or such transactions will then be exempt from any such taxes, and the Lessee will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations. No taxes, fees or other charges in connection with the execution and delivery of the Operative Agreements or the issuance and sale of the Equipment Note to be delivered on the Closing Date are payable; (q) no broker's or finder's or placement fee or commission will be payable with respect to the transactions contemplated by the Operative Agreements as a result of any action by the Lessee, except for the fees of the Arranger, which shall be included in Transaction Costs as provided in this Agreement, and the Lessee agrees that it will hold the Participants, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee harmless from any claim, demand or liability for broker's or finder's or placement fees or commission alleged to have been incurred as a result of any action by the Lessee in connection with this transaction; (r) (i) each Unit delivered on the Closing Date, taken as a whole, and each major component thereof, complies in all material respects with all applicable laws and regulations, conforms with the specifications for such Unit contained in the Appraisal referred to in Section 4.3(a) hereof (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to the Lessee) and is substantially complete such that it is ready and available to operate in commercial service and otherwise perform the function for which it was designed; and the railcar identification marks shown on Schedule 1 are the marks presently used on the Units of Equipment set forth on Schedule 1, (ii) on the Closing Date (as defined in the Participation Agreement TRLI 2001-1A), each Pledged Unit, taken as a whole, and each major component thereof, conformed with the specifications for such Pledged Unit contained in the Appraisal referred to in Section 4.3(a) of the Participation Agreement TRLI 2001-1A (to the extent a copy of such Appraisal or a relevant excerpt therefrom had been delivered to the Lessee) and (iii) on the Closing Date, each Pledged Unit, taken as a whole, and each major component thereof, complies in all material respects with all applicable laws and regulations and is substantially complete such that it is ready and available to operate in commercial service and otherwise perform the function for which it had been designed; and the railcar identification marks shown on Schedule 1-A to each Pledged Equipment Transfer and Assignment Agreement are the marks presently used on the Pledged Units except that CFMX 2115 has been remarked to TILX 5660, and CFMX 2118 has been remarked to TILX 5663; and (s) neither the Lessee nor any Partner is subject to regulation as a "holding company," an "affiliate" of a "holding company," or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Participation Agreement (TRLI 2001-1C) 25 Section 3.3 Representations and Warranties of the Indenture Trustee. The Indenture Trustee represents and warrants to the Owner Participant, the Owner Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Indenture Trustee is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States and has the full corporate power, authority and legal right under the laws of the State of Illinois and the United States pertaining to its banking, trust and fiduciary powers to execute, deliver and perform its obligations under each of the Indenture Trustee Agreements; (b) the execution, delivery and performance by the Indenture Trustee of each of the Indenture Trustee Agreements have been duly authorized by the Indenture Trustee and will not violate any applicable federal or Illinois law governing its banking or trust powers or its charter documents or bylaws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or any of its properties may be bound or affected; (c) this Agreement has been duly executed and delivered and constitutes, and each of the other Indenture Trustee Agreements, when executed and delivered, will constitute (assuming the due authorization, execution and delivery by each other party thereto) the legal, valid and binding obligation of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (d) there are no proceedings pending or, to the knowledge of the Indenture Trustee, threatened, and to the knowledge of the Indenture Trustee there is no existing basis for any such proceedings, against or affecting the Indenture Trustee in or before any court or before any governmental authority or arbitration board or tribunal which, individually or in the aggregate, if adversely determined, might impair the ability of the Indenture Trustee to perform its obligations under the Indenture Trustee Agreements; (e) no authorization or approval or other action by, and no notice to or filing with, any stockholder, trustee or holder of indebtedness or any federal or Illinois state governmental authority or regulatory body governing the Indenture Trustee in its trust capacity, is required for the due execution, delivery and performance by the Indenture Trustee of the Indenture Trustee Agreements, except as have been previously obtained, given or taken; Participation Agreement (TRLI 2001-1C) 26 (f) the Indenture Trustee is not in default under any of the Indenture Trustee Agreements; and (g) neither the Indenture Trustee, nor any Person authorized to act on behalf of the Indenture Trustee, has directly or indirectly offered any interest in the Trust Estate or the Equipment Note or any security similar to either thereof related to this transaction for sale to, or solicited offers to buy any of the same from, or otherwise approached or negotiated with respect to any of the same with, any Person other than the Pass Through Trustee and the Initial Purchasers. Section 3.4 Representations, Warranties and Covenants Regarding Beneficial Interest, Equipment Note and Pass Through Certificates. (a) Owner Trustee and Trust Company. Each of the Owner Trustee and the Trust Company represents and warrants to the Lessee, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Owner Participant that, as of the date hereof and as of the Closing Date, except as expressly provided in the Operative Agreements, neither the Owner Trustee, nor the Trust Company nor any Person authorized or employed by the Owner Trustee or the Trust Company as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (b) Lessee. The Lessee represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither the Lessee nor any Person authorized or employed by the Lessee as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (c) TRMI. TRMI represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither TRMI nor any Person authorized or employed by TRMI as agent or otherwise has directly or indirectly offered or sold Participation Agreement (TRLI 2001-1C) 27 any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (d) TILC. TILC represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither TILC nor any Person authorized or employed by TILC as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (e) Owner Participant. The Owner Participant represents and warrants to the Owner Trustee, the Indenture Trustee, TILC, TRMI, the Lessee and the Pass Through Trustee that, as of the date hereof and as of the Closing Date, neither the Owner Participant nor any Person authorized or employed by the Owner Participant as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (f) Pass Through Trustee. The Pass Through Trustee represents and warrants to the Owner Trustee, the Indenture Trustee, TILC, TRMI, the Lessee and the Owner Participant that, as of the date hereof and as of the Closing Date, neither the Pass Through Trustee nor any Person authorized or employed by the Pass Through Trustee as agent or otherwise has directly or indirectly offered or sold any interest in the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. Participation Agreement (TRLI 2001-1C) 28 (g) Future Actions. Each of the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee and the Pass Through Trustee agrees, as to its own actions only, severally but not jointly, that neither the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee nor the Pass Through Trustee nor anyone acting on behalf of the Owner Trustee, the Trust Company, the Owner Participant, the Lessee, TILC, TRMI, the Indenture Trustee or the Pass Through Trustee will offer the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof or any similar interest for issue or sale to any prospective purchaser, or solicit any offer to acquire any of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof so as to cause Section 5 of the Securities Act to apply to the issuance and sale of the Beneficial Interest, the Equipment Note, the Pass Through Certificates or any part thereof. Section 3.5 Representations and Warranties of the Owner Participant. The Owner Participant represents and warrants to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Owner Participant is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has full limited partnership power and authority to carry on its business as now conducted; (b) the Owner Participant has the requisite limited partnership power and authority to execute, deliver and perform its obligations under the Owner Participant Agreements, and the execution, delivery and performance by it thereof do not and will not contravene any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on the Owner Participant or any of its properties, or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than such as are created by the Operative Agreements) upon the Equipment under, its Certificate of Limited Partnership, limited partnership agreement or any indenture, mortgage, contract or other agreement or instrument to which the Owner Participant is a party or by which it or any of its properties may be bound or affected; (c) the Owner Participant Agreements have been duly authorized by all necessary actions on the part of the Owner Participant and its general partner, do not require any approval not already obtained of the partners of the Owner Participant or any approval or consent not already obtained of any trustee or holders of indebtedness or obligations of the Owner Participant, have been, or on or before the Closing Date will be, duly executed and delivered by the general partner of the Owner Participant in its capacity as general partner of the Owner Participant and Participation Agreement (TRLI 2001-1C) 29 (assuming the due authorization, execution and delivery by each other party thereto) constitute, or will constitute, the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity; (d) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery or performance by the Owner Participant of the Trust Agreement, the Tax Indemnity Agreement or this Agreement; (e) the Trust Estate is free and clear of any Lessor's Lien attributable to the Owner Participant; (f) there are no pending or, to the Owner Participant's knowledge, threatened actions or proceedings against the Owner Participant before any court or administrative agency which would materially adversely affect the Owner Participant's ability to perform its obligations under the Trust Agreement, the Tax Indemnity Agreement or this Agreement; (g) as of the Closing Date, the Owner Participant is purchasing the Beneficial Interest to be acquired by it for its own account with no present intention of distributing such Beneficial Interest or any part thereof in any manner which would violate the Securities Act, but without prejudice, however, to the right of the Owner Participant at all times to sell or otherwise dispose of all or any part of such Beneficial Interest in compliance with the Securities Act and any state securities or "blue sky" laws; provided, however, that subject to the provisions of Section 6.1, the disposition of the Beneficial Interest shall at all times be within the Owner Participant's control. The Owner Participant acknowledges that its Beneficial Interest has not been registered under the Securities Act, and that neither the Owner Participant, the Owner Trustee, Trust Company, the Lessee, TRMI nor TILC contemplates filing, or is legally required to file, any such registration statement. Notwithstanding the foregoing, the Owner Participant makes no representation that the Beneficial Interest is a "security" within the meaning of such term under the Securities Act; (h) with respect to the source of the amount to be invested by the Owner Participant pursuant to Section 2.2, no part of such amount constitutes assets of any employee benefit plan subject to Title I of ERISA or Section 4975 of the Code; and Participation Agreement (TRLI 2001-1C) 30 (i) no broker's or finder's or placement fee or commission will be payable with respect to the transactions contemplated by the Operative Agreements as a result of any action by the Owner Participant, and the Owner Participant agrees that it will hold TILC, TRMI, the Lessee, the Indenture Trustee, the Loan Participant and the Owner Trustee harmless from any claim, demand or liability for broker's or finder's or placement fees or commission alleged to have been incurred as a result of any action by the Owner Participant in connection with this transaction. Section 3.6 Representations and Warranties of TILC. TILC represents and warrants to each of the Owner Trustee, the Indenture Trustee and the Participants, as of the date hereof: (a) TILC is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TILC Agreements, the Pledged Equipment Transfer and Assignment Agreements, the TILC Pledged Equipment Assignments and the TILC Pledged Equipment Bills of Sale, has the power and authority to carry on its business as now conducted, and has the requisite power and authority to execute, deliver and perform its obligations under the TILC Agreements; (b) the TILC Agreements have been duly authorized by all necessary corporate action, executed and delivered by TILC, and (assuming the due authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of TILC, enforceable against TILC in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by TILC of each TILC Agreement and compliance by TILC with all of the provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on TILC or any of its properties, or (ii) the provisions of, or constitute a default by TILC under, its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or other agreement or instrument to which TILC is a party or by which TILC or any of its properties may be bound or affected except, with respect to clause (iii), where such contravention would not materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business; Participation Agreement (TRLI 2001-1C) 31 (d) there are no proceedings pending or, to the knowledge of TILC, threatened against TILC in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business; (e) TILC is not in violation of any term of any charter instrument or bylaw or any other material agreement or instrument to which it is a party or by which it may be bound except where such violation would not materially adversely affect TILC's ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business. TILC is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TILC to perform its obligations under the TILC Agreements, and has obtained all required licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebtedness of TILC or any governmental authority on the part of TILC is required in the United States in connection with the execution and delivery by TILC of the TILC Agreements, or is required to be obtained in order for TILC to perform its obligations thereunder in accordance with the terms thereof, other than (i) as may be required under existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing Date in connection with the performance of its obligations under the TILC Agreements and which are routine in nature and are not normally applied for prior to the time they are required, and which TILC has no reason to believe will not be timely obtained or (ii) as may be required under the Operative Agreements in consequence of any transfer of ownership of the Equipment occurring after the Closing Date; (g) to the best knowledge of TILC, no casualty event or other event that may constitute an Event of Loss under the Lease or a Pledged Unit Event of Loss under the Collateral Agency Agreement has occurred as of the date of this Agreement with respect to any Unit delivered on the Closing Date or any Pledged Unit; (h) (i) TILC shall have, and the TILC Bill of Sale to be delivered on the Closing Date shall convey to the Lessee, all legal and beneficial title to the Units which are being delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition Participation Agreement (TRLI 2001-1C) 32 thereof), and such conveyance will not be void or voidable under any applicable law; (ii) TILC shall have, and the TILC Assignment to be delivered on the Closing Date shall assign to the Lessee, all legal and beneficial title to the Existing Equipment Subleases, free and clear of all Liens (other than subleases of the Existing Equipment Subleases by the Sublessees as expressly permitted by the Existing Equipment Subleases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignment will not be void or voidable under any applicable law; (iii) all of the Units being delivered on the Closing Date other than an immaterial amount shall be subject to sublease by the Sublessees under the Existing Equipment Subleases on rental and other terms which are no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet; (iv) the TILC Pledged Equipment Bills of Sale have conveyed to the Lessee, all legal and beneficial title to the Pledged Units, free and clear of all Liens (other than Permitted Liens of the type described in clause (v) below with respect to the Existing Pledged Equipment Leases, and in clauses (iii), (iv) and (v) of the definition thereof), and such conveyances are not void or voidable under any applicable law; (v) the TILC Pledged Equipment Assignments have assigned to the Lessee all legal and beneficial title to the Existing Pledged Equipment Leases, free and clear of all Liens (other than leases of the Existing Pledged Equipment Leases by the Pledged Equipment Lessees as expressly permitted by the Existing Pledged Equipment Leases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof), and such assignments are not void or voidable under any applicable law; and (vi) all of the Pledged Units delivered pursuant to the Pledged Equipment Transfer and Assignment Agreements other than an immaterial amount were subject to lease by the Pledged Equipment Lessees under the Existing Pledged Equipment Leases on rental and other terms which were, as of the respective date of the Pledged Equipment Transfer and Assignment Agreements, no different, taken as a whole, from those for similar railcars in the rest of the TILC Fleet, as of such date; (i) (a) all sales, use or transfer taxes, if any, due and payable upon the sale of the Equipment and assignment of Existing Equipment Subleases by TILC to the Lessee will have been paid or such transactions will then be exempt from any such taxes and TILC will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations; and (b) all sales, use or transfer taxes, if any, due and payable upon the sale of the Pledged Equipment and assignment of Existing Pledged Equipment Leases by TILC to the Lessee have been paid or such transactions have then been exempt from any such taxes and TILC has caused or will cause any required forms or reports in connection with such taxes to be filed in accordance with applicable laws and regulations; (j) all Units delivered on the Closing Date are, and all Pledged Units delivered to the Lessee were when delivered, substantially similar in terms of objectively identifiable characteristics that are relevant for purposes of the services to Participation Agreement (TRLI 2001-1C) 33 be performed by TILC under the Management Agreement to the equipment in the TILC Fleet; (k) (i) in selecting the Units to be sold on the Closing Date to the Lessee pursuant to the TILC Bill of Sale, TILC has not discriminated against the Lessee in a negative fashion when such Units are compared with the other equipment in the TILC Fleet, and (ii) in selecting the Pledged Units sold to the Lessee pursuant to the TILC Pledged Equipment Bills of Sale, TILC did not discriminate against the Lessee in a negative fashion when Pledged Units were then compared with the other equipment in the TILC Fleet, as of such respective date; (l) the written information provided by TILC or on behalf of TILC to the Owner Participant and/or the Loan Participant in each document set forth on Schedule 3.2(m) hereto (with respect to each document set forth in Part I of Schedule 3.2(m), as of the date such information was provided to the Owner Participant and/or the Loan Participant, and with respect to each document set forth in Part II of Schedule 3.2(m), as of the Closing Date) does not contain any untrue statement of a material fact and does not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The assumptions and related financial information relating to the proposed business and operations of TILC and the Partnership Fleet which are contained in the information on Schedule 3.2(m) have been prepared in good faith based upon information that TILC deems fair and reasonable, and there are no statements or conclusions therein which are based on or include information known to TILC to be misleading in any material respect or which fail to take into account material information known to TILC regarding the matters stated therein (with respect to the information set forth in Part I of Schedule 3.2(m), as of the date such statements or conclusions were made to the Owner Participant and/or the Loan Participant, and with respect to the information set forth in Part II of Schedule 3.2(m), as of the Closing Date). Certain information contained in the information on Schedule 3.2(m) (e.g. statistical information relating to renewal and remarketing of railcars, potential increases in absolute or nominal railcar lease rates, anticipated utilization, and maintenance costs) is based on the historical experience of TILC. Subject to the foregoing, there can be no assurance that past experience will be indicative of future performance with respect to these or other operating and marketing factors set forth in the information on Schedule 3.2(m); (m) the representations and warranties of the Lessee contained in Section 3.2(h), clause (iii) of Section 3.2(l), the first sentence of Section 3.2(p) and in Section 3.2(r) (to the extent a copy of any such Appraisal or a relevant excerpt therefrom has been delivered to TILC) are true and correct as of the date hereof (except with respect to representations and warranties made as of an earlier date, in which case such representations and warranties shall be true as of such earlier date); Participation Agreement (TRLI 2001-1C) 34 (n) TILC is not in default under any Existing Equipment Subleases, and, to the best of the TILC's knowledge, there are (i) no defaults by any Sublessee thereunder existing as of the date hereof under the Existing Equipment Subleases, except such defaults as are not material, (ii) no claims or liabilities arising as a result of the operation or use of any Unit described on Schedule 1 hereto prior to the date hereof as to which the Lessor, as owner of the Units delivered on the Closing Date, would be liable. TILC was not in default under any Existing Pledged Equipment Leases on the respective date of the applicable Pledged Equipment Transfer and Assignment Agreement, and, to the best of the TILC's knowledge, there were (i) no defaults by any Pledged Equipment Lessee thereunder existing as of each such relevant date under the Existing Pledged Equipment Leases, except such defaults as were not material and (ii) no claims or liabilities arising as a result of the operation or use of any Pledged Unit prior to each such relevant date, as to which the Lessee, as owner of the Pledged Units, would be liable; (o) (i) as of the Closing Date, TILC shall have provided, or caused to be provided, in either case in accordance with the terms of the relevant Existing Equipment Sublease, a notice relating to each Existing Equipment Sublease (which notice shall be substantially in the form attached hereto as Exhibit D) to the related Sublessee under such Existing Equipment Sublease, and (ii) on or prior to the Closing Date, TILC shall have provided, or caused to be provided, in either case in accordance with the terms of the relevant Existing Pledged Equipment Lease, a notice relating to each Existing Pledged Equipment Lease (other than those with respect to Pledged Units that constitute Special Collateral after the Closing Date) (which notice shall be substantially in the form attached hereto as Exhibit D) to the related Pledged Equipment Lessee under such Existing Pledged Equipment Lease; (p) (i) the balance sheet of TILC as of March 31, 2001, and the related statements of operations, stockholders' equity and cash flows for the period then ended, and (ii) the balance sheet of TILC as of September 30, 2001 and the related statements of income and cash flows of TILC for the six month period beginning on April 1, 2001 and ending on September 30, 2001, have been prepared in accordance with generally accepted accounting principles (except as may be stated in the notes thereto and except, with respect to interim financial statements, for year-end audit adjustments), consistently applied, and fairly set forth, in all material respects, the financial condition of TILC as of such dates and the results of their operations and cash flows for such periods; and (q) TILC is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Equipment Note or the Owner Participant's Commitment as contemplated by this Agreement and the other Operative Agreements will be used by TILC for a purpose which violates, Participation Agreement (TRLI 2001-1C) 35 or would be inconsistent with, Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 3.6(q) with such meanings. Section 3.7 Representations and Warranties of TRMI. TRMI represents and warrants to the Indenture Trustee, the Owner Trustee and the Participants, as of the date hereof: (a) TRMI is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TRMI Agreements, has the power and authority to carry on its business as now conducted, and has the requisite power and authority to execute, deliver and perform its obligations under the TRMI Agreements; (b) the TRMI Agreements have been duly authorized by all necessary corporate action, executed and delivered by TRMI, and (assuming the due authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of TRMI, enforceable against TRMI in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by TRMI of each TRMI Agreement and compliance by TRMI with all of the provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency applicable to or binding on TRMI or any of its properties, or (ii) the provisions of, or constitute a default by TRMI under, its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or other agreement or instrument to which TRMI is a party or by which TRMI or any of its properties may be bound or affected except, with respect to clause (iii) above, where such contravention would not materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business; (d) there are no proceedings pending or, to the knowledge of TRMI, threatened against TRMI in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would materially Participation Agreement (TRLI 2001-1C) 36 adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business; (e) TRMI is not in violation of any term of any charter instrument or bylaw or any other material agreement or instrument to which it is a party or by which it may be bound except where such violation would not materially adversely affect TRMI's ability to perform its obligations under the TRMI Agreements or materially adversely affect its financial condition or business. TRMI is in compliance with all laws, ordinances, governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TRMI to perform its obligations under the TRMI Agreements, and has obtained all licenses, permits, franchises and other governmental authorizations material to the conduct of its business; (f) no consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of indebted ness of TRMI or any governmental authority on the part of TRMI is required in the United States in connection with the execution and delivery by TRMI of the TRMI Agreements, or is required to be obtained in order for TRMI to perform its obligations thereunder in accordance with the terms thereof, other than those which (i) are routine in nature and are not normally applied for prior to the time they are required, and which TRMI has no reason to believe will not be timely obtained or (ii) the failure to obtain would not have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the ability of TRMI to perform its obligations under the TRMI Agreements; (g) the written information provided by TRMI or on behalf of TRMI to the Owner Participant and/or the Loan Participant as of the date such information was provided to the Owner Participant and/or the Loan Participant, as the case may be, did not contain any untrue statement of a material fact and did not omit a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. No representation or warranty is given with respect to any forecasts or projections included therein or omitted therefrom; (h) the representations and warranties of the Lessee contained in Sections 3.2(a), (b), (c), (d), (e), (f), (g), (i), (j), (k), clauses (i), (ii) and (iv) of (l), (m), (n), (o), (p) other than the first sentence thereof, (q) and (s) are true and correct as of the date hereof (except with respect to representations and warranties made as of an earlier date, in which case such representations and warranties shall be true as of such earlier date); and Participation Agreement (TRLI 2001-1C) 37 (i) (x) the balance sheet of TRMI as of March 31, 2001, and the related statements of operations, stockholders' equity and cash flows for the period then ended, and (y) the balance sheet of TRMI as of September 30, 2001 and the related statements of income and cash flows of TRMI for the six month period beginning on April 1, 2001 and ending on September 30, 2001, have been prepared in accordance with generally accepted accounting principles (except as may be stated in the notes thereto and except, with respect to interim financial statements, for year-end audit adjustments), consistently applied, and fairly set forth, in all material respects, the financial condition of TRMI as of such dates and the results of their operations and cash flows for the periods then ended. Section 3.8 Representations and Warranties of the Pass Through Trustee. The Pass Through Trustee represents and warrants to the Owner Trustee, the Indenture Trustee, the Owner Participant, TILC, TRMI and the Lessee that, as of the date hereof: (a) the Pass Through Trustee is a national banking association duly organized and validly existing in good standing under the laws of the United States of America and has the full corporate power, authority and legal right under the laws of the United States of America and the State of Illinois pertaining to its banking, trust and fiduciary powers to execute, deliver and perform its obligations under the Pass Through Trustee Agreements and the Pass Through Documents to which it is a party; (b) this Agreement has been, and on the Closing Date, each of the other Pass Through Trustee Agreements will have been, duly authorized, executed and delivered by the Pass Through Trustee; this Agreement constitutes, and on the Closing Date, each of the other Pass Through Trustee Agreements will constitute, the legal, valid and binding obligations of the Pass Through Trustee, enforceable against the Pass Through Trustee in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by the Pass Through Trustee of each of the Pass Through Trustee Agreements, the purchase by the Pass Through Trustee of the Equipment Note pursuant to this Agreement, and the issuance of the Pass Through Certificates pursuant to the Pass Through Trust Agreement, do not contravene any law, rule or regulation of any federal or Illinois governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Pass Through Trustee and do not contravene or result in any breach of, or constitute a default under, the Pass Through Trustee's articles of association or bylaws or any agreement Participation Agreement (TRLI 2001-1C) 38 or instrument to which the Pass Through Trustee is a party or by which it or any of its properties may be bound or affected; (d) neither the execution and delivery by the Pass Through Trustee of each of the Pass Through Trustee Agreements nor the consummation by the Pass Through Trustee of any of the transactions contemplated thereby, requires the consent or approval of, the giving of notice to, or the registration with, or the taking of any other action with respect to, any federal or Illinois governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers; (e) there are no pending or, to its knowledge, threatened actions or proceedings against the Pass Through Trustee before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Pass Through Trustee to perform its obligations under any of the Pass Through Trustee Agreements; (f) the Pass Through Trustee is not in default under any Pass Through Trustee Agreement; (g) the Pass Through Trustee does not directly or indirectly control, and is not directly or indirectly controlled by or under common control with, the Owner Participant, the Owner Trustee, the Initial Purchasers, TILC, TRMI or the Lessee; (h) the Pass Through Trustee is purchasing the Equipment Note for the purposes contemplated by the Operative Agreements and not with a view to the transfer or distribution of any Equipment Note to any other Person, except as contemplated by the Operative Agreements; and (i) except for the issue and sale of the Pass Through Certificates contemplated hereby and by the other Pass Through Trustee Agreements, the Pass Through Trustee has not directly or indirectly offered any Equipment Note or Pass Through Certificate or any interest in or to the Trust Estate, the Trust Agreement or any similar interest for sale to, or solicited any offer to acquire any of the same from, anyone other than the Owner Trustee and the Owner Participant, and the Pass Through Trustee has not authorized anyone to act on its behalf to offer directly or indirectly any Equipment Note, any Pass Through Certificate or any interest in and to the Trust Estate, the Trust Agreement or any similar interest related to this transaction for sale to, or to solicit any offer to acquire any of the same from, any Person other than the Owner Trustee and the Owner Participant. Section 3.9 Opinion Acknowledgment. Each of the parties hereto, with respect to such party, expressly consents to the rendering by its counsel of the Participation Agreement (TRLI 2001-1C) 39 opinion referred to in Section 4.1(e) and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such party. SECTION 4. CLOSING CONDITIONS. Section 4.1 Conditions Precedent to Investment by Each Participant. The obligation of each Participant to make the investment specified with respect to such Participant in Section 2 on the Closing Date shall be subject to the satisfaction or waiver of the following conditions precedent (except that the obligations of any Person shall not be subject to such Person's own performance or compliance): (a) Execution of Operative Agreements. (i) On or before the Closing Date, this Agreement, the Trust Agreement, the Lease, the Lease Supplement in respect of the Units delivered on the Closing Date, the Indenture, the Indenture Supplement in respect of the Units delivered on the Closing Date, the Equipment Note, the Pass Through Documents, the Transfer and Assignment Agreement, the TILC Bill of Sale, the TILC Assignment, the Bill of Sale, the Assignment, the OP Guaranty, the Trinity Guaranty, the Second Supplement to Marks Company Trust Supplement, the Second Amended and Restated Collateral Agency Agreement, the First Amendment to Control Agreement, the Amended and Restated Blocked Account Agreement, the Equity Collateral Security Agreement, the Equity Collateral Control Agreement and the Omnibus Amendment Agreement (amending, among other documents, the Management Agreement, the Insurance Agreement and the Administrative Services Agreement) shall each be satisfactory in form and substance to such Participant, shall have been duly executed and delivered by the parties thereto (except that the execution and delivery of the documents referred to above (other than this Agreement) by a party hereto or thereto shall not be a condition precedent to such party's obligations hereunder), shall each be in full force and effect, and executed counterparts of each shall have been delivered to such Participant or its counsel on or before the Closing Date; and no event shall have occurred and be continuing that constitutes a Lease Default or an Indenture Default. (ii) The Operative Agreements (as defined in the Participation Agreement TRLI 2001-1A) remain in full force and effect, no Lease Default (as defined in the Lease Agreement TRLI 2001-1A) has occurred and is continuing, and no Indenture Event of Default (as defined in the Indenture TRLI 2001-1A) has occurred and is continuing. (iii) The Operative Agreements (as defined in the Participation Agreement TRLI 2001-1B) remain in full force and effect, no Lease Default (as defined in the Lease Agreement TRLI 2001-1B) has occurred and is continuing, and no Indenture Event of Default (as defined in the Indenture TRLI 2001-1B) has occurred and is continuing. Participation Agreement (TRLI 2001-1C) 40 (b) Recordation and Filing. On or before the Closing Date (except as expressly stated below), the Lessee shall have caused the Lease, the Lease Supplement, the Indenture and the Indenture Supplement (each in respect of Units delivered on the Closing Date), the Collateral Agency Agreement, the TILC Bill of Sale, the Bill of Sale, the TILC Assignment and the Assignment to be duly filed, recorded and deposited in memorandum form with the STB in conformity with 49 U.S.C. Section 11301 and with the Registrar General of Canada pursuant to Section 105 of the Canada Transportation Act, and all necessary actions shall have been taken to cause publication of notice of such deposit in The Canada Gazette in accordance with said Section 105 and all appropriate Uniform Commercial Code financing statements to be filed where necessary or reasonably advisable within 10 days after the Closing Date, and the Lessee shall furnish the Indenture Trustee, the Owner Trustee, the Collateral Agent and each Participant proof thereof. Without limiting the representations and warranties set forth in any Operative Agreement, by such recording or filing of the Lease (or a financing statement or similar notice thereof), the Owner Trustee and the Lessee are not acknowledging or implying that the Lease constitutes a "security agreement" or creates a "security interest" within the meaning of the Uniform Commercial Code in any applicable jurisdiction. (c) Representations and Warranties of the Lessee. On the Closing Date, the representations and warranties of the Lessee contained in Section 3.2 and Section 3.4(b) hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from the General Partner of the Lessee certifying to the foregoing matters, and the Lessee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Lessee on or before said date. (d) Representations and Warranties of the Owner Trustee. On the Closing Date, the representations and warranties of the Trust Company and the Owner Trustee contained in Section 3.1 and Section 3.4(a) shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, the Indenture Trustee, TILC, TRMI and the Participants shall have received an Officer's Certificate to such effect dated such date from the Trust Company (in respect of the Trust Company) and the Owner Trustee (in respect of the Owner Trustee), and the Trust Company and the Owner Trustee shall have performed and complied with all agreements and Participation Agreement (TRLI 2001-1C) 41 conditions herein contained which are required to be performed or complied with by the Trust Company and the Owner Trustee, respectively, on or before said date. (e) Opinions of Counsel. On the Closing Date, the Owner Trustee, the Indenture Trustee and each Participant shall have received the favorable written opinion of each of (i) Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel for the Lessee, TILC, Trinity and TRMI, substantially in the form of Exhibit E-1, (ii) counsel for the Lessee, TILC, Trinity and TRMI (which counsel shall be the General Counsel of Trinity), substantially in the form of Exhibit E-2, (iii) Bingham Dana LLP, counsel to the Owner Trustee, substantially in the form of Exhibit E-3, (iv) Winston & Strawn, special counsel to the Owner Participant, substantially in the form of Exhibit E-4, (v) Philip Morris Capital Corporation Legal Department, counsel to the Owner Participant, substantially in the form of Exhibit E- 5, (vi) Robert A. Wolz, Assistant Counsel to the Indenture Trustee, substantially in the form of Exhibit E-6, (vii) Alvord & Alvord, special STB counsel, substantially in the form of Exhibit E-7, (viii) McCarthy Tetrault, special Canadian counsel, substantially in the form of Exhibit E-8, (ix) Andrews & Kurth L.L.P., special counsel for the Collateral Agent and the Equity Collateral Agent, substantially in the form of Exhibit E-9, (x) Robert A. Wolz, Assistant Counsel to the Pass Through Trustee, substantially in the form of Exhibit E-10 and (xi) Morris, James, Hitchens & Williams, counsel for the Marks Company Trust, substantially in the form of Exhibit E-11. (f) Title. On the Closing Date, after giving effect to the transactions contemplated hereby, (i) the Owner Trustee shall have all legal and beneficial title to each Unit to be delivered on the Closing Date, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof), (ii) the Owner Trustee shall have received all right, title and interest of the Lessee in and to the Existing Equipment Subleases, free and clear of all Liens (other than subleases of the Existing Equipment Subleases by the Sublessees as expressly permitted by the Existing Equipment Subleases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the definition thereof) and (iii) each Sublessee under an Existing Equipment Sublease shall have been notified of the assignment thereof to the Owner Trustee. In addition, (i) the Lessee has all legal and beneficial title to each Pledged Unit, free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Pledged Equipment Leases, and in clauses (iii), (iv) and (v) of the definition thereof), (ii) the Lessee has received all right, title and interest of TILC in and to the Existing Pledged Equipment Leases, free and clear of all Liens (other than subleases of the Existing Pledged Equipment Leases by the Pledged Equipment Lessees as expressly permitted by the Existing Pledged Equipment Leases and other than Permitted Liens of the type described in clauses (iii), (iv) and (v) of the Participation Agreement (TRLI 2001-1C) 42 definition thereof) and (iii) each Pledged Equipment Lessee under an Existing Pledged Equipment Lease has been notified of the assignment thereof to the Lessee. (g) Bills of Sale; Assignments. On the Closing Date, each of the following documents shall each have been duly executed and delivered: (i) the TILC Bill of Sale and the Bill of Sale, in each case in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date and covering the Units to be delivered on such date, transferring to the Owner Trustee and the Lessee, respectively, legal and beneficial title to such Units free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof) and warranting to the Owner Trustee that at the time of delivery of each such Unit, TILC and the Lessee, as the case may be, had legal and beneficial title thereto and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens of the type described in clause (ii) below with respect to the Existing Equipment Subleases, and in clauses (iii), (iv) and (v) of the definition thereof and, with respect to the TILC Bill of Sale, warranting that TILC shall be responsible for discharging any Permitted Lien of the type described in subclause (iii) or (iv) of the definition thereof which has attached as of the Closing Date) and (ii) the TILC Assignment and the Assignment, in each case in form and substance reasonably satisfactory to the Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee, dated such date covering the Existing Equipment Subleases, assigning to the Owner Trustee and Lessee respectively, all right, title and interest of TILC and the Lessee, respectively, to the Existing Equipment Subleases, free and clear of all Liens (other than Permitted Liens) and warranting to the Lessee that, at the time of such assignment, TILC and the Lessee, respectively, had legal and beneficial title to the Existing Equipment Subleases and good and lawful right to sell the same, and title thereto was free and clear of all Liens (other than Permitted Liens); (h) Insurance Certificate. On or before the Closing Date, the Indenture Trustee and each Participant shall have received (x) each certificate relating to insurance that is required pursuant to Section 12 of the Lease and Section 6.4 of the Collateral Agency Agreement and (y) certificates from a nationally recognized insurance broker substantially in the forms attached hereto as Exhibits A- 1 and A-2 with respect to the public liability insurance required by Section 12.1(b) of the Lease and Section 6.4 of the Collateral Agency Agreement. (i) Corporate, Partnership, Limited Liability Company and Other Organizational Documents. Each of the Participants shall have received such documents and evidence with respect to Trinity, TILC, TRMI, the Lessee, the General Partner, the Limited Partner, the Owner Participant, the Pass Through Participation Agreement (TRLI 2001-1C) 43 Trustee, the Owner Trustee and the Indenture Trustee as the Participants may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement and the taking of all corporate, limited partnership and other proceedings in connection therewith. (j) No Threatened Proceedings. No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transactions contemplated hereby. (k) Representations and Warranties of the Owner Participant. On the Closing Date, the representations and warranties of the Owner Participant contained in Section 3.4(e) and Section 3.5 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Indenture Trustee and the Pass Through Trustee shall have received an Officer's Certificate to such effect dated such date from the Owner Participant, and the Owner Participant shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Owner Participant on or before said date. (l) Notice of Delivery. The Indenture Trustee and the Participants shall have received the Notice of Delivery described in Section 2.3(a). (m) Representations and Warranties of the Indenture Trustee. On the Closing Date, the representations and warranties of the Indenture Trustee contained in Section 3.3 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Owner Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from the Indenture Trustee, and the Indenture Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Indenture Trustee on or before said date. (n) No Illegality. No change shall have occurred after the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by regulatory authorities that, in the opinion of such Participation Agreement (TRLI 2001-1C) 44 Participant or its counsel, would make it illegal for such Participant to enter into any transaction contemplated by the Operative Agreements. (o) Participants' Investments. (i) The Owner Participant shall have made available the Owner Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan Participant shall have made available the Loan Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3. (p) Consents. All approvals and consents of any trustees or holders of any indebtedness or obligations of the Lessee, Trinity, TILC and TRMI, if any, required to have been obtained in connection with the transactions contemplated by this Agreement and the other Operative Agreements shall have been duly obtained and be in full force and effect. (q) Governmental Actions. All actions, if any, required to have been taken on or prior to the Closing Date in connection with the transactions contemplated by this Agreement and the other Operative Agreements on the Closing Date shall have been taken by any governmental or political agency, subdivision or instrumentality of the United States, and all orders, permits, waivers, exemptions, authorizations and approvals of such entities required to be in effect on the Closing Date in connection with the transactions contemplated by this Agreement and the other Operative Agreements on the Closing Date shall have been issued, and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect, on the Closing Date. (r) Tax Indemnity Agreement. On or before the Closing Date, the Tax Indemnity Agreement shall be satisfactory in form and substance to the Owner Participant, shall have been duly executed and delivered by the Lessee and the Guarantor and, assuming due authorization, execution and delivery by the Owner Participant or one of its Affiliates, shall be in full force and effect. (s) Appointment of Representative. The Owner Trustee shall have authorized its representative, who shall be an individual designated by the Lessee and acceptable to the Owner Trustee, to accept the Units being delivered on the Closing Date from the Lessee and to deliver such Units to the Lessee. The Lessee shall have authorized its representative (who shall be the same individual designated by the Lessee under this Section 6.1(s)) to accept delivery of such Units from the Owner Trustee as Lessor pursuant to the Lease. (t) Solvency of the Lessee. The Lessee shall have furnished to the Participants an Officer's Solvency Certificate (substantially in the form attached hereto as Exhibit F) as to the solvency of the Lessee as of the Closing Date. Participation Agreement (TRLI 2001-1C) 45 (u) Schedule of Subleases and Units; Pledged Equipment Leases and Pledged Units. The Participants and the Collateral Agent shall have received a schedule, certified by the Lessee and TILC, listing the Existing Equipment Subleases under the Lease, the Sublessee under each thereof and the Units covered thereby.. The Participants and the Collateral Agent shall have received a schedule, certified by the Lessee and TILC, listing the Existing Equipment Subleases under the Lease, the Sublessee under each thereof and the Units covered thereby. The Participants and the Collateral Agent shall have also received a copy of Schedules 1-A and 1-B to the Participation Agreement TRLI 2001-1A, certified by the Lessee and TILC, listing the Existing Pledged Equipment Leases, the Pledged Equipment Lessee under each thereof and the Pledged Units covered thereby. (v) Projected Coverage Ratio. The Manager shall have furnished to the Participants and the Collateral Agent that portion of the report provided for in Section 7.1 of the Management Agreement setting forth the Projected Coverage Ratio for the six-month period immediately succeeding the Closing Date. (w) Representations and Warranties of TILC. On the Closing Date, the representations and warranties of TILC contained in Section 3.4(d) and Section 3.6 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from TILC, and TILC shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by TILC on or before said date. (x) Representations and Warranties of TRMI. On the Closing Date, the representations and warranties of TRMI contained in Section 3.4(c) and Section 3.7 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from TRMI, and TRMI shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by TRMI on or before said date. Participation Agreement (TRLI 2001-1C) 46 (y) Representations and Warranties of the Pass Through Trustee. On the Closing Date, the representations and warranties of the Pass Through Trustee contained in Sections 3.4(f) and Section 3.8 hereof shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Lessee, TILC, TRMI, the Indenture Trustee, the Owner Trustee and the Owner Participant shall have received an Officer's Certificate to such effect dated such date from the Pass Through Trustee, and the Pass Through Trustee shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by the Pass Through Trustee on or before said date. (z) Representations and Warranties of Trinity. On the Closing Date, the representations and warranties of Trinity contained in the Trinity Guaranty shall be true and correct in all material respects as of the Closing Date as though then made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date), and each of the Owner Trustee, the Indenture Trustee and the Participants shall have received an Officer's Certificate to such effect dated such date from Trinity, and Trinity shall have performed and complied with all agreements and conditions herein contained which are required to be performed or complied with by Trinity on or before said date. (aa) Accountant's Letter. The Participants shall have received an accountant's letter from PriceWaterhouseCoopers L.L.P. in form and substance reasonably satisfactory to each of them. (bb) Certificate Rating. On the Closing Date, the Certificates and the Other Certificates shall be rated "AA-" by Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. (cc) Sublessee Consents. The Lessee shall have obtained the consent to assignment from Sublessees under Existing Equipment Subleases, such consents to be substantially in the form of the consents received with respect to the Other Participation Agreements if not in the form attached hereto as Exhibit D. (dd) Second Supplement to Marks Company Trust Supplement. On or before the Closing Date, the Second Supplement to the Marks Company Trust Supplement shall have been duly executed and delivered by the parties thereto. Participation Agreement (TRLI 2001-1C) 47 (ee) Balances of Accounts. The Lessee shall have furnished to the Participants an Officer's Accounts Balance Certificate (substantially in the form attached hereto as Exhibit G) stating that (i) as of the start of business on December 27, 2001, the Collection Account has a balance of $841,042.60, and in addition, as of the Closing Date, the Lessee has funded the Collection Account with the amount of $40,733.30, (ii) the Lessee has funded the Liquidity Reserve Account so as of the Closing Date the Liquidity Reserve Account shall have a balance of at least $9,202,959, and (iii) the Lessee has funded the Equity Collateral Account so as of the Closing Date the Equity Collateral Account shall have a balance of at least $6,500,000. Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant. The obligation of the Loan Participant to fund the Loan Participant's Commitment and purchase and pay for the Equipment Note to be purchased by it pursuant to Sections 2.2(b) and 2.3 on the Closing Date shall be subject to the satisfaction or waiver of the following additional conditions precedent: (a) Equipment Note. The Equipment Note to be delivered on the Closing Date shall have been duly authorized, executed and delivered to the Loan Participant by a duly authorized officer of the Owner Trustee and duly authenticated by the Indenture Trustee. (b) Sale of Pass Through Certificates. The Pass Through Certificates shall have been sold to the Initial Purchasers pursuant to the Certificate Purchase Agreement. (c) Appraisal. The Pass Through Trustee and each Initial Purchaser shall have received the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with the Appraisal. Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant. The obligation of the Owner Participant to provide the funds specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date with respect to any Unit to be delivered on the Closing Date shall be subject to the satisfaction or waiver of the following additional conditions precedent: (a) Appraisal. On or before the Closing Date, the Owner Participant shall have received an opinion (the "Appraisal") of Rail Solutions, Inc. (the "Appraiser"), satisfactory in form and substance to the Owner Participant (with a separate summary or other evidence of such Appraisal as it relates to fair market value and useful life being provided to the Rating Agency), concluding that: (i) the fair market value of each Unit being delivered on the Closing Date is equal to the portion of the Total Equipment Cost with respect to such Unit; (ii) at the expiration Participation Agreement (TRLI 2001-1C) 48 of the Basic Term and any Fixed Rate Renewal Term, (A) without taking into account inflation or deflation from and after the Closing Date or the existence of any purchase option, it is reasonable to expect that each such Unit will have a fair market value of at least 20% of the Total Equipment Cost with respect to such Unit and (B) the remaining economic life of each such Unit will be at least equal to 20% of the economic life of such Unit as estimated in the Appraisal; (iii) as of the Early Purchase Date, the estimated fair market value of each such Unit being delivered on the Closing Date, taking into account inflation or deflation from and after the Closing Date, will not exceed the portion of the Early Purchase Price attributable to such Unit; (iv) no Unit being delivered on the Closing Date is Limited Use Property; (v) the Fixed Rate Renewal is greater than or equal to the fair market rental value of each such Unit and the Lessee is not reasonably expected to exercise any Fixed Rate Renewal option; and (vi) such other matters as the Owner Participant may reason ably request; provided that the Lessee makes no representation as to the fair market value, useful life, fair market rental value or estimated residual value of the Equipment, and the Lessee shall not be responsible for, or incur any liabilities as a result of, the contents of such Appraisal or report to which it relates or, except to the extent provided in the Tax Indemnity Agreement. (b) Opinion with Respect to Certain Tax Aspects. On the Closing Date, the Owner Participant shall have received the opinion of Winston & Strawn, addressed to the Owner Participant, in form and substance satisfactory to the Owner Participant, containing such counsel's favorable opinion with respect to such tax matters as the Owner Participant may reasonably request. (c) Absence of Change in Tax Laws. No change or proposed change shall have occurred after the execution and delivery of this Agreement in relevant United States tax laws, regulations, or administrative or judicial interpretation thereof which change would cause an adverse change to the tax assumptions used to calculate Basic Rent, Stipulated Loss Values, Stipulated Loss Amounts, Termination Values, Termination Amounts and Early Purchase Price, unless the adjustment referred to in Section 2.6(a) is made to the Owner Participant's satisfaction. (d) Absence of Accounting Changes. No change shall have occurred in generally accepted accounting principles which shall, in the opinion of the Owner Participant, adversely affect its Net Economic Return. (e) No Material Adverse Change. No material adverse change shall have occurred in the business, operations or the financial condition of any of Lessee, Manager, the Administrator, the Insurance Manager or Trinity. Participation Agreement (TRLI 2001-1C) 49 (f) Absence of Certain Changes. The Owner Participant shall be satisfied that the transaction is consistent in all respects with the Owner Participant's internal approvals, including but not limited to its Investment Committee approval relating to the transaction. Section 4.4 Conditions Precedent to the Obligation of TILC and the Lessee. The obligation of TILC with respect to the sale of the Units to the Lessee on the Closing Date, the obligation of the Lessee with respect to the sale of such Units to the Owner Trustee and the obligation of the Lessee to accept such Units under the Lease as of the Closing Date is subject to the satisfaction or waiver of the following conditions precedent: (a) Corporate Documents. On or before the Closing Date, the Lessee shall have received such documents and evidence with respect to the Participants, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee as the Lessee may reasonably request in order to establish the authorization of the consummation of, or otherwise relating to the ability to consummate, the transactions contemplated by this Agreement and the other Operative Agreements, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth. (b) Operative Agreements. On or before the Closing Date, the Operative Agreements shall have been duly authorized, executed and delivered by the respective party or parties thereto (other than the Lessee, Trinity, TILC and TRMI), and an executed counterpart of each thereof shall have been delivered to the Lessee or its special counsel. (c) Representations and Warranties. On the Closing Date, the representations and warranties of each of the Owner Trustee, the Indenture Trustee and the Participants contained in Section 3 hereof shall be true and correct in all material respects as of the Closing Date as though made on and as of such date, and the Lessee shall have received an Officer's Certificate to such effect dated such date from each of the Owner Trustee as described in Section 4.1(d), the Owner Participant as described in Section 4.1(k), the Indenture Trustee as described in Section 4.1(m) and the Pass Through Trustee as described in Section 4.1(y). (d) Opinions of Counsel. On the Closing Date, the Lessee shall have received the opinions of counsel referred to in Section 4.1(e) (other than that set forth in clauses (i) and (ii) therein), addressed to the Lessee. (e) No Threatened Proceedings. No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or Participation Agreement (TRLI 2001-1C) 50 proposed to be issued by any court or governmental agency at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transactions contemplated hereby. (f) No Illegality. No change shall have occurred after the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by regulatory authorities that, in the opinion of the Lessee or its counsel, would make it illegal for the Lessee to enter into any transaction contemplated by the Operative Agreements. (g) Participants' Investments. (i) The Owner Participant shall have made available the Owner Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan Participant shall have made available the Loan Participant's Commitment in the amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3. (h) Absence of Change in Tax Laws; Absence of Change in Rent. No change shall have occurred after the execution and delivery of this Agreement in relevant United States tax laws or regulations, which change would cause an increase in the net present value (expressed as a percentage of Total Equipment Cost) of the Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to exceed 100 basis points. No other adjustment under Section 2.6(a) would cause an increase in the net present value (expressed as a percentage of Total Equipment Cost) of the Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to exceed 100 basis points. (i) No Adverse Accounting Treatment. The Lessee shall not have been advised by its independent accountants that the Lessee or its affiliates will not be afforded "off-balance sheet" accounting treatment with respect to the Lease and the transactions contemplated by the Operative Agreements; provided, that the Lessee shall not have deliberately caused the loss of "off-balance sheet" accounting treatment to provoke non-satisfaction of such condition precedent pursuant to this Section 4.4(i). SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE. The Lessee agrees during the Lease Term and (if longer, in the event that the Lessee has assumed all of the rights and obligations of the Lessor under the Indenture in respect of the Equipment Notes) so long as any Equipment Note remains outstanding, that it will furnish directly to each Participant the following: (a) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, a balance sheet of the Participation Agreement (TRLI 2001-1C) 51 Lessee as at the end of such quarter, together with the related consolidated statements of income and cash flows of the Lessee for the period beginning on the first day of such fiscal year and ending on the last day of such quarter, setting forth in each case (except for the balance sheet) in comparative form the figures for the corresponding periods of the previous fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles; (b) as soon as available and in any event within 120 days after the last day of each fiscal year, a copy of the Lessee's audited annual report covering the operations of the Lessee including a balance sheet, and related statements of income and retained earnings and statement of cash flows of the Lessee for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with generally accepted accounting principles applied on a consistent basis, which statements will have been certified by a firm of independent public accountants of recognized national standing selected by the Lessee; (c) within the time period prescribed in paragraph (a) above, a certificate, signed by the Treasurer or principal financial officer of the General Partner, (i) to the effect that such officer is not aware (without any obligation of due inquiry), as of the date of such certificate, of any Lease Default, and if a Lease Default shall exist, specifying such Lease Default, the nature and status thereof and what action Lessee is taking or plans to take with respect thereto and (ii) setting forth the Historical Coverage Ratio and the Projected Coverage Ratio as of the last Business Day of the immediately preceding calendar quarter; (d) within the time period prescribed in paragraph (b) above, a certificate, signed by the Treasurer or principal financial officer of the General Partner, (i) to the effect that the signer has reviewed the Operative Agreements and activities and records of the Lessee during the immediately preceding fiscal year and that, after due inquiry, such officer is not aware, as of the date of such certificate, of any Lease Default, and if a Lease Default shall exist, specifying such Lease Default, the nature and status thereof and what action Lessee is taking or plans to take with respect thereto, (ii) setting forth the Historical Coverage Ratio and the Projected Coverage Ratio as of the last Business Day of the preceding fiscal year and (iii) setting forth in summary terms the Lessee's compliance with Section 8.3 of the Lease as to new Subleases entered into by the Lessee, and sub-subleases entered into by any Sublessee, during such fiscal year, including without limitation as to whether such new Subleases are subject and subordinate to the terms of the Lease; (e) within the time periods presented in Section 7 of the Management Agreement, each of the reports referred to therein delivered by the Manager to the Lessee; and Participation Agreement (TRLI 2001-1C) 52 (f) promptly after request therefor, such additional information with respect to the financial condition or business of the Lessee as the Owner Participant or the Indenture Trustee may from time to time reasonably request. SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE. Section 6.1 Restrictions on Transfer of Beneficial Interest. The Owner Participant agrees that it shall not, directly or indirectly, sell, convey, assign, pledge, mortgage or otherwise transfer all or any part of the Beneficial Interest (collectively, for purposes of this Section 6.1, a "transfer") prior to the expiration or earlier termination of the Lease Term without the Lessee's prior written consent (which consent shall not be unreasonably withheld); provided, however, no such consent shall be required in connection with any indirect transfer of the Beneficial Interest resulting from (i) any direct or indirect change of control of Philip Morris Capital Corporation or change of control of any direct or indirect parent of Philip Morris Capital Corporation or (ii) any transfer of substantially all of the assets of Philip Morris Capital Corporation as an entirety; provided, further, that no such consent shall be required if the following conditions are satisfied: (a) the Person to whom such transfer is to be made (a "Transferee") is (i) an institutional or corporate investor with tangible net worth or, in the case of a bank or lending institution, combined capital and surplus at the time of such transfer, of at least $75,000,000, determined in accordance with generally accepted accounting principles, as of the date of such transfer, or (ii) an Affiliate of an institutional or corporate investor that satisfies the requirements set forth in clause (i) above if such investor guarantees pursuant to a guaranty in form and substance satisfactory to the Lessee the obligations of the Owner Participant under the Operative Agreements assumed by such Affiliate as required herein or (iii) an Affiliate of the Owner Participant; provided that in the event of a transfer pursuant to clause (iii) which does not qualify under clauses (i) or (ii), the Owner Participant shall remain liable for all of its obligations under this Agreement and the other Operative Agreements; (b) so long as no Lease Event of Default has occurred and is continuing, neither the Transferee nor any of its Affiliates shall compete (directly or indirectly) (other than as a passive investor or loan participant in the financing of equipment or facilities used in railcar leasing) with the Lessee or TILC (unless such non-competition requirement has been waived in writing by the Lessee and TILC) in any respect material to the full service railcar leasing business of the Lessee or TILC; provided, that no Transferee or Affiliate thereof shall be deemed to (i) be engaged in railcar leasing or (ii) hold (directly or indirectly) any material interest in any business Participation Agreement (TRLI 2001-1C) 53 that is competitive with Lessee's or TILC's railcar leasing business, solely by reason of any sale, lease or other disposition (or any actions in furtherance of any of the foregoing) of any of such Person's interest in any equipment or facilities directly or indirectly owned, leased or otherwise controlled pursuant to any such Person's passive investment or loan participation in the financing of any such equipment or facilities used in railcar leasing or any re-leasing or sale of any rail equipment which is returned to or repossessed by or on behalf of such Person from a lessee or borrower in connection with a lease financing or lender transaction entered into by such Person as a passive lessor, investor or lender; (c) each of the Indenture Trustee, the Owner Trustee and the Lessee shall have received 10 days (or, if a Lease Event of Default shall have occurred and is continuing and the proposed Transferee or any of its Affiliates would not, but for the occurrence of such Lease Event of Default, have satisfied the requirements set forth in Section 6.1(b) above or Section 6.1(l) below, fifteen (15) Business Days) prior written notice of such transfer specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this Section 6.1; (d) such Transferee enters into an agreement (i) in the form attached hereto as Exhibit C or (ii) otherwise in form and substance satisfactory to each of the Lessee and the Owner Trustee and not reasonably objected to by the Indenture Trustee whereby such Transferee confirms that it shall be deemed a party to this Agreement and each other Operative Agreement to which the transferring Owner Participant is a party, and agrees to be bound by all the terms of, and to undertake all of the obligations and liabilities of the transferring Owner Participant contained in, this Agreement and such other Operative Agreements and in which the Transferee shall make representations and warranties comparable to those of the Owner Participant contained herein and therein; (e) an opinion of counsel of the Transferee (which counsel shall be reasonably acceptable to the Lessee, the Owner Trustee and the Indenture Trustee and which may be internal counsel of the Transferee), confirming (i) the existence, corporate power and authority of, and due authorization, execution and delivery of all relevant documentation by, the Transferee (with appropriate reliance on certificates of corporate officers or public officials as to matters of fact), (ii) that each agreement referred to in Section 6.1(d) above is the legal, valid, and binding obligation of the Transferee, enforceable against the Transferee in accordance with its terms (subject to customary qualifications as to bankruptcy and equitable principles) and (iii) compliance of the transfer with applicable requirements of federal securities laws and securities laws of the Transferee's domicile, shall be provided, prior to such transfer, to each of the Lessee, the Owner Trustee and the Indenture Trustee, which opinion Participation Agreement (TRLI 2001-1C) 54 shall be in form and substance reasonably satisfactory to the Lessee, the Owner Trustee and the Indenture Trustee; (f) such transfer complies in all respects with and does not violate any applicable provisions of the federal securities laws and the securities law of any applicable state or any other applicable law; (g) except as specifically consented to in writing by each of the Lessee, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee, the terms of the Operative Agreements shall not be altered; (h) after giving effect to such transfer, the Beneficial Interest and the beneficial interests with respect to the Other Trusts shall be held by not more than three Persons in the aggregate; provided that for the purpose of calculating the number of Persons under this Section 6.1(h), Persons that are Affiliates of each other shall be considered to be one Person; (i) all reasonable expenses of the parties hereto (including, without limitation, reasonable legal fees and expenses of special counsel) incurred in connection with each transfer of such Beneficial Interest shall be paid by the transferring Owner Participant; (j) such transfer either (i) does not involve the use of any funds which constitute assets of an employee benefit plan subject to Title I of ERISA or Section 4975 of the Code or (ii) if clause (i) is not applicable, will not constitute a prohibited transaction under ERISA or the Code; (k) as a result of and following such transfer, no Indenture Default attributable to the Owner Participant or the Owner Trustee shall have occurred and be continuing; (l) unless a Lease Event of Default shall have occurred and is continuing, the transfer does not involve the sale of the stock of any Owner Participant, the sole asset of which is all or a portion of the Beneficial Interest, to, or the merger of any such Owner Participant with or into, any Person who is a competitor of the Lessee or TILC as described in Section 6.1(b), provided that the Lessee may waive this requirement in writing; (m) the Transferee (i) is a "United States Person" within the meaning of Section 7701(a)(30) of the Code or (ii) is engaged in a United States trade or business for purposes of Subtitle A, Chapter 1, Subchapter N of the Code and is acquiring such Beneficial Interest in connection with such trade or business; and Participation Agreement (TRLI 2001-1C) 55 (n) the Owner Participant shall deliver to the Lessee an Officer's Certificate certifying as to compliance with the transfer requirements contained herein; provided that no such Officer's Certificate is required in case of a transfer of the Beneficial Interest to the Lessee (or Lessee's designee) pursuant to Section 6.9. Upon any such transfer (i) except as the context otherwise requires, such Transferee shall be deemed the "Owner Participant" for all purposes, and shall enjoy the rights and privileges and perform the obligations of the Owner Participant to the extent of the interest transferred hereunder and under each other Operative Agreement to which the Owner Participant is a party, and, except as the context otherwise requires, each reference in this Agreement and each other Operative Agreement to the "Owner Participant" shall thereafter be deemed to include such Transferee for all purposes to the extent of the interest transferred, and (ii) the transferor, except to the extent provided in Section 6.1(i) hereof and except in the case of a transfer to a Transferee described in the proviso to Section 6.1(a)(iii) hereof, shall be released from all obligations hereunder and under each other Operative Agreement to which such transferor is a party or by which such transferor is bound solely to the extent such obligations are expressly assumed by a Transferee; and provided, further, that in no event shall any such transfer or assignment waive or release the transferor from any liability on account of any breach existing prior to such transfer of any of its representations, warranties, covenants or obligations set forth herein or in any of the other Operative Agreements or for any fraudulent or willful misconduct. Subject to Section 6.1(l), the provisions of this Section 6.1 shall not be construed to restrict the Owner Participant from consolidating with or merging into any other corporation or restricting another corporation from merging into or consolidating with the Owner Participant. Notwithstanding any transfer, the transferor Owner Participant shall be entitled to all benefits accrued and all rights vested prior to such transfer, including, without limitation, rights to indemnification under any of the Operative Agreements. No transfer hereunder shall, by virtue of the Transferee engaging in a business or activity not generally conducted by other institutional or corporate investors in lease transactions, increase the Lessee's indemnification obligations under Section 7.1 or 7.2. The Owner Participant hereby acknowledges and agrees (and each Transferee by virtue of any transfer shall be deemed to have acknowledged and agreed) to the terms of the Collateral Agency Agreement. The Lessee agrees to provide notice to the Rating Agency of any proposed transfer by an Owner Participant no later than 5 days after Lessee's receipt of notice of such proposed transfer from an Owner Participant. Section 6.2 Lessor's Liens Attributable to the Owner Participant. The Owner Participant hereby unconditionally agrees with and for the benefit of each of Participation Agreement (TRLI 2001-1C) 56 the other parties to this Agreement that the Owner Participant shall not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to the Owner Participant on or against all or any portion of the Indenture Estate or the Equipment, and the Owner Participant agrees that it shall, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full any such Lessor's Lien; provided that the Owner Participant may contest any such Lessor's Lien in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest therein or interference with the use, operation, or possession of the Equipment or any portion thereof by the Lessee under the Lease or the rights of the Indenture Trustee under the Indenture. Section 6.3 Lessor's Liens Attributable to Trust Company. Trust Company hereby unconditionally agrees with and for the benefit of each of the other parties to this Agreement that it shall not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to it on or against all or any portion of the Trust Estate or the Equipment, the Trust Company agrees that it shall, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full any such Lessor's Lien; provided that the Trust Company may contest any such Lessor's Lien in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Equipment or any interest therein or interference with the use, operation, or possession of the Equipment or any portion thereof by the Lessee under the Lease or the right of the Indenture Trustee under the Indenture. Section 6.4 Liens Created by the Indenture Trustee and the Loan Participant. (a) The Indenture Trustee, in its individual capacity, covenants and agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the Loan Participant that it shall not cause or permit to exist any Lien on or against all or any portion of the Equipment, the Pledged Equipment, the Trust Estate or the Indenture Estate arising as a result of (i) claims against the Indenture Trustee in its individual capacity not related to its interest in the Equipment, the Pledged Equipment and the Trust Estate, or to the administration of the Indenture Estate pursuant to the Indenture, (ii) acts of the Indenture Trustee in its individual capacity not contemplated by, or failure of the Indenture Trustee to take any action it is expressly required to perform by, any of the Operative Agreements, (iii) claims against the Indenture Trustee attributable to the actions of the Indenture Trustee in its individual capacity relating to Taxes or expenses that are not indemnified against by the Lessee pursuant to Section 7 or (iv) claims against the Indenture Trustee arising out of the transfer by the Indenture Trustee of all or any portion of its interest in the Equipment, the Pledged Equipment, the Indenture Estate or the Operative Participation Agreement (TRLI 2001-1C) 57 Agreements, other than a transfer permitted by the Operative Agreements and with respect to which the Indenture Trustee will, at its own cost and expense (and without any right of reimbursement from any other party hereto), promptly take such action as may be necessary duly to discharge any such Lien. (b) The Loan Participant covenants and agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee that the Loan Participant shall not cause or permit to exist any Lien on or against all or any portion of the Equipment, the Pledged Equipment, the Trust Estate or the Indenture Estate arising as a result of (i) claims against the Loan Participant not related to its interest in the Equipment, the Pledged Equipment and the Trust Estate, (ii) acts of the Loan Participant not contemplated by, or failure of the Loan Participant to take any action it is expressly required to perform by, any of the Operative Agreements, (iii) claims against the Loan Participant relating to Taxes or expenses that are not indemnified against by the Lessee pursuant to Section 7, or (iv) claims against the Loan Participant arising out of the transfer by the Loan Participant of all or any portion of its interest in the Equipment, the Pledged Equipment, the Indenture Estate or the Operative Agreements, other than a transfer permitted by the Operative Agreements and with respect to which the Loan Participant will, at its own cost and expense (and without any right of reimbursement from the Lessee), promptly take such action as may be necessary duly to discharge any such Lien. Section 6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee. Each of the Owner Participant and Trust Company, in its individual and trust capacities, hereby agrees, as to its own actions only and severally and not jointly, with (a) the Loan Participant and the Indenture Trustee (so long as the Equipment Notes remain outstanding), not to amend, supplement, or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of the Loan Participant or the Indenture Trustee without the prior written consent of such party and (b) with the Lessee, not to terminate or revoke the Trust Agreement or the trust created by the Trust Agreement prior to the payment in full and discharge of the Equipment Notes and all other indebtedness secured by the Indenture and the final discharge thereof. Each of the Trust Company and the Indenture Trustee agrees, for the benefit of the Lessee and the Owner Participant, to comply with the provisions of the Indenture and not to amend, supplement, or otherwise modify any provision of the Indenture except in the manner provided in Article IX thereof. Notwithstanding anything to the contrary contained herein or in any of the other Operative Agreements, the Indenture Trustee's obligation to take or refrain from taking any actions, or to use its discretion (including, but not limited to, the giving or withholding of consent or approval and the exercise of any rights or remedies under such Operative Agreement), and any liability therefor, shall, in addition to any other limitations provided herein or in any of the other Operative Agreements, be limited by the provisions of the Indenture. Participation Agreement (TRLI 2001-1C) 58 Section 6.6 Amendments to Operative Agreements That Are Not Lessee Agreements. Unless a Lease Event of Default shall have occurred and be continuing, the Owner Trustee, the Indenture Trustee and the Participants shall not terminate the Operative Agreements to which the Lessee is not or will not be a party, or amend, supplement, waive or modify in any manner such Operative Agreements to which the Lessee is not or will not be a party, (i) except in accordance with such Operative Agreements in effect on the date hereof (as amended, modified or supplemented from time to time in accordance with the terms hereof and of such Operative Agreements), or (ii) adverse to the Lessee or to any of its rights or interests under any of the Operative Agreements, except with the prior written consent of the Lessee. Without limiting the generality of the foregoing, each of the Owner Participant and the Owner Trustee, the Pass Through Trustee and the Indenture Trustee (as applicable) agrees that, in any event, unless a Lease Event of Default shall have occurred and be continuing, it will not amend Section 2.10 or Article IX of the Indenture or Article IX of the Trust Agreement without the prior written consent of the Lessee. Section 6.7 Certain Representations, Warranties and Covenants. The Lessee hereby confirms its representations, warranties and covenants in Article 6 of the Collateral Agency Agreement, which are hereby incorporated in this Agreement by this reference as fully as if set forth herein in their entirety. Section 6.8 Covenants of the Manager. The Manager hereby confirms the covenants in Article 7 of the Management Agreement, which are hereby incorporated in this Agreement by this reference as fully as if set forth herein in their entirety. Section 6.9 Lessee's Purchase in Certain Circumstances. (a) If (A) the Owner Participant or any Affiliate thereof is or acquires, is acquired by, merges or otherwise consolidates with any company or Affiliate thereof who would not be an eligible "Transferee" by reason of Section 6.1(b) (and, in the case of an Affiliate, such entity continues to be an Affiliate of the Owner Participant after such acquisition, merger or consolidation), or (B) the Lessee shall have requested a waiver pursuant to Section 12.3(c) of the Lease and the Lessor and the Owner Participant shall have refused to grant such waiver or shall have granted such waiver but shall have refused to further waive the requirement that amounts be deposited in the Special Insurance Reserves Account pursuant to the Collateral Agency Agreement in connection with the granting of the initial waiver, or (C) the Lessee shall have elected to purchase, or arrange a purchase of, the Beneficial Interest pursuant to Section 22.1 of the Lease, the Lessee may elect either to: Participation Agreement (TRLI 2001-1C) 59 (i) keep the Lease and the Equipment Notes in place and require that the Owner Participant, and the Owner Participant agrees to, transfer its Beneficial Interest in accordance with the terms of Section 6.1 (other than provisions of Sections 6.1(a), (b), (i), (l) and (n)) to the Lessee or such other transferee as the Lessee may designate (such transfer to occur on a Determination Date which is designated by the Lessee by written notice to the Owner Participant not less than 60 days prior to such Determination Date) at a purchase price (the "Beneficial Interest Purchase Price") equal to (1) the Equity Portion of Termination Amount as of the date of such transfer, plus (2) in the case of clause (B) above, the excess, if any, of the Fair Market Sales Value of the Equipment calculated as of such date over the Termination Value as of such date, plus (3) the Equity Portion of Basic Rent accrued and unpaid therefor as of the date of such transfer (exclusive of any Basic Rent payable on such date), plus (4) without duplication or limitation of any amount under clauses (1) to (3) above, the sum of the Accumulated Equity Deficiency Amount and Late Payment Interest related thereto, plus (5) without duplication or limitation of any amount under clauses (1) to (4) above, that portion of Supplemental Rent due and unpaid on such date that is payable to the Owner Participant; provided, however, that, without regard to such Owner Participant's obligations under the Operative Agreements relating to the period prior to such transfer, any transfer of the Beneficial Interest pursuant to this Section 6.9 shall be without additional representations or warranties of or other liabilities or obligations on such Owner Participant other than those expressly set forth in the Owner Participant Agreements; provided, further, that in case such Owner Participant holds less than 100% of the Beneficial Interest (after excluding any Beneficial Interests held by the Lessee, TILC or any Affiliate of either thereof), the purchase price for such Owner Participant's Beneficial Interest shall be equal to (x) (i) the sum of the amounts calculated under clauses (1), (2), (3) and (4) above multiplied by (ii) a fraction equal to the portion such Owner Participant's Beneficial Interest bears to 100% of the Beneficial Interests, plus (y) without duplication or limitation of any amount under clause (x) above, that portion of Supplemental Rent due and unpaid on such date that is payable to such Owner Participant; or (ii) on a Determination Date which is designated by the Lessee by written notice to the Owner Trustee and the Indenture Trustee not less than 60 days prior to such Determination Date, purchase the Equipment for a purchase price equal to (I) the Termination Amount calculated as of such Determination Date, plus (II) in the case of clause (B) of the lead paragraph of this Section 6.9(a), the excess, if any, of the Fair Market Sales Value of the Equipment calculated as of such date over the Termination Value as of such Determination Date, plus (III) without duplication or limitation, all other amounts due and owing by the Lessee under the Operative Agreements with respect to the Equipment, including, without limitation, all accrued and unpaid Basic Rent therefor as of such Determination Date (exclusive of any Basic Rent payable on such date), Make-Whole Amount then payable on the Participation Agreement (TRLI 2001-1C) 60 Equipment Notes pursuant to Section 2.10(c) of the Indenture with respect to the Equipment and Late Payment Premium, if any, due and owing under the Operative Agreements with respect to the Equipment so that, after receipt and application of all such payments the Owner Participant shall be entitled under the terms of the Collateral Agency Agreement to receive, and does receive, in respect of all such Units, the sum of the Accumulated Equity Deficiency Amount (without duplication of any amount provided under clauses (I) - (III) above) and Late Payment Interest related thereto and any other amounts of Supplemental Rent due and unpaid on such Determination Date that are payable to the Owner Participant. (b) If the Lessee elects to exercise the option to purchase the Equipment (as opposed to such Owner Participant's Beneficial Interest) as provided in Section 6.9(a), the Lessee shall, as the purchase price therefor pay the purchase price, as specified in Section 6.9(a)(ii), with respect to the Equipment, together with all other amounts due and owing by the Lessee under the Operative Agreements. (c) In connection with any purchase of the Equipment under this Section 6.9, the Lessee will make the payments required by Section 6.9(a)(ii) in immediately available funds against delivery of a bill of sale transferring and assigning to the Lessee all right, title and interest of the Lessor in and to the Equipment on an "as-is" "where-is" basis and containing a warranty with respect to the absence of any Lessor's Lien. In such event, the costs of preparing the bill of sale or other transfer documents and all other documentation relating to such purchase and the costs of any necessary filings related thereto will be borne by the Lessee. If the Lessee shall fail to fulfill its obligations under Sections 6.9(b) and (c), all of the Lessee's obligations under the Lease and the Operative Agreements, including, without limitation, the Lessee's obligation to pay installments of Rent, with respect to the Equipment shall continue. Section 6.10 Owner Participant as Affiliate of Lessee. So long as there are any Notes outstanding, if at any time the original or any successor Owner Participant shall be an Affiliate of the Lessee, the Manager or the Administrator such Owner Participant and the Lessee agree that, notwithstanding Section 9.5 of the Indenture, they will not vote its Beneficial Interest in any respect if there is another Owner Participant not affiliated with the Lessee, the Manager or the Administrator and, if there is no such Owner Participant, they will not vote its Beneficial Interest to modify, amend or supplement any provision of the Lease, this Agreement or any other Operative Agreement or give or withhold, or permit the Owner Trustee to give or withhold, any consent, waiver, authorization or approval thereunder unless such action shall have been consented to by the Pass Through Trustee; provided that the restrictions of this Section 6.10 shall not apply with respect to any such modification, Participation Agreement (TRLI 2001-1C) 61 amendment, supplement, consent, waiver, authorization or approval to the extent pertaining to any Excepted Property. Section 6.11 Records; U.S. Income Tax Information. Each of the Lessee, TRMI and TILC covenants that it will maintain or cause to be maintained and retain sufficient factual records (to the extent such records are maintained by the Lessee, TRMI and TILC respectively, any sublessee, or any trustee for or Affiliate of any thereof, in the ordinary course of their respective businesses) to enable the Owner Participant to prepare required United States federal, state and local tax returns. Upon request of the Owner Participant, the Lessee, TRMI and TILC, respectively, shall deliver such records to the Owner Participant at the expense of the Owner Participant. In addition, as soon as practicable, the Lessee, TRMI and TILC, respectively, shall provide or cause to be provided (at the expense of the Lessee) to the Owner Participant such information (in form and substance reasonable satisfactory to the Owner Participant) as the Owner Participant may reasonably request from and as shall be reasonably available to the Lessee, TRMI and TILC, respectively, to enable the Owner Participant to fulfill its tax return filing obligations, to respond to requests for information, to verify information in connection with any income tax audit and to participate effectively in any tax contest. Such information may include, without limitation, information as to the location of and use of the Equipment from time to time (to the extent such information is available on the basis of the records regularly maintained by the Lessee, TRMI and TILC, respectively, any sublessee, or any trustee for or Affiliate of any thereof, in the ordinary course of their respective businesses). Section 6.12 Replacement of Manager. (a) Manager Replacement Event. So long as any Equipment Notes remain outstanding, if a Manager Replacement Event has occurred and is continuing, the Pass Through Trustee shall have the right, but not the obligation, to require the Lessee to replace the Manager as provided in this Section 6.12 but only if the Other Pass Through Trustee, simultaneously therewith exercises its right under Section 6.12 of the respective Other Participation Agreements. (b) Replacement Manager. The Pass Through Trustee and the Other Pass Through Trustee shall send a written notice of their decision to replace the Manager pursuant to this Section 6.12 (a "Manager Replacement Notice") to the Lessee, the Manager, the Rating Agency, each Owner Participant, each Other Owner Participant, the Owner Trustee, the Other Owner Trustees, the Indenture Trustee and the Other Indenture Trustees. If each Owner Participant and each Other Owner Participant agree with such decision of the Pass Through Trustee and the Other Pass Through Trustee to replace the Manager, the Lessee shall, within 10 Business Days Participation Agreement (TRLI 2001-1C) 62 after it received confirmation of such agreement by each Owner Participant and each Other Owner Participant, provide a written notice (a "Lessee Proposed Replacement Manager Notice") proposing one or more replacement Managers (each, a "Replacement Manager") to the Indenture Trustee, the Other Indenture Trustees, the Rating Agency, each Owner Participant, the Other Owner Participants, the Owner Trustee, the Other Owner Trustees, the Pass Through Trustee and the Other Pass Through Trustee; provided, that each proposed Replacement Manager must satisfy the requirements of Section 8.4(b) of the Management Agreement imposed on a Successor Manager. A Lessee Proposed Replacement Manager Notice must contain the names of the proposed Replacement Managers, the information that may be reason ably required to confirm that the Replacement Managers satisfy the requirements of Section 8.4(b) of the Management Agreement imposed on a Successor Manager and other information that the Pass Through Trustee, the Other Pass Through Trustee, any Owner Participant or any Other Owner Participant may reasonably request. Within 30 calendar days after the delivery of the Lessee Proposed Replacement Manager Notice, the Pass Through Trustee and the Other Pass Through Trustee, acting jointly, and each Owner Participant and each Other Owner Participant, acting jointly, shall notify the Lessee in writing (a "Response Notice") whether they accept any of the proposed Replacement Managers with indication of which Replacement Managers are acceptable or they do not accept any of the proposed Replacement Managers; provided, however, that the Pass Through Trustee, the Other Pass Through Trustee, any Owner Participant and any Other Owner Participant may refuse to accept any proposed Replacement Manager (i) in their sole discretion, if such proposed Replacement Manager shall have a rating of long-term Dollar-denominated senior unsecured debt obligations below BBB- by S&P or Baa3 by Moody's, or (ii) in their reasonable discretion, if the proposed Replacement Manager shall have a rating of long-term Dollar-denominated senior unsecured debt obligations equal to or above BBB- by S&P and Baa3 by Moody's. If the Pass Through Trustee, the Other Pass Through Trustee, each Owner Participant and each Other Owner Participant (x) accept a proposed Replacement Manager or (y) any of them fails to deliver a Response Notice to the Lessee within the required period, the Lessee shall within 60 calendar days (after the delivery of the Response Notice or the expiration of the required period) replace the Manager with the Replacement Manager; provided, however, that in the event described under clause (x) immediately above, such Replacement Manager shall be the Replacement Manager accepted by the Pass Through Trustee, the Other Pass Through Trustee, each Owner Participant and each Other Owner Participant in the Response Notice, and in the event described under clause (y) immediately above, such Replacement Manager may be any of the Replacement Managers from the Replacement Managers proposed by Lessee in the Lessee Proposed Replacement Manager Notice. Any Replacement Manager shall execute and deliver to the Lessee and to the replaced Manager an instrument accepting such appointment, including customary confidentiality provisions in favor of the replaced Manager and the Lessee, and Participation Agreement (TRLI 2001-1C) 63 thereupon such Replacement Manager, without further act, shall become vested with all the rights, powers, duties and trusts of the replaced Manager under the Management Agreement on the same terms and conditions as the replaced Manager (or such other commercially reasonable terms and conditions as the Replacement Manager may reasonably require and which are reasonably acceptable to the Pass Through Trustee, the Other Pass Through Trustee, each Owner Participant and each Other Owner Participant) with like effect as if originally named the Manager therein except that in any event any Replacement Manager shall not be a "Guaranteed Party" for purposes of the Trinity Guaranty or the Other Trinity Guaranty. (c) Alternative Replacement Manager. If the Pass Through Trustee, the Other Pass Through Trustee, each Owner Participant and each Other Owner Participant deliver a Response Notice to the Lessee within the period required in Section 6.12(b) refusing to accept all proposed Replacement Managers in accordance with Section 6.12(b), the Pass Through Trustee and the Other Pass Through Trustee, acting jointly, and each Owner Participant and each Other Owner Participant, acting jointly, shall also propose in such Response Notice an alternative replacement Manager ("Alternative Replacement Manager"); provided, that any Alternative Replacement Manager shall satisfy the requirements of Section 8.4(b) of the Management Agreement imposed on a Successor Manager. Such Response Notice must contain the name of the proposed Alternative Replacement Manager, the information that may be reasonably required to confirm that the Alternative Replacement Manager satisfies the requirements of Section 8.4(b) of the Management Agreement imposed on a Successor Manager and the other information that the Lessee may reasonably request. The Lessee shall replace the Manager with the Alternative Replacement Manager within 60 calendar days after the delivery of the Response Notice. Any Alternative Replacement Manager appointed pursuant to this Section 6.12(c) shall execute and deliver to the Lessee and to the replaced Manager an instrument accepting such appointment, including customary confidentiality provisions in favor of the replaced Manager and the Lessee, and thereupon such Alternative Replacement Manager, without further act, shall become vested with all the rights, powers, duties and trusts of the replaced Manager under the Management Agreement on the same terms and conditions as the replaced Manager (or such other commercially reasonable terms and conditions as the Alternative Replacement Manager may reasonably require and which are reasonably acceptable to the Pass Through Trustee, the Other Pass Through Trustee, each Owner Participant and each Other Owner Participant) with like effect as if originally named the Manager therein except that in any event any Alternative Replacement Manager shall not be a "Guaranteed Party" for purposes of the Trinity Guaranty or the Other Trinity Guaranty. (d) Waiver by the Pass Through Trustee and the Other Pass Through Trustee. Any of the Pass Through Participation Agreement (TRLI 2001-1C) 64 Trustee or the Other Pass Through Trustee may at any time (i) withdraw any Manager Replacement Notice without penalty to the Pass Through Trustee and the Other Pass Through Trustee, and the Lessee shall have no obligation to replace the Manager under this Section 6.12 or (ii) waive any or all of its rights under this Section 6.12. (e) No Notes Outstanding. If after the replacement of the Manager with a Replacement Manager or an Alternative Replacement Manager pursuant to this Section 6.12, there are no Notes outstanding, the Lessee shall have the right, but not the obligation, at its sole cost and expense to terminate such Replacement Manager or Alternative Replacement Manager and return the Manager so replaced without penalty to the Lessee. Section 6.13 Acknowledgment of Equity Collateral Security Documents. Each of the parties to this Agreement acknowledges and agrees that (a) the Equity Collateral Security Documents are included in the Operative Agreements and (b) any rights of the Owner Trustee and/or Owner Participant or any other Equity Beneficiary (i) to payment or performance under the Equity Collateral Security Documents or (ii) to amend, waive or otherwise modify any provision of the Equity Collateral Security Documents are included in Excepted Property. It is expressly understood that (x) the exercise of any rights and remedies under the Collateral Agency Agreement and the other Operative Agreements (other than the Equity Collateral Security Documents) shall not restrict, limit or preclude the exercise of any rights and remedies under the Equity Collateral Security Documents and (y) the exercise of any rights and remedies under the Equity Collateral Security Documents shall not restrict, limit or preclude the exercise of any rights and remedies under the Collateral Agency Agreement and the other Operative Agreements (other than the Equity Collateral Security Documents), in each case without duplication of any amounts otherwise payable under the Operative Agreements. SECTION 7. LESSEE'S INDEMNITIES. Section 7.1 General Tax Indemnity. (a) Tax Indemnitee Defined. For purposes of this Section 7.1, "Tax Indemnitee" means the Pass Through Trustee, both in its individual capacity and as trustee, the Owner Participant, its Affiliates (including, without limitation, Philip Morris Capital Corporation, Grant Holdings, Inc., Trimaran Leasing Investors, L.L.C. I, Trimaran Leasing Investors, L.L.C. II and Trimaran Leasing, L.P.), the Owner Trustee, the Trust Company, the Indenture Trustee, both in its individual capacity and as trustee, each of their successors or assigns permitted under the terms of the Operative Agreements, any officer, director, employee or agent of any of the foregoing, the Trust Estate and the Indenture Estate; "Equity Tax Indemnitee" means the Owner Participant, its Affiliates, the Owner Trustee, the Trust Company, and Participation Agreement (TRLI 2001-1C) 65 each of their respective successors, assigns, officers, directors, employees and agents and the Trust Estate; "Lender Tax Indemnitee" means each Tax Indemnitee which is not an Equity Tax Indemnitee. (b) Taxes Indemnified. Except as provided below, all payments by the Lessee to any Tax Indemnitee in connection with the transactions contemplated by the Operative Agreements shall be free of withholdings of any nature whatsoever (and at the time that any payment is made upon which any withholding is required the Lessee shall pay an additional amount such that the net amount actually received will, after such withholding and on an After-Tax Basis, equal the full amount of the payment then due) and shall be free of expense to each Tax Indemnitee for collection or other charges. The Lessee shall defend, indemnify and save harmless each Tax Indemnitee from and against, and as between the Lessee and each Tax Indemnitee the Lessee hereby assumes liability with respect to, all fees (including, without limitation, license fees and registration fees), taxes (including, without limitation, income, gross receipts, franchise, sales, use, value added, property and stamp taxes), assessments, levies, imposts, duties, charges or withholdings of any nature whatsoever, together with any and all penalties, additions to tax, fines or interest thereon ("Taxes") imposed against any of the Tax Indemnitees, any item of Equipment or Pledged Equipment or the Lessee, upon, arising from or relating to (i) any item of the Equipment or the Pledged Equipment, (ii) the construction, manufacture, financing, purchase, delivery, ownership, acceptance, rejection, possession, improvement, use, operation, leasing, subleasing, condition, maintenance, repair, refinancing, registration, sale, return, replacement, storage, abandonment or other application or disposition of any item of the Equipment or the Pledged Equipment, (iii) the rental payments, receipts or earnings arising from any item of the Equipment or the Pledged Equipment or payable pursuant to the Operative Agreements, or (iv) the Operative Agreements, the Equipment Note or any Sublease or any Pledged Equipment Lease or otherwise with respect to or in connection with the transactions contemplated thereby. (c) Taxes Excluded. The indemnity provided in Section 7.1(b) shall not include: Participation Agreement (TRLI 2001-1C) 66 (i) as to any Equity Tax Indemnitee, any Income Tax imposed by the United States federal government (but not excluding any Income Tax required to make a payment on an After-Tax Basis); (ii) as to any Equity Tax Indemnitee, any Income Tax imposed by any state, local or foreign government or taxing authority or subdivision thereof; provided, however, that this exclusion shall not apply to the extent such Taxes (but not including Income Taxes imposed on net income) are attributable to (I) the use or location of any item of the Equipment or the activities of the Lessee or its Affiliates or any sublessee in the taxing jurisdiction, (II) the presence or organization of the Lessee or any sublessee in the taxing jurisdiction, (III) the status of the Lessee or any sublessee as a foreign entity or as an entity owned by a foreign person or (IV) Lessee or sublessee having made (or deemed to have made) payments to the Tax Indemnitee from the relevant jurisdiction; provided, further, however, that the preceding proviso shall not apply to any jurisdiction where the Owner Trust, the Owner Trustee (other than in its individual capacity) or the Owner Participant has its legal domicile or principal place of business (determined without regard to the transactions contemplated by the Operative Agreement); (iii) as to any Equity Tax Indemnitee, any Tax that is imposed as a result of the sale, transfer or other disposition, by the Lessor or the Owner Participant of any of its rights with respect to any item of Equipment, Equity Collateral or the Owner Participant's interest in the Trust Estate unless such sale, transfer or other disposition is a result of an Event of Default, results from any substitution, repair or replacement of any item of Equipment under the Lease, or results from any sale, transfer or disposition required under the Lease (including but not limited to Section 10 of the Lease); (iv) as to any Equity Tax Indemnitee, any Taxes to the extent they exceed the Taxes that would have been imposed had an Equity Tax Indemnitee not transferred, sold or disposed of its interest or rights in any item of the Equipment to a non-U.S. Person; (v) Taxes imposed on a Lender Tax Indemnitee with respect to any period after the payment in full of the Equipment Notes; provided that the exclusion set forth in this clause (v) shall not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to or simultaneously with the applicable time of payment of the Equipment Notes or relate to any payment made by the Lessee after such date; (vi) as to any Tax Indemnitee, Taxes to the extent caused by any misrepresentation or breach of warranty or covenant by such Tax Participation Agreement (TRLI 2001-1C) 67 Indemnitee or a Related Party under any of the Operative Agreements or by the gross negligence or willful misconduct of such Tax Indemnitee or a Related Party; (vii) as to any Lender Tax Indemnitee, Taxes which become payable as a result of a sale, assignment, transfer or other disposition (whether voluntary or involuntary) by such Lender Tax Indemnitee of all or any portion of its interest in the Equipment or any part thereof, the Pledged Equipment or any part thereof, the Trust Estate, the Indenture Estate or any of the Operative Agreements or rights created thereunder, other than as a result of (A) the substitution, modification or improvement of the Equipment or any part thereof or the Pledged Equipment or any part thereof, (B) a modification to the Operative Agreements, or (C) a disposition which occurs as the result of the exercise of remedies upon a Lease Event of Default; provided, that, notwithstanding the foregoing, the Lessee shall not be obligated to indemnify any Lender Tax Indemnitee with respect to net income taxes imposed within the United States as the result of a sale, assignment, transfer or other disposition by such Lender Tax Indemnitee or any Taxes imposed as a result of the status of the Lender Tax Indemnitee as other than a resident of the United States for tax purposes; (viii) as to any Lender Tax Indemnitee, Taxes imposed as the result of such Lender Tax Indemnitee not being a resident of the United States for tax purposes; (ix) as to any Lender Tax Indemnitee, Income Taxes or transfer taxes relating to any payments of principal, interest or Make Whole Amount, if any, on the Equipment Notes or the Pass Through Certificates paid to any such Tax Indemnitee that are imposed by (A) any other jurisdiction in which such Indemnitee is subject to such Taxes as a result of it or an Affiliate being organized in such jurisdiction or conducting activities in that jurisdiction unrelated to the transactions contemplated by the Operative Agreements, (B) the United States federal government or (C) any state or local government within the United States; (x) Taxes to the extent directly resulting from or that would not have been imposed but for (x) in the case of Taxes imposed on or with respect to any Equity Tax Indemnitee, the existence of any Lessor Liens with respect to such Equity Tax Indemnitee, (y) in the case of Taxes imposed on or with respect to any Lender Tax Indemnitee, the existence of any Liens attributable to the Indenture Trustee or Liens attributable to the Pass Through Trustee; (xi) Taxes imposed on a Tax Indemnitee to the extent that such Taxes would not have been imposed upon such Tax Indemnitee but for any failure of such Tax Indemnitee or a Related Party to comply with (x) any certification, information, documentation, reporting or other similar requirements Participation Agreement (TRLI 2001-1C) 68 concerning the nationality, residence, identity or connection with the jurisdiction imposing such Taxes, if such compliance is required under the laws or regulations of such jurisdiction to obtain or establish relief or exemption from or reduction in such Taxes and the Tax Indemnitee or such Related Party was eligible to comply with such requirement or (y) any other certification, information, documentation, reporting or other similar requirements under the Tax laws or regulations of the jurisdiction imposing such Taxes that would establish entitlement to otherwise applicable relief or exemption from such Taxes; provided, however, that the exclusion set forth in this clause (xii) shall not apply (I) if such failure to comply was due to a failure of the Lessee to provide reasonable assistance on request in complying with such requirement, (II) if, in the case of Taxes imposed on the Owner Participant, in the good faith judgment of the Owner Participant there is a risk of adverse consequence to the Owner Participant or any Affiliate from such compliance against which the Owner Participant is not satisfactorily indemnified, (III) in the case of Taxes imposed on the Owner Participant, if any such failure to comply on the part of the Owner Trustee was the result of the Owner Trustee's gross negligence or failure to act in accordance with instructions of the Owner Participant, or (IV) in the case of any Tax Indemnitee, unless Lessee shall have given such Tax Indemnitee prior written notice of such requirements; (xii) Taxes that are imposed with respect to any period after the earlier of (x) return of the Equipment to the Lessor in accordance with, and at a time and place contemplated by the Lease (including the payment of all amounts due at such time) and (y) the termination of the Term pursuant to Section 6, 10, 11, 15 or 22 of the Lease and the discharge in full of Lessee's payment obligation's thereunder unless the Equipment is thereafter required to be returned, in which case, after such return; provided, however, that the exclusion set forth in this clause (xii) shall not apply to Taxes to the extent such Taxes relate to events occurring or matters arising prior to or simultaneously with such return or termination; (xiii) as to any Lender Tax Indemnitee, Taxes in the nature of an intangible or similar tax upon or with respect to the value of the interest of such Lender Tax Indemnitee in the Indenture Estate, in any Equipment Note or Pass Through Certificate imposed as a result of such Lender Tax Indemnitee or any Affiliate of such Lender Tax Indemnitee being organized in, or conducting activities unrelated to the contemplated transactions in, the jurisdiction imposing such Taxes; (xiv) Taxes imposed on the Owner Trustee or the Indenture Trustee that are on, based on or measured by any trustee fees for services rendered by such Tax Indemnitee in its capacity as trustee under the Operative Agreements; Participation Agreement (TRLI 2001-1C) 69 (xv) Taxes imposed on any Tax Indemnitee, or any other person who, together with such Tax Indemnitee, is treated as one employer for employee benefit plan purposes, as a result of, or in connection with, any "prohibited transaction," within the meaning of the provisions of the Code or regulations thereunder or as set forth in Section 406 of ERISA or the regulations implementing ERISA or Section 4975 of the Code or the regulations thereunder; (xvi) Taxes for so long as (x) such Taxes are being contested in accordance with the provisions of Section 7.1(e) hereof, (y) the Lessee is in compliance with its obligations under Section 7.1(e), and (z) the payment of such Taxes is not required pursuant to Section 7.1(e); (xvii) Taxes as to which such Tax Indemnitee is indemnified pursuant to the Tax Indemnity Agreement; (xviii) any Taxes imposed on or with respect to any Certificateholder; and (xix) Taxes imposed as a result of the authorization or giving of any future amendments, supplements, waivers or consents with respect to any Operative Agreement other than (w) those which are legally required, (x) in connection with the exercise of remedies pursuant to Section 15 of the Lease, (y) such as have been proposed by the Lessee or consented to by the Lessee or (z) those that are required pursuant to the terms of the Operative Agreements. (d) Payments to Tax Indemnitee. The Lessee agrees to pay, on demand, any and all Taxes indemnified under this Section 7.1 ("Indemnified Taxes"), and to keep at all times all and every part of each item of the Equipment and Pledged Equipment free and clear of all Indemnified Taxes which might in any way affect the interest of any Tax Indemnitee therein or result in a Lien upon any such item of the Equipment or Pledged Equipment; provided, however, that the Lessee shall be under no obligation to pay any Tax so long as either the Tax Indemnitee or the Lessee is contesting in good faith and by appropriate legal proceedings such tax and the nonpayment thereof does not, in the reasonable opinion of the Tax Indemnitee, materially adversely affect the interest of any Tax Indemnitee hereunder or under the Indenture. Subject to Section 7.1(e), if any Indemnified Taxes shall have been charged or levied against any Tax Indemnitee directly and paid by such Tax Indemnitee after such Tax Indemnitee shall have given written notice thereof to the Lessee and the same shall have remained unpaid for a period of ten Business Days thereafter, the Lessee shall reimburse such Tax Indemnitee payment. Participation Agreement (TRLI 2001-1C) 70 (e) Contests. If a written claim is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which the Lessee may be required to indemnify against hereunder (a "Tax Claim"), such Tax Indemnitee shall give the Lessee written notice of such Tax Claim promptly (but in any event within twenty (20) days) after its receipt, and shall furnish Lessee with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim (but failure to so notify the Lessee shall relieve the Lessee of its obligations hereunder only to the extent it effectively precludes a contest of the claim). The Tax Indemnitee shall not pay such Tax Claim until at least thirty (30) days after providing the Lessee with such written notice, unless (a) the Tax Indemnitee is required to do so by law or regulation and (b) in the written notice described above, the Tax Indemnitee has notified the Lessee of such requirement. If the Lessee shall so request within 30 days after receipt of such notice, then such Tax Indemnitee shall in good faith at Lessee's expense contest such Tax; provided, however, that to the extent the contest involves only Taxes constituting property taxes, sales taxes, or use taxes and does not involve any taxes or other issues relating to a Tax Indemnitee which are unrelated to the transactions contemplated by the Operative Agreements and if no Equity Insufficiency Circumstance exists, such contest shall be undertaken by the Lessee at the Lessee's expense and at no-after-tax cost to the Lessor or the Owner Participant, but if such contest would involve any other type of Tax or any taxes or issues relating to a Tax Indemnitee which are unrelated to the transactions contemplated by Operative Agreements or if an Equity Insufficiency exists, then such Tax Indemnitee may, in its sole discretion, control such contest (including selecting the forum for such contest, and determining whether any such contest shall be conducted by (i) paying such Tax under protest or (ii) resisting payment of such Tax or (iii) paying such Tax and seeking a refund thereof; provided, further, however, that at such Tax Indemnitee's option, such contest shall be conducted by the Lessee in the name of such Tax Indemnitee). In no event shall such Tax Indemnitee be required or the Lessee be permitted to contest any Tax for which the Lessee is obligated to indemnify pursuant to this Section unless: (i) the Lessee shall have acknowledged in writing its liability to such Tax Indemnitee for an indemnity payment pursuant to this Section as a result of such claim if and to the extent such Tax Indemnitee or the Lessee, as the case may be, shall not prevail in the contest of such claim; provided, however, that the Lessee shall not be required to indemnify for such Taxes to the extent the results of the contest clearly and unambiguously demonstrate that the Tax is not an indemnified Tax; (ii) such Tax Indemnitee shall have received the opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee furnished at the Lessee's sole expense, to the effect that a reasonable basis exists for contesting such claim or, in the event of an appeal of a court decision, that it is more likely than not that an appellate court or an administrative agency with appellate jurisdiction, as the case may be, will reverse or substantially modify the adverse determination; (iii) the Lessee shall have agreed to pay such Tax Indemnitee on demand (and at no after-tax Participation Agreement (TRLI 2001-1C) 71 costs to the Lessor and the Owner Participant) all reasonable costs and expenses that such Tax Indemnitee may incur in connection with contesting such claim (including, without limitation, all costs, expenses, reasonable legal and accounting fees, disbursements, penalties, interest and additions to the Tax); (iv) no Lease Default described in Section 14(a), 14(b), 14(g) or 14(h) of the Lease or a Lease Event of Default shall have occurred and shall have been continuing, unless the Lessee shall have posted a satisfactory bond or other security with respect to the costs of such contest and the Taxes which may be required to be indemnified; (v) such Tax Indemnitee shall have determined that the action to be taken will not result in any substantial danger of sale, forfeiture or loss of, or the creation of any Lien, or the Lessee shall have or otherwise made a provision to protect the interest of such Tax Indemnitee (in a manner satisfactory to such Tax Indemnitee), on the Equipment or any portion thereof or any interest therein; (vi) the amount of such claims alone, or, if the subject matter thereof shall be of a continuing or recurring nature, when aggregated with substantially identical potential claims shall be (A) at least $5,000 in the event of a Lessee controlled contest, or (B) $25,000 in the event of a Tax Indemnitee controlled contest; and (vii) if such contest shall be conducted in a manner requiring the payment of the claim, the Lessee shall have paid the amount required (and at no after-tax costs to the Lessor and the Owner Participant). The Lessee shall cooperate with the Tax Indemnitee with respect to any contest controlled and conducted by the Tax Indemnitee and the Tax Indemnitee shall consult with the Lessee regarding the conduct of such contest. The Tax Indemnitee shall cooperate with respect to any contest controlled and conducted by the Lessee and the Lessee shall consult with the Tax Indemnitee regarding the conduct of such contest. Notwithstanding anything to the contrary contained in this Section 7.1, no Tax Indemnitee shall be required to contest any claim if the subject matter thereof shall be of a continuing or recurring nature and shall have previously been adversely decided to the Tax Indemnitee pursuant to the contest provisions of this Section unless there shall have been a change in the law (including, without limitation, amendments to statutes or regulations, administrative rulings or court decisions) enacted, promulgated or effective after such claim shall have been so previously decided, and such Tax Indemnitee shall have received an opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee, furnished at the Lessee's sole expense, to the effect that such change is favorable to the position which such Tax Indemnitee or the Lessee, as the case may be, had asserted in such previous contest and as a result of such change, there is a reasonable basis to contest such claim. Notwithstanding anything contained in this Section 7.1, a Tax Indemnitee will not be required to contest the imposition of any Tax and shall be permitted to settle or compromise any claim without the Lessee's consent if such Tax Indemnitee (A) shall waive its right to indemnity under this Section 7.1 with respect Participation Agreement (TRLI 2001-1C) 72 to such Tax (and any directly related claim and any claim the outcome of which is determined based upon the outcome of such claim) and (B) shall pay to the Lessee any amount previously paid or advanced by the Lessee pursuant to this Section 7.1 with respect to such Tax, plus interest at the rate that would have been payable by the relevant taxing authority with respect to a refund of such Tax. (f) Payments to Lessee. With respect to any payment or indemnity hereunder, such payment or indemnity shall have included an amount payable to the Tax Indemnitee sufficient to hold such Tax Indemnitee harmless on an After- Tax Basis from all Taxes required to be paid by such Tax Indemnitee with respect to such payment or indemnity under the laws of any federal, state or local government or taxing authority in or of the United States, or under the laws of any taxing authority or governmental subdivision in or of a foreign country; provided that, if any Tax Indemnitee realizes and recognizes a permanent tax benefit by reason of such payment or indemnity (whether such tax benefit shall be by means of a foreign tax credit, investment tax credit, depreciation or recovery deduction or otherwise), such Tax Indemnitee shall pay to the Lessee an amount equal to the sum of such tax benefit plus any tax benefit realized as the result of any payment made pursuant to this proviso, when, as, if and to the extent realized; provided further that, (i) if at the time such payment shall be due to the Lessee, a Lease Event of Default shall have occurred and be continuing, such amount shall not be payable until such Lease Event of Default shall have been cured, and (ii) the amount which such Tax Indemnitee shall be required to pay to the Lessee shall not exceed the amounts which the Lessee has theretofore paid such Tax Indemnitee hereunder with respect to such indemnity or a substantially identical indemnity. For purposes of this Section 7.1, in determining the order in which the consolidated (for federal income tax purposes) group to which such Tax Indemnitee belongs utilizes withholding or other foreign taxes as a credit against such group's United States income taxes, such Tax Indemnitee (and such group) shall be deemed to utilize (i) first, all foreign taxes other than those described in clauses (ii) and (iii) below; provided, however, that such other foreign taxes which are carried back to the taxable year for which a determination is being made pursuant to such clause (i) shall be deemed utilized after the foreign taxes described in clause (ii) below, (ii) then, on a pari passu basis, the foreign taxes indemnified hereunder together with all other foreign taxes (including fees, taxes and other charges hereunder) with respect to which such Tax Indemnitee (or any member of such group) is entitled to obtain indemnification pursuant to an indemnification provision contained in any lease, loan agreement, financing document or participation agreement (including, without limitation, this Agreement) pursuant to which there is an agreement that foreign taxes shall be, or shall be deemed to be, utilized on a basis no less favorable to the indemnitor than those contemplated in this paragraph, and (iii) third, foreign taxes attributable to transactions entered into by such Tax Participation Agreement (TRLI 2001-1C) 73 Indemnitee (or any member of such group) which did not provide for foreign taxes to be utilized or deemed utilized on at least a pari passu basis. (g) Reports. In the event any reports with respect to Indemnified Taxes are required to be made, the Lessee will either prepare and file such reports (and in the case of reports which are required to be filed on the basis of individual items of Equipment, such reports shall be prepared and filed in such manner as to show, if required, the interest of each Tax Indemnitee in such items of Equipment) or, if it shall not be permitted to file the same, it will notify each Tax Indemnitee of such reporting requirements, prepare such reports in such manner as shall be satisfactory to each Tax Indemnitee and deliver the same to each Tax Indemnitee within a reasonable period prior to the date the same is to be filed. The Lessee shall provide such information as the Owner Participant or the Lessor may reasonably require from the Lessee to enable the Owner Participant and the Lessor to fulfill their respective tax filing, tax audit, and tax litigation obligations. (h) Survival. In the event that, during the continuance of this Agreement, any Indemnified Tax accrues or becomes payable or is levied or assessed (or is attributable to the period of time during which the Lease is in existence or prior to the return of Equipment in accordance with the provisions of the Lease) which the Lessee is or will be obligated to pay or reimburse, pursuant to this Section 7.1, such liability shall continue, notwithstanding the expiration of the Lease, until all such Taxes are paid or reimbursed by the Lessee. (i) Affiliated Group. For purposes of applying this Section 7.1 with respect to any Tax, the term "Owner Participant" shall include each member of the affiliated group of corporations with which Grant Holdings, Inc. (and its successors and assigns) files consolidated or combined tax returns relating to such Imposition. (j) Income Tax. For purposes of this Section 7.1, the term "Income Tax" means any Tax based on or measured by or with respect to gross or net income (including without limitation, capital gains taxes, personal holding company taxes, minimum taxes and tax preferences) or gross or net receipts and Taxes which are capital, net worth, conduct of business, franchise or excess profits taxes and interest, additions to tax, penalties, or other charges in respect thereof (provided, however, that Taxes that are, or are in the nature of, sales, use, rental, value-added, excise, ad valorem, or property (whether tangible or intangible) taxes shall not constitute an Income Tax). (k) Certain Withholding. If the Indenture Trustee fails to with hold any Tax required to be withheld with respect to any payment to a Lender Tax Indemnitee or any claim is otherwise asserted by a taxing authority against any Participation Agreement (TRLI 2001-1C) 74 Equity Tax Indemnitee for or on account of any amount required to be withheld from any payment to a Lender Tax Indemnitee or Certificateholder, the Lessee will indemnify each Equity Tax Indemnitee (without regard to any exclusions in Section 7.1(c) hereof) on an After-Tax Basis against any Taxes required to be withheld and any interest, penalties, and additions to tax with respect thereto, along with other costs (including attorneys' fees) incurred in connection with such claim. Section 7.2 General Indemnification. (a) Claims Defined. For the purposes of Sections 7.2, 7.3 and 7.4, "Claims" shall mean any and all costs, expenses, liabilities, obligations, losses, damages, penalties, actions or suits or claims of whatsoever kind or nature (whether or not on the basis of negligence, strict or absolute liability or liability in tort) which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, any Unit or any Pledged Unit and, except as otherwise expressly provided in Section 7.2, 7.3 and 7.4, shall include, but not be limited to, all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith or related thereto. (b) Indemnified Person Defined. For the purposes of Sections 7.2, 7.3 and 7.4, "Indemnified Person" means the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee, each of their Affiliates and each of their respective directors, officers, employees, successors and permitted assigns, agents and servants, the Trust Estate and the Indenture Estate (the respective directors, officers, employees, successors and permitted assigns, agents and servants of the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as applicable, together with the Owner Participant, the Owner Trustee, Trust Company, the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as the case may be, being referred to herein collectively as the "Related Indemnitee Group" of the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Trust Company, respectively). (c) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.2(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.2(g)): (i) this Agreement or any other Operative Agreement or any of the transactions contemplated hereby and thereby or any Unit or Pledged Participation Agreement (TRLI 2001-1C) 75 Unit or the ownership, lease, operation, possession, modification, improvement, abandonment, use, non-use, maintenance, lease, sublease, substitution, control, repair, storage, alteration, transfer or other application or disposition, return, overhaul, testing, servicing, replacement or registration of any Unit or Pledged Unit (including, without limitation, injury, death or property damage of passengers, shippers or others, and environmental control, noise and pollution regulations, or the presence, discharge, treatment, storage, handling, generation, disposal, spillage, release, escape of or exposure of any Person or thing to (directly or indirectly) Hazardous Sub stances or damage to the environment (including, without limitation, costs of investigations or assessments, clean-up costs, response costs, remediation costs, removal costs, restoration costs, monitoring costs, costs of corrective actions and natural resource damages)) whether or not in compliance with the terms of the Lease or the Collateral Agency Agreement, as applicable, or by any of the commodities, items or materials from time to time contained in any Unit or Pledged Unit, whether or not in compliance with the terms of the Lease or the Collateral Agency Agreement, as applicable, or by the inadequacy of any Unit or Pledged Unit or deficiency or defect in any Unit or Pledged Unit or by any other circumstances in connection with any Unit or Pledged Unit or by the performance of any Unit or Pledged Unit or any risks relating thereto; (ii) the construction, manufacture, financing, refinancing, design, purchase, acceptance, rejection, delivery, non-delivery or condition of any Unit or any Pledged Unit (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement); (iii) any act or omission (whether negligent or other wise) or any breach of or failure to perform or observe, or any other non-compliance with, any covenant, condition or agreement to be performed by, or other obligation of, the Lessee or any Affiliate of the Lessee under any of the Operative Agreements, or the falsity of any representation or warranty of the Lessee or any Affiliate of the Lessee in any of the Operative Agreements to which it is a party or in any document or certificate delivered by the Lessee or any Affiliate of the Lessee in connection therewith other than representations and warranties in the Tax Indemnity Agreement; (iv) the offer, sale or delivery of any Equipment Notes or Pass Through Certificates or any interest in the Trust Estate or in connection with a refinancing in accordance with the terms hereof; and (v) any violation of law, rule, regulation or order by the Lessee or any Affiliate of Lessee or any Sublessee or any Pledged Equipment Lessee or their respective directors, officers, employees, agents or servants. Participation Agreement (TRLI 2001-1C) 76 (d) Claims Excluded. The following are excluded from the Lessee's agreement to indemnify under this Section 7.2: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to such Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any such Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes, whether or not the Lessee is required to indemnify therefor under Section 7.1 hereof or under the Tax Indemnity Agreement or any loss of tax benefits or increases in tax liability whether or not the Lessee is required to indemnify a Indemnified Person elsewhere in the Operative Agreements; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate or the Equity Collateral other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs Participation Agreement (TRLI 2001-1C) 77 during the continuance of a Lease Event of Default, Claims relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9) or the Equity Collateral or (b) with respect to the Loan Participant, of all or any portion of the Loan Participant's interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Lease Event of Default; Participation Agreement (TRLI 2001-1C) 78 (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) without affecting Lessee's obligations under Section 2.5(b), Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by Lessee or are not specifically required by the Operative Agreements. (e) Insured Claims. In the case of any Claim indemnified by the Lessee hereunder which is covered by a policy of insurance maintained by the Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified Person agrees to provide reasonable cooperation to the insurers in the exercise of their rights to investigate, defend, settle or compromise such Claim as may be required to retain the benefits of such insurance with respect to such Claim. (f) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify the Lessee of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release the Lessee from any of its obligations under this Section 7.2, except (but only if neither the Lessee nor TILC shall have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on Lessee's ability to defend such Claim or recover proceeds under any insurance policies maintained by the Participation Agreement (TRLI 2001-1C) 79 Lessee or to the extent Lessee's indemnification obligations are increased as a result of such failure. The Lessee shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, the Lessee shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that the Lessee shall confirm to such Indemnified Person Lessee's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against Lessee pursuant to this Section 7.2 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against TILC, TRMI and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if Lessee is entitled to control the defense of such Claim pursuant to this Section 7.2 and at the same time TILC, TRMI and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, Lessee's indemnification obligations under this Section 7.2 shall not be reduced as a result of the inability of Lessee to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by TILC, TRMI and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, the Lessee shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of the Lessee. In addition, any Indemnified Person may participate in any proceeding controlled by the Lessee pursuant to this Section 7.2, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to the Lessee materially interfere with such control, at its own expense, in respect of any such proceeding as to which the Lessee shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.2, and at the expense Participation Agreement (TRLI 2001-1C) 80 of the Lessee in respect of any such proceeding as to which the Lessee shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.2. The Lessee may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.2(f) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of the Lessee unless the Indemnified Person waives its rights to indemnification hereunder. (g) Subrogation. If a Claim indemnified by the Lessee under this Section 7.2 is paid in full by the Lessee and/or an insurer under a policy of insurance maintained by the Lessee, the Lessee and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by the Lessee hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount the Lessee or any of its insurers has paid) to the Lessee; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for the Lessee's obligations under the Lease and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.2(f) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. Section 7.3 Indemnification by TILC. (a) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.3(b) below, TILC agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.3(d)): (i) any breach of or any inaccuracy in any representation or warranty made by TILC in this Agreement or any of the other Operative Agreements or in any certificate delivered by TILC pursuant hereto or thereto; Participation Agreement (TRLI 2001-1C) 81 (ii) any breach of or failure by TILC to perform any covenant or obligation of TILC set out in or contemplated by this Agreement or any of the other Operative Agreements; and (iii) any violation of law, rule, regulation or order by TILC or its directors, officers, employees, agents or servants. (b) Claims Excluded. The following are excluded from TILC's agreement to indemnify under this Section 7.3: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to such Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes or any loss of tax benefits or increases in tax liability; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate or Equity Collateral other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; Participation Agreement (TRLI 2001-1C) 82 (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claims relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than pursuant to Section 6.9) or the Equity Collateral, or (b) with respect to the Loan Participant, of all or any portion of its interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); Participation Agreement (TRLI 2001-1C) 83 (xi) Claims relating to an Indenture Event of Default that is not attributable to a Manager Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by TILC or are not specifically required by the Operative Agreements. (c) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify TILC of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release TILC from any of its obligations under this Section 7.3, except (but only if TILC shall not have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on TILC's ability to defend such Claim or recover proceeds under any insurance policies maintained by TILC or to the extent TILC's indemnification obligations are increased as a result of such failure. TILC shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, TILC shall at its sole cost and expense be entitled to Participation Agreement (TRLI 2001-1C) 84 control, and shall assume full responsibility for, the defense of such claim or liability; provided that TILC shall confirm to such Indemnified Person TILC's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Claim is made against TILC pursuant to this Section 7.3 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against Lessee, TRMI and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if TILC is entitled to control the defense of such Claim pursuant to this Section 7.3 and at the same time Lessee, TRMI and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, TILC's indemnification obligations under this Section 7.3 shall not be reduced as a result of the inability of TILC to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by Lessee, TRMI and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, TILC shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of TILC. In addition, any Indemnified Person may participate in any proceeding controlled by TILC pursuant to this Section 7.3, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to TILC materially interfere with such control, at its own expense, in respect of any such proceeding as to which TILC shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.3, and at the expense of TILC in respect of any such proceeding as to which TILC shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.3. TILC may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.3(c) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect Participation Agreement (TRLI 2001-1C) 85 thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of TILC unless the Indemnified Person waives its rights to indemnification hereunder. (d) Subrogation. If a Claim indemnified by TILC under this Section 7.3 is paid in full by TILC and/or an insurer under a policy of insurance maintained by TILC, TILC and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by TILC hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount TILC or any of its insurers has paid) to TILC; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for TILC's obligations under the Management Agreement and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.3(c) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. Section 7.4 Indemnification by TRMI. (a) Claims Indemnified. Whether or not any Unit is accepted under the Lease, or the Closing occurs, and subject to the exclusions stated in Section 7.4(b) below, TRMI agrees to indemnify, protect, defend and hold harmless each Indemnified Person on an After-Tax Basis against Claims directly or indirectly resulting from or arising out of or alleged to result from or arise out of (whether or not such Indemnified Person shall be indemnified as to such Claim by any other Person but subject to Section 7.4(d)): (i) any breach of or any inaccuracy in any representation or warranty made by TRMI in this Agreement or any of the other Operative Agreements or in any certificate delivered by TRMI pursuant hereto or thereto; (ii) any breach of or failure by TRMI to perform any covenant or obligation of TRMI set out in or contemplated by this Agreement or any of the other Operative Agreements; and (iii) any violation of law, rule, regulation or order by TRMI or its directors, officers, employees, agents or servants. Participation Agreement (TRLI 2001-1C) 86 (b) Claims Excluded. The following are excluded from TRMI's agreement to indemnify under this Section 7.4: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (except (A) in any case where remedies are being exercised under Section 15 of the Lease for so long as the Lessor shall be entitled to exercise remedies under such Section 15, or (B) the Lessee has assumed any of the obligations with respect to the Equipment Notes under Section 3.6 of the Indenture and the Equipment Notes remain outstanding under the Indenture) the later to occur of (x) with respect to such Unit, the earlier to occur of the termination of the Lease or the expiration of the Lease Term in accordance with the terms thereof, and (y) with respect to each Unit, the return of such Unit to the Lessor in accordance with the terms of the Lease (it being understood that, so long as any Unit is in storage as provided in Section 6.1(c) of the Lease, the date of return thereof for the purpose of this clause (i) shall be the last day of the Storage Period); (ii) Claims which are Taxes or any loss of tax benefits or increases in tax liability; provided that this clause (ii) shall not apply to Taxes necessary to pay Claims on an After-Tax Basis; (iii) with respect to any particular Indemnified Person, Claims to the extent resulting from (x) the gross negligence or willful misconduct of such Indemnified Person or a Related Party, or (y) any breach of any covenant to be performed by such Indemnified Person or a Related Party under any of the Operative Agreements, or the falsity of any representation or warranty of such Indemnified Person or a Related Party in any of the Operative Agreements or in a document or certificate delivered in connection therewith; (iv) Claims to the extent attributable to any transfer by the Lessor of the Equipment or any portion thereof or any transfer by the Owner Participant of all or any portion of its interest in the Trust Estate or Equity Collateral other than (A) any transfer after a Lease Event of Default, (B) the transfer of all or any portion of the Equipment or any Owner Participant's interest in the Equipment to the Lessee, (C) the transfer of all or any portion of the Equipment to a third party pursuant to Lessee's election to terminate the Lease or (D) any transfer of all or any portion of the Equipment pursuant to Section 6.9; (v) with respect to any particular Indemnified Person, unless such transfer is required by the terms of the Operative Agreements or occurs during the continuance of a Lease Event of Default, Claim relating to any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) (a) in the case of the Owner Participant, of any of its interest in the Beneficial Interest (other than Participation Agreement (TRLI 2001-1C) 87 pursuant to Section 6.9) or Equity Collateral, or (b) with respect to the Loan Participant, of all or any portion of its interest in the Equipment Notes or the collateral therefor; (vi) with respect to any particular Indemnified Person, Claims resulting from the imposition of (x) any Lessor's Lien attributable to such Indemnified Person or a Related Party or (y) any Lien attributable to such Indemnified Person or a Related Party not expressly permitted under the Operative Agreements or which such Indemnified Person is required to remove pursuant to the terms of the Operative Agreements; (vii) with respect to any particular Indemnified Person, Claims to the extent the risk thereof has been expressly assumed by such Indemnified Person in connection with the exercise by such Indemnified Person of the right of inspection granted under Section 6.2 of the Lease, inspection or restenciling under Section 6.1(c) of the Lease or inspection under Section 13.2 of the Lease; (viii) Claims relating to any amount that constitutes principal of, or interest or premium on the Equipment Notes or the Pass Through Certificates; (ix) Claims relating to the payment of any amount which constitutes Transaction Costs which the Owner Trustee is obligated to pay pursuant to Section 2.5(a) (other than those that the Lessee may be required to pay under Section 2.5(c) or Section 2.5(e)) or any other amount to the extent such Indemnified Person or a Related Party has expressly agreed to pay such amount without a right of reimbursement, or any Claim payable by any Indemnified Person pursuant to any provision of any Operative Agreement that expressly states that such Claim is not subject to indemnification or reimbursement by the Lessee, or any Claim arising out of obligations expressly assumed by the Indemnified Person seeking indemnification or a Related Party; (x) Claims relating to any amount that is an ordinary and usual operating or overhead expense of any Indemnified Person (it being understood out-of-pocket expenses payable to third parties do not constitute "ordinary and usual operating or overhead expenses"); (xi) Claims relating to an Indenture Event of Default that is not attributable to a Manager Default; (xii) with respect to the Owner Trustee in its individual and trust capacities, and its Related Indemnitee Group, any Claims relating to a failure on the part of the Owner Trustee to distribute in accordance with the Trust Participation Agreement (TRLI 2001-1C) 88 Agreement any amounts distributable by it thereunder; (xiii) with respect to the Indenture Trustee in its individual and trust capacities, any Claims relating to failure on the part of the Indenture Trustee to distribute in accordance with the Indenture any amounts distributable by it thereunder; (xiv) with respect to the Pass Through Trustee in its individual and trust capacities, any Claims relating to failure on the part of the Pass Through Trustee to distribute in accordance with the Pass Through Trust Agreement or Pass Through Trust Supplement any amounts distributable by it thereunder; (xv) Claims relating to the offer, sale or delivery of any Equipment Note or any interest in the Trust Estate; (xvi) Claims relating to any sale, transfer or holding of the Equipment Notes or Pass Through Certificates being deemed to result in a "prohibited transaction" under ERISA; or (xvii) any Claims relating to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Operative Agreements which amendments, supplements, waivers or consents are not requested by TRMI or are not specifically required by the Operative Agreements. (c) Claims Procedure. An Indemnified Person shall, after obtaining knowledge thereof, promptly notify TRMI of any Claim as to which indemnification is sought; provided, however, that the failure to give such notice shall not release TRMI from any of its obligations under this Section 7.4, except (but only if TRMI shall not have actual knowledge of such Claim) to the extent that failure to give notice of any action, suit or proceeding against such Indemnified Person shall have a material adverse effect on TRMI's ability to defend such Claim or recover proceeds under any insurance policies maintained by TRMI or to the extent TRMI's indemnification obligations are increased as a result of such failure. TRMI shall, after obtaining knowledge thereof, promptly notify each Indemnified Person of any indemnified Claim affecting such Indemnified Person. Subject to the provisions of the following paragraph, TRMI shall at its sole cost and expense be entitled to control, and shall assume full responsibility for, the defense of such claim or liability; provided that TRMI shall confirm to such Indemnified Person TRMI's obligations to indemnify hereunder for such Claim, shall keep the Indemnified Person which is the subject of such proceeding fully apprised of the status of such proceeding and shall provide such Indemnified Person with all information with respect to such proceeding as such Indemnified Person shall reasonably request. To the extent that a Participation Agreement (TRLI 2001-1C) 89 Claim is made against TRMI pursuant to this Section 7.4 at a time when an identical claim for indemnification arising from substantially similar facts and circumstances is being asserted against Lessee, TILC and/or Trinity pursuant to this Section 7 or Section 4 of the Trinity Guaranty, if TRMI is entitled to control the defense of such Claim pursuant to this Section 7.4 and at the same time Lessee, TILC and/or Trinity, as the case may be, is entitled to control the defense of such claim or liability pursuant to this Section 7 or Section 4 of the Trinity Guaranty, TRMI's indemnification obligations under this Section 7.4 shall not be reduced as a result of the inability of TRMI to control the defense of such Claim where such inability to control the defense of such Claim is caused by the exercise by Lessee, TILC and/or Trinity, as applicable, of such Person's right to control the defense of such indemnified claim as provided by this Section 7 or Section 4 of the Trinity Guaranty. Notwithstanding any of the foregoing to the contrary, TRMI shall not be entitled to control and assume responsibility for the defense of any Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2) such proceeding will involve any material danger of the sale, forfeiture or loss of, or the creation of any Lien (other than any Lien permitted under the Operative Agreements or a Lien which is adequately bonded to the satisfaction of such Indemnified Person) on, any Unit or Pledged Unit, (3) in the good faith opinion of such Indemnified Person, there exists an actual or potential conflict of interest such that it is advisable for such Indemnified Person to retain control of such proceeding, (4) such Claim involves the possibility of criminal sanctions or liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance shall exist. In the circumstances described in clauses (1) - (5), the Indemnified Person shall be entitled to control and assume responsibility for the defense of such claim or liability at the expense of TRMI. In addition, any Indemnified Person may participate in any proceeding controlled by TRMI pursuant to this Section 7.4, but only to the extent that such Person's participation does not in the reasonable opinion of counsel to TRMI materially interfere with such control, at its own expense, in respect of any such proceeding as to which TRMI shall have acknowledged in writing its obligation to indemnify the Indemnified Person pursuant to this Section 7.4, and at the expense of TRMI in respect of any such proceeding as to which TRMI shall not have so acknowledged its obligation to the Indemnified Person pursuant to this Section 7.4. TRMI may in any event participate in all such proceedings at its own cost. Nothing contained in this Section 7.4(c) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. No Indemnified Person shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of TRMI unless the Indemnified Person waives its rights to indemnification hereunder. Participation Agreement (TRLI 2001-1C) 90 (d) Subrogation. If a Claim indemnified by TRMI under this Section 7.4 is paid in full by TRMI and/or an insurer under a policy of insurance maintained by TRMI, TRMI and/or such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person (other than under insurance policies maintained by such Indemnified Person) on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by TRMI hereunder, it shall promptly pay over the amount refunded (but not in excess of the amount TRMI or any of its insurers has paid) to TRMI; provided, however, so long as a Lease Event of Default shall have occurred and be continuing, such amount may be held by the Collateral Agent as security for TRMI's obligations under the Administrative Services Agreement and the other Operative Agreements; provided, further, only with respect to the Owner Participant and its Related Indemnitee Group, so long as an event referred to in clause (5) of Section 7.4(c) hereof shall have occurred and be continuing, such amount may be held by the Owner Trustee as security for the Lessee's obligations with respect to the Equity Insufficiency Circumstance. SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT. Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Lease, and expressly, severally and as to its own actions only, agrees that, so long as no Lease Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to the Lessee's rights under the Lease, including, without limitation, the right to possession, use and quiet enjoyment by the Lessee of the Equipment, or by any Sublessee of the Equipment or by any Pledged Equipment Lessee of the Pledged Equipment. SECTION 9. SUCCESSOR INDENTURE TRUSTEE. In the event that the Indenture Trustee gives notice of its resignation pursuant to Section 8.2 of the Indenture, the Owner Trustee shall promptly appoint a successor Indenture Trustee reasonably acceptable to the Lessee. SECTION 10. MISCELLANEOUS. Section 10.1 Consents. Each Participant covenants and agrees (subject, in the case of the Loan Participant, to all of the terms and provisions of the Indenture) that it shall not unreasonably withhold its consent to any consent requested by the Lessee, TILC, TRMI, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, under the terms of the Operative Agreements that by its terms is not to be unreasonably withheld by the Owner Trustee or the Indenture Trustee. Participation Agreement (TRLI 2001-1C) 91 Section 10.2 Refinancing. So long as no Lease Event of Default shall have occurred and be continuing, the Lessee shall have the right, at any time following the fifth anniversary of the Closing Date (as defined in the Participation Agreement TRLI 2001-1A), and provided that Lessee is simultaneously exercising the refinancing option provided by Section 10.2 of each of the Other Participation Agreements, to request the Owner Participant and the Owner Trustee to effect an optional prepayment of all, but not less than all, of the Equipment Notes pursuant to Section 2.10(d) of the Indenture as part of a refunding or refinancing operation, provided that the Lessee shall obtain the prior consent of the Owner Participant to be granted in the sole discretion of the Owner Participant acting in good faith if such refinancing imposes any increased risk or liability on or otherwise adversely affects, the Owner Participant; provided further, that the Owner Participant shall not withhold such consent if in its sole judgment (i) any increased risk, or liability is both remote and not material, (ii) the Lessee is at the time at least as creditworthy as on the Closing Date and (iii) Lessee provides an indemnity, in form and substance satisfactory to the Owner Participant, for such increased risk or liability. As soon as practicable after receipt of such request and consent, if required, the Owner Participant and the Lessee will enter into an agreement, in form and substance satisfactory to the parties thereto, as to the terms of such refunding or refinancing as follows: (a) the Lessee, the Owner Participant, the Indenture Trustee, the Owner Trustee, and any other appropriate parties will enter into a financing or loan agreement (which may involve an underwriting agreement in connection with a public offering), in form and substance reasonably satisfactory to the parties thereto, providing for (i) the issuance and sale by the Owner Trustee or such other party as may be appropriate on the date specified in such agreement (for the purposes of this Section 10.2, the "Refunding Date") of debt securities in an aggregate principal amount (in the lawful currency of the United States) equal to the principal amount of the Equipment Notes outstanding on the Refunding Date, having the same maturity date as said Equipment Notes and having a weighted average life which is not less than or greater than (in either case, by more than three months) the Remaining Weighted Average Life of said Equipment Notes, (ii) the application of the proceeds of the sale of such debt securities to the prepayment of all such Equipment Notes on the Refunding Date, and (iii) payment by Lessee to the Person or Persons entitled thereto of all other amounts, in respect of accrued interest, any Make Whole Amount or other premium, if any, payable on such Refunding Date; (b) the Lessee and the Owner Trustee will amend the Lease in a manner such that (i) if the Refunding Date is not a Rent Payment Date and the accrued and unpaid interest on the Equipment Notes is not otherwise paid pursuant to Section 10.2(a), the Lessee shall on the Refunding Date prepay that portion of the next succeeding installment of Basic Rent as shall equal the aggregate interest Participation Agreement (TRLI 2001-1C) 92 accrued on the Equipment Notes outstanding to the Refunding Date, (ii) Basic Rent payable in respect of the period from and after the Refunding Date shall be recalculated to preserve the Net Economic Return which the Owner Participant would have realized had such refunding not occurred, provided that the net present value of Basic Rent shall be minimized to the extent consistent therewith, and (iii) amounts payable in respect of Stipulated Loss Value, Stipulated Loss Amount, Early Purchase Price, Termination Value and Termination Amount from and after the Refunding Date shall be appropriately recalculated to preserve the Net Economic Return which the Owner Participant would have realized had such refunding not occurred (it being agreed that any recalculations pursuant to subclauses (ii) and (iii) of this clause (b) shall be performed in accordance with the requirements of Section 2.6 hereof); (c) the Owner Trustee will enter into an agreement to provide for the securing thereunder of the debt securities issued by the Owner Trustee pursuant to clause (a) of this Section 10.2 in like manner as the Equipment Notes and/or will enter into such amendments and supplements to the Indenture as may be necessary to effect such refunding or refinancing, which agreements, amendments and/or supplements shall be reasonably satisfactory in form and substance to the Owner Participant; provided that, no such agreement or amendment shall provide for any increase in the security for the new debt securities; and provided further that, notwithstanding the foregoing (but subject to the provisions of clauses (a) and (b) and the lead in paragraph of this Section 10.2 above), the Lessee reserves the right to set the economic terms and other terms not customarily negotiated between an owner participant and a lender of the refunding or refinancing transaction except to the extent adversely affecting cash flow, coverage ratios and reserve accounts as to the Owner Participant to be so offered to the extent that they are passed through to the Lessee in, or define rights or obligations of the Lessee under, the Operative Agreements; provided, further, that no such amendment or supplement will in the sole judgment of the Owner Participant increase its obligations or impair its rights under the Operative Agreements or otherwise adversely affect it without the consent of the Owner Participant; (d) (i) in the case of a refunding or refinancing involving a public offering of debt securities, neither the Owner Trustee nor the Owner Participant shall be an "issuer" for securities law purposes or an "obligor" within the meaning of the Trust Indenture Act of 1939, as amended, the offering materials (including any registration statement) for the refunding or refinancing transaction shall be reason ably satisfactory to the Owner Participant and (ii) the Lessee shall provide satisfactory indemnity to the Owner Trustee and Owner Participant with respect to the refunding or refinancing; Participation Agreement (TRLI 2001-1C) 93 (e) unless otherwise agreed by the Owner Participant, the Lessee shall pay to the Owner Trustee as Supplemental Rent an amount, on an After-Tax Basis, equal to any Make-Whole Amount, Late Payment Premium, if any, payable in respect of Equipment Notes outstanding on the Refunding Date pursuant to the Indenture, all interest which is accrued and unpaid in respect of late payments of Basic Rent or any part thereof, all reasonable fees, costs, expenses of such refunding or refinancing and of the parties hereto incurred in connection with such refunding or refinancing (including all reasonable out-of-pocket legal fees and expenses and the reasonable fees of any financial advisors); (f) the Lessee shall give the Indenture Trustee, the Pass Through Trustee and the Owner Participant not less than 25 days prior written notice of the Refunding Date; (g) the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee shall have received (i) such opinions of counsel as they may reasonably request concerning compliance with the Securities Act of 1933, as amended, and any other applicable law relating to the sale of securities and (ii) such other opinions of counsel and such certificates and other documents, each in form and substance reasonably satisfactory to them, as they may reasonably request in connection with compliance with the terms and conditions of this Section 10.2; and (h) all necessary authorizations, approvals and consents shall have been obtained and shall be in full force and effect. The Lessee shall pay to or reimburse the Participants, the Owner Trustee and the Indenture Trustee for all costs and expenses (including reasonable attorneys' and accountants' fees) paid or incurred by them in connection with such refunding or refinancing. Section 10.3 Amendments and Waivers. Except as otherwise provided in the Indenture, no term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party against which enforcement of the termination, amendment or waiver is sought. Section 10.4 Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by facsimile, and any such notice shall become effective (i) upon personal delivery thereof, including, without limitation, by reputable overnight courier, or (ii) in the case of notice by facsimile, upon confirmation of receipt thereof, provided such transmission is promptly further confirmed by any of the methods set forth in 94 Participation Agreement (TRLI 2001-1C) clause (i) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: If to the Lessee: Trinity Rail Leasing I L.P. 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1C) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to TILC: Trinity Industries Leasing Company 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1C) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to TRMI: Trinity Rail Management, Inc. 2525 Stemmons Freeway Dallas, TX 75207 Attention: Vice President Leasing Operations Re: (TRLI 2001-1C) Fax No.: (214) 589-8271 Confirmation No.: (214) 631-4420 If to the Owner Trustee: TRLI 2001-1C Railcar Statutory Trust c/o State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street, Goodwin Square, Hartford, CT 06103 Attention: Corporate Trust Administration Facsimile No.: (860) 244-1889 Participation Agreement (TRLI 2001-1C) 95 Confirmation No.: (860) 244-1800 with a copy to: the Owner Participant at the address set forth below If to the Owner Participant: Trimaran Leasing, L.P. c/o Philip Morris Capital Corporation 225 High Ridge Road, Suite 300 Stamford, CT 06905 Attention: Vice President, Structured Finance Fax No.: (914) 335-8297 Confirmation No.: (914) 335-8204 If to the Indenture Trustee: LaSalle Bank National Association 135 South LaSalle Street Suite 1960 Chicago, IL 60603 Attention: Kristine Schossow, Corporate Trust Services Division Facsimile No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to the Pass Through Trustee: LaSalle Bank National Association 135 South LaSalle Street Suite 1960 Chicago, IL 60603 Attention: Kristine Schossow, Corporate Trust Services Division Facsimile No.: (312) 904-2236 Confirmation No.: (312) 904-2571 If to the Rating Agency: Participation Agreement (TRLI 2001-1C) 96 Standard & Poor's Corporation 25 Broadway New York, New York 10004 Attention: Stephen F. Rooney Facsimile No.: (212) 438-2646 Confirmation No.: (212) 438-2591 Section 10.5 Survival. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement, shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby on the Closing Date regardless of any investigation made by any such party or on behalf of any such party. Section 10.6 No Guarantee of Residual Value or Debt. Nothing contained herein or in the Lease, the Indenture, the Trust Agreement or the Tax Indemnity Agreement or in any certificate or other statement delivered by the Lessee in connection with the transactions contemplated hereby shall be deemed to be (i) a guarantee by the Lessee, TILC or TRMI to the Owner Trustee, the Owner Participant, the Indenture Trustee, the Pass Through Trustee or the Loan Participant that the Equipment will have any residual value or useful life, or (ii) a guarantee by the Indenture Trustee, the Owner Trustee, the Owner Participant, the Lessee, TILC or TRMI of payment of the principal of, premium, if any, or interest on the Equipment Notes. Section 10.7 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Beneficial Interest permit ted under Section 6.1 hereof and each successive holder of any Equipment Note permitted under the Indenture issued and delivered pursuant to this Agreement or the Indenture. The parties hereto agree that each of the Collateral Agent and Equity Collateral Agent shall be a third party beneficiary of this Agreement. Except as expressly provided herein or in the other Operative Agreements, no party hereto may assign their interests herein without the consent of the parties hereto. Section 10.8 Business Day. Notwithstanding anything herein or in any other Operative Agreement to the contrary, if the date on which any payment is to be made pursuant to this Agreement or any other Operative Agreement is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such succeeding Business Day and (provided such payment is made on such succeeding Business Day) no Participation Agreement (TRLI 2001-1C) 97 interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. SECTION 10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Section 10.10 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 10.11 Counterparts. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Section 10.12 Headings and Table of Contents. The headings of the Sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 10.13 Limitations of Liability; Extent of Interest. (a) Liabilities of Participants. Neither the Indenture Trustee, the Owner Trustee nor any Participant shall have any obligation or duty to the Lessee, to TILC, TRMI, to any other Participant or to others with respect to the transactions contemplated hereby, except those obligations or duties of such Participant expressly set forth in this Agreement and the other Operative Agreements, and neither the Indenture Trustee nor any Participant shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Indenture Trustee or any Participant be liable to the Lessee, TILC or TRMI for any action or inaction on the part of the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Owner Trustee, unless such action or inaction is at the direction of the Indenture Trustee or any Participant, as the case may be, and such action or inaction is expressly prohibited hereby. Participation Agreement (TRLI 2001-1C) 98 (b) No Recourse to the Owner Trustee. It is expressly understood and agreed by and between Trust Company, the Owner Trustee, the Lessee, the Owner Participant, the Indenture Trustee, and the Loan Participant, and their respective successors and permitted assigns that, subject to the proviso contained in this Section 10.13(b), all representations, warranties and undertakings of the Owner Trustee hereunder shall be binding upon the Owner Trustee only in its capacity as Owner Trustee under the Trust Agreement, and (except as expressly provided herein) Trust Company shall not be liable for any breach thereof, except for its gross negligence or willful misconduct, or for breach of its covenants, representations and warranties contained herein, except to the extent covenanted or made in its individual capacity; provided, however, that nothing in this Section 10.13(b) shall be construed to limit in scope or substance those representations and warranties of Trust Company made expressly in its individual capacity set forth herein. The term "Owner Trustee" as used in this Agreement shall include any successor trustee under the Trust Agreement, or the Owner Participant if the trust created thereby is revoked. (c) Extent of Interest of Holders of Equipment Notes. No holder of an Equipment Note shall have any further interest in, or other right with respect to, the mortgage and security interests created by the Indenture when and if the principal of and interest on all Equipment Notes held by such holder and all other sums payable to such holder hereunder, under the Indenture and under such Equipment Notes shall have been paid in full. Each holder of the Equipment Notes by its acceptance of an Equipment Note, agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to such holder as provided in Article III of the Indenture and that neither TILC, TRMI, the Lessee, the Owner Participant, the Indenture Trustee nor the Owner Trustee shall be personally liable to any holder of the Equipment Notes for any amounts payable under the Equipment Notes, the Indenture or hereunder, except as expressly provided in the Operative Agreements. (d) Loan Participant's Source of Funds. It is expressly understood and agreed by and between the Owner Trustee, the Lessee, the Owner Participant, the Indenture Trustee and the Loan Participant, and their respective successors and permitted assigns that, subject to the proviso contained in this Section 10.13(d), the undertakings of the Loan Participant hereunder are limited to the application of the proceeds of the sale of the Pass Through Certificates to the purchase by the Pass Through Trustee of the Equipment Notes; provided, however, that nothing in this Section 10.13(d) shall be construed to limit in scope or substance those representations and warranties of the Loan Participant made expressly in its individual capacity set forth herein. Section 10.14 Maintenance of Non-Recourse Debt. The parties hereto agree that if the Owner Trustee becomes a debtor subject to the reorganization provisions Participation Agreement (TRLI 2001-1C) 99 of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code") or any successor provision, the parties hereto will make an election under 1111(b)(1)(A)(i) of the Bankruptcy Code. If (a) the Owner Trustee becomes a debtor subject to the reorganization provisions of the Bankruptcy Code or any successor provision, (b) pursuant to such reorganization provisions the Owner Trustee is required, by reason of the Owner Trustee being held to have recourse liability to the Pass Through Trustee or the Indenture Trustee, directly or indirectly, to make payment on account of any amount payable under the Equipment Notes or any of the other Operative Agreements and (c) the Indenture Trustee and/or the Pass Through Trustee actually receives any Excess Amount (as hereinafter defined) which reflects any payment by the Owner Trustee on account of (b) above, then the Indenture Trustee and/or the Pass Through Trustee, as the case may be, shall promptly refund to the Owner Trustee such Excess Amount. For purposes of this Section 10.14, "Excess Amount" means the amount by which such payment exceeds the amount which would have been received by the Indenture Trustee or the Pass Through Trustee if the Owner Trustee had not become subject to the recourse liability referred to in (b) above. Section 10.15 Ownership of and Rights in Units. The sale of the Units described on Schedule 1 hereto and the Existing Equipment Subleases by TILC contemplated hereby is intended for all purposes to be a true sale of all of TILC's right, title and interest in and to such Units and the Existing Equipment Subleases to the Lessee, which shall be the legal owner thereof upon such sale. Upon consummation of the sale and leaseback transactions contemplated hereby, the Lessee's interest in such Units is intended to be that of a lessee only. It is intended that for federal and state income tax purposes the Owner Participant will be the owner of such Units. The rights of the Indenture Trustee in and to such Units pursuant to the Indenture is intended to be that of a secured party holding a security interest, subject to the Lease and the rights of the Lessee thereunder. No holder of an Equipment Note is intended to have any right, title or interest in or to such Units except as a beneficiary of the Lien granted by the Owner Trustee to the Indenture Trustee pursuant to the Indenture in trust for the equal and ratable benefit of the holders from time to time of the Equipment Notes. Section 10.16 No Petition. Each party hereto agrees that, prior to the date which is one year and one day after payment in full of all outstanding Equipment Notes and all obligations of the Lessee under the Operative Agreements, release of all Collateral held under the Collateral Agency Agreement and release of all Equity Collateral held under the Equity Collateral Security Agreement (i) no party hereto shall authorize the Lessee to commence a voluntary winding-up or other voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Lessee or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect in any jurisdiction or seeking the appointment of an administrator, a trustee, receiver, liquidator, custodian or other similar official of the Participation Agreement (TRLI 2001-1C) 100 Lessee or any substantial part of its property or to consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against the Lessee, or to make a general assignment for the benefit of any party hereto or any other creditor of the Lessee, and (ii) none of the parties hereto shall commence or join with any other Person in commencing any proceeding against the Lessee under any bankruptcy, reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction. Each of the parties hereto agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Equipment Notes and all obligations of the Lessee under the Operative Agreements, release of all Collateral held under the Collateral Agency Agreement and release of all Equity Collateral held under the Equity Collateral Security Agreement, it will not institute against, or join any other Person in instituting against, Lessee an action in bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceeding under the laws of the United States or any state of the United States. Section 10.17 Consent To Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 10.4 hereof, or at such other address of which the other parties shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. Participation Agreement (TRLI 2001-1C) 101 SECTION 10.18 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS AGREEMENT. * * * Participation Agreement (TRLI 2001-1C) 102 IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be executed and delivered, all as of the date first above written. Lessee: TRINITY RAIL LEASING I L.P. By TILX GP I, LLC its General Partner By: ---------------------------- Name: Eric Marchetto Title: Vice President TILC: TRINITY INDUSTRIES LEASING COMPANY By: ------------------------------- Name: Eric Marchetto Title: Vice President TRMI: TRINITY RAIL MANAGEMENT, INC. By: ------------------------------- Name: Eric Marchetto Title: Vice President Participation Agreement (TRLI 2001-1C) Owner Trustee: TRLI 2001-1C RAILCAR STATUTORY TRUST, By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity except as expressly provided herein but solely as Owner Trustee By: -------------------------------------- Name: ------------------------------------ Title: ------------------------------------ Participation Agreement (TRLI 2001-1C) Owner Participant: TRIMARAN LEASING, L.P. By: Trimaran Leasing Investors, L.L.C.-I, its General Partner By: Grant Holdings, Inc., its sole member By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Participation Agreement (TRLI 2001-1C) Indenture Trustee: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee By: -------------------------------------- Name: Sarah H. Webb Title: Senior Vice President Pass Through Trustee: LASALLE BANK NATIONAL ASSOCIATION, not in its individual capacity except as expressly provided herein but solely as Pass Through Trustee By: -------------------------------------- Name: Sarah H. Webb Title: Senior Vice President Participation Agreement (TRLI 2001-1C) EX-10.17.2 13 d94851ex10-17_2.txt 2ND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.17.2 SECOND AMENDMENT TO CREDIT AGREEMENT This Second Amendment to Credit Agreement (this "Second Amendment") is executed effective as of December 10, 2001 (the "Effective Date"), by and among Trinity Industries, Inc., a Delaware corporation (the "Borrower"), JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, as the Administrative Agent (the "Administrative Agent"), and the financial institutions parties hereto as Lenders (individually a "Lender" and collectively the "Lenders"). WITNESSETH: WHEREAS, the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agents and the Lenders are parties to that certain Credit Agreement dated as of June 8, 2001, as amended by that certain First Amendment to Credit Agreement dated as of October 15, 2001 (as amended, the "Credit Agreement") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, pursuant to the Credit Agreement, the Lenders have made Loans to the Borrower; and WHEREAS, the Borrower has requested that the Lenders amend certain terms of the Credit Agreement in certain respects; and WHEREAS, subject to the terms and conditions herein contained, the Lenders have agreed to the Borrower's request. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Borrower, the Administrative Agent and each Lender hereby agree as follows: Section 1. AMENDMENTS. In reliance on the representations, warranties, covenants and agreements contained in this Second Amendment, and subject to the terms and conditions contained herein, the Credit Agreement is hereby amended effective as of the Effective Date, in the manner provided in this Section 1. 1.1 ADDITIONAL DEFINITIONS. Section 1.01 of the Credit Agreement is amended to add thereto in alphabetical order the definitions of "Collateral Agent," "Intercreditor Agreement," "Mortgage," "Mortgaged Property," "Second Amendment" and "Security Agreement" which shall read in full as follows: "Collateral Agent" means JPMorgan Chase Bank, as collateral agent under the terms of the Intercreditor Agreement, and its successors and assigns. "Intercreditor Agreement" means that certain Intercreditor Agreement to be executed in accordance with Section 5.12 by the Borrower, certain of its Subsidiaries, the Collateral Agent, the Administrative Agent and JPMorgan Chase Bank, as administrative agent 1 for the lenders under the Bridge Agreement, in the form approved by the Required Lenders and as the same may be amended or otherwise modified from time to time. "Mortgage" means any mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien to the Collateral Agent on any Mortgaged Property to secure the obligations described in the Intercreditor Agreement. Each Mortgage shall be satisfactory in form and substance to the Administrative Agent. "Mortgaged Property" means each parcel of real property and improvements thereto owned by the Borrower with respect to which a Mortgage is granted pursuant to Section 5.12 or the Intercreditor Agreement. "Second Amendment" means that certain Second Amendment to Credit Agreement dated as of December 10, 2001, among the Borrower, the Administrative Agent and the Lenders. "Security Agreement" means one or more security agreements to be executed in accordance with Section 5.12, and pursuant to the terms of the Intercreditor Agreement, by the Borrower, certain of its Subsidiaries and the Collateral Agent, which such agreements shall be satisfactory in form and substance to the Administrative Agent. 1.2 AMENDMENTS TO DEFINITIONS. The definitions of "Administrative Agent," "Chase," "Collateral," "ETC Indebtedness," "Loan Documents," "Permitted Encumbrances" and "Security Instruments" set forth in Section 1.01 of the Credit Agreement are amended to read in full as follows: "Administrative Agent" means (i) prior to November 10, 2001, The Chase Manhattan Bank, and (ii) from and after November 10, 2001, JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder. "Chase" means (i) prior to November 10, 2001, The Chase Manhattan Bank, and (ii) from and after November 10, 2001, JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, in its individual capacity or as an Issuing Bank, as the case may be, and not as Administrative Agent. "Collateral" means the Mortgaged Property, the "Collateral" as defined in the Security Agreements and any and all property and assets on which Liens have been granted to the Collateral Agent to secure the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries under the Loan Documents. "ETC Indebtedness" means equipment trust certificate or other secured Indebtedness financing created or incurred after the date hereof and secured by leased rail equipment which is pledged to a trustee acting on behalf of the holders of such certificates or other secured Indebtedness. "Loan Documents" means this Agreement, the First Amendment, the Second Amendment, the Notes, the Subsidiary Guaranties, the Security Instruments, the Intercreditor 2 Agreement, the Letters of Credit, any Certificate of Conversion, any Borrowing Request, any Interest Election Request, any Assignment and Acceptance, the Fee Letter, and all other agreements (including Hedging Agreements) relating to this Agreement entered into from time to time between or among the Borrower (or any or all of its Subsidiaries) and the Administrative Agent or any Lender (or, with respect to the Hedging Agreements, any Affiliates of any Lender), and any document delivered by the Borrower or any of its Subsidiaries in connection with the foregoing. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; and (g) Liens, if any, securing the Indebtedness described in Sections 6.01(a), (h), (i), (j), (m) and (n); provided that the term "Permitted Encumbrances" shall not (except as otherwise permitted by clause (g) of this definition) include any Lien securing Indebtedness. "Security Instruments" means the Mortgages, the Security Agreements and any and all other mortgages, deeds of trust, security agreements, pledge agreements, financing statements and other agreements, documents or instruments now or hereafter executed and delivered by the Borrower, any of its Subsidiaries or any other Person as security for the payment and performance of the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries under the Loan Documents. 3 1.3 AMENDMENT TO PROPERTIES REPRESENTATION. Section 3.05 of the Credit Agreement is amended to read in full as follows: "SECTION 3.05 Properties. (a) Each of the Borrower and its Consolidated Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Collateral), except for (i) Permitted Encumbrances and (ii) minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and its Consolidated Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Consolidated Subsidiaries does not infringe upon the rights of any other Person, except for any such infringement that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (c) Neither the Borrower nor any of its Subsidiaries has received notice of, or has knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any other real property owned by it or any sale or disposition thereof in lieu of condemnation. Neither any such real property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such real property or interest therein." 1.4 AMENDMENT TO SECURITY INSTRUMENTS PROVISION. Section 5.10 of the Credit Agreement is amended to read in full as follows: "SECTION 5.10 Security Instruments. If at any time, the ratings established by either S&P or Moody's for the Index Debt are reduced to a category or level (as established in accordance with the terms of this Agreement) below the applicable Security Threshold Rating Level, the Borrower will, and will cause each of its Subsidiaries (as applicable) to, at the Borrower's expense, execute and deliver to the Administrative Agent for the benefit of the Lenders, on or prior to twenty (20) days following the reduction of either of the ratings for the Index Debt to a category or level below the applicable Security Threshold Rating Level (or on or prior to such other date as may be agreed to in writing by the Borrower and the Required Lenders), and at such other times as the Required Lenders shall request, one or more Security Instruments, in form and substance satisfactory to the Administrative Agent, and in such number of counterparts as the Administrative Agent or the Collateral Agent shall request, for the purpose and with the effect of granting to the Collateral Agent as security for the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries described in the Intercreditor Agreement, a valid first and prior Lien on such assets and property of the Borrower and its Material Subsidiaries as the Required Lenders may require, together with such other executed documentation as the Administrative Agent or any Lender may require or deem necessary to perfect or protect the Collateral Agent's Liens on such assets and properties of the Borrower 4 and its Subsidiaries, including, without limitation, (i) financing statements under the Uniform Commercial Code, (ii) all intellectual property assignments for all intellectual property registered in the United States of America, (iii) all Collateral the possession of which is necessary to perfect the Liens therein, (iv) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, (v) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Instruments, and (vi) opinions of counsel (including, without limitation, local counsel), in form and substance satisfactory to the Administrative Agent, and covering such matters as the Administrative Agent or the Required Lenders shall reasonably request. Notwithstanding the foregoing or anything else to the contrary contained herein, the assets and property of the Borrower and its Subsidiaries on which Liens have been (or will be) granted to secure the indebtedness, obligations and liabilities of the Borrower and such Subsidiaries described in Sections 6.01(i), (j) and (n) shall not be included as Collateral for purposes of this Section 5.10 (including, without limitation, such assets and property separately identified in writing by the Borrower or the appropriate Subsidiary as reasonably necessary to secure such indebtedness, obligations and liabilities that may be incurred by the Borrower or such Subsidiary under Sections 6.01(i), (j) and (n)) for as long as such assets and property continue to secure (or be separately identified as reasonably necessary to secure) such indebtedness, obligations and liabilities." 1.5 ADDITIONAL AFFIRMATIVE COVENANTS. Article V of the Credit Agreement is amended to add new Sections 5.11 and 5.12 thereto to read in full as follows: "SECTION 5.11 Compliance With Security Instruments. The Borrower will, and will cause each of its Subsidiaries to, comply with its obligations under the Intercreditor Agreement and the Security Agreements arising in connection with the formation or acquisition of any Subsidiary within ten (10) Business Days after such Subsidiary is formed or acquired. SECTION 5.12 Collateral Provisions. (a) On or before December 31, 2001, the Borrower shall deliver or cause to be delivered to the Administrative Agent, each of the following, all in form and substance acceptable to the Administrative Agent and the Required Lenders in their sole discretion: (i) the Intercreditor Agreement executed by the Borrower and certain of its Subsidiaries a party thereto; (ii) a Security Agreement executed by the Borrower and certain of its Subsidiaries a party thereto, pursuant to which the Borrower and such Subsidiaries grant to the Collateral Agent a valid first and prior Lien on all of their accounts receivable and inventory; 5 (iii) a Subsidiary Guaranty executed by each of Trinity Rail Group, LLC, Trinity Tank Car, Inc., Trinity Rail Components & Repair, Inc. and Thrall Trinity Freight Car, Inc.; (iv) Uniform Commercial Code, tax and judgment lien search reports listing all documentation on file against the Borrower, each Subsidiary (as applicable) and such other Persons as the Administrative Agent may require in each jurisdiction in which it has a principal place of business and jurisdiction of organization and in which any Collateral is or has been located; (v) subject to the terms of the Intercreditor Agreement and the Security Agreements, such executed documentation as the Collateral Agent or the Administrative Agent may require or deem necessary to perfect or protect the Collateral Agent's Liens in the assets of the Borrower and its Subsidiaries granted pursuant to the Security Agreement described in clause (ii) above, including, without limitation, (A) financing statements under the Uniform Commercial Code, (B) all Collateral the possession of which is necessary to perfect the Lien therein, (C) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, and (D) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Agreement; (vi) duly executed UCC-3 termination statements and such other documentation as shall be necessary to terminate or release all Liens encumbering the Collateral not otherwise permitted by this Agreement; (vii) evidence that the insurance required by Section 5.05 is in effect; (viii) favorable written opinions from counsel to the Borrower and its Subsidiaries addressed to the Lenders and satisfactory to Vinson & Elkins L.L.P., counsel for the Administrative Agent, as to such matters relating to the Intercreditor Agreement, the Security Agreements and the other Loan Documents, as the Administrative Agent may request (and the Borrower hereby instructs its counsel to deliver such opinions to the Administrative Agent for the benefit of the Lenders); (ix) an amendment to the Bridge Agreement, in form and substance satisfactory to the Administrative Agent, executed by the Borrower, JPMorgan Chase Bank, as administrative agent for the lenders under the Bridge Agreement, and the lenders a party to such Bridge Agreement; and (x) such additional information and documentation as the Collateral Agent or the Administrative Agent may require to consummate the transactions contemplated by this Section 5.12(a). The Borrower shall, and shall cause each Subsidiary to use, commercially reasonable efforts to obtain on or before February 28, 2002, lien waivers, 6 subordination agreements and/or estoppel certificates with respect to the Collateral from all of the Borrower's and its applicable Subsidiaries' landlords, mortgages and/or lessees. The Borrower's failure to fully and timely satisfy on or before December 31, 2001 each requirement set forth in clauses (i) through (x) of this Section 5.12(a) shall constitute an immediate Event of Default. (b) On or before February 15, 2002, the Borrower shall deliver or cause to be delivered to the Administrative Agent, each of the following, all in form and substance acceptable to the Administrative Agent and the Required Lenders in their sole discretion: (i) a Security Agreement (which may take the form of an amendment and restatement of the Security Agreement delivered pursuant to Section 5.12(a)(ii)) executed by the Borrower and certain of its Subsidiaries, pursuant to which the Borrower and such Subsidiaries grant to the Collateral Agent a valid first and prior Lien on certain equipment, real property and other assets and property of the Borrower and such Subsidiaries (in addition to the Liens granted pursuant to the Security Agreement delivered pursuant to Section 5.12(a)(ii)) as shall be required and determined by the Administrative Agent and the Required Lenders; (ii) Uniform Commercial Code, tax and judgment lien search reports listing all documentation on file against the Borrower, each Subsidiary and such other Persons as the Administrative Agent may require in each jurisdiction in which it has a principal place of business and jurisdiction of organization and in which any Collateral is or has been located; (iii) subject to the terms of the Intercreditor Agreement and the Security Agreements, such executed documentation as the Collateral Agent or the Administrative Agent may require or deem necessary to perfect or protect the Collateral Agent's Liens in the assets of the Borrower and its Subsidiaries granted pursuant to the Security Agreement described in clause (i) above, including, without limitation, (A) financing statements under the Uniform Commercial Code, (B) all Collateral the possession of which is necessary to perfect the Lien therein, (C) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, and (D) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Agreement; (iv) duly executed UCC-3 termination statements and such other documentation as shall be necessary to terminate or release all Liens encumbering the Collateral not otherwise permitted by this Agreement; (v) evidence that the insurance required by Section 5.05 is in effect; 7 (vi) favorable written opinions from counsel to the Borrower and its Subsidiaries addressed to the Lenders and satisfactory to Vinson & Elkins L.L.P., counsel for the Administrative Agent, as to such matters relating to the Security Agreements and the other Loan Documents, as the Administrative Agent may request (and the Borrower hereby instructs its counsel to deliver such opinions to the Administrative Agent for the benefit of the Lenders); (vii) as applicable, a Mortgage with respect to each Mortgaged Property executed on behalf of the record owner of such Mortgaged Property with a metes and bounds or other description of the parcel attached thereto and recorded in the applicable real property records; (viii) with respect to each parcel of the Mortgaged Property, a title insurance commitment, all documentation evidencing any exceptions to title reflected thereon (or other evidence of title satisfactory to the Administrative Agent), and, to the extent available, a survey and environmental report relating to such parcel; and (ix) such additional information and documentation as the Collateral Agent or the Administrative Agent may require to consummate the transactions contemplated by this Section 5.12(b). The Borrower's failure to fully and timely satisfy on or before February 15, 2002 each requirement set forth in clauses (i) through (ix) of this Section 5.12(b) shall constitute an immediate Event of Default." 1.6 AMENDMENT TO LIEN COVENANT. Section 6.02 of the Credit Agreement is amended to read in full as follows: "SECTION 6.02 Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens created by the Security Agreements, the Mortgages, the other Security Instruments and the other Loan Documents; (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on December 10, 2001 and set forth in Schedule 6.02; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other 8 property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such Liens secure Indebtedness permitted by clause (e) of Section 6.01, (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary." 1.7 AMENDMENT TO FUNDAMENTAL CHANGE COVENANT. Section 6.03(a) of the Credit Agreement is amended to read in full as follows: "(a) Except for the Thrall Merger which is expressly permitted hereunder, and except as otherwise set forth herein, the Borrower will not, and will not permit any Subsidiary to, (i) merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, (ii) except for (A) sales of inventory in the ordinary course of business, and (B) the sale of assets described on Schedule 6.03 (or the sale of the voting securities or other equity interests of Subsidiaries whose only substantial assets are those described on Schedule 6.03), (y) sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or (z) sell, transfer lease or otherwise dispose of any Collateral, or (iii) liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (A) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (B) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (C) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary, (D) TRLI may enter into, observe and perform its obligations pursuant to, and in accordance with, the TRLI Equipment Lease Transaction, and (E) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04." 1.8 AMENDMENT TO RESTRICTIVE AGREEMENTS COVENANT. Section 6.08 of the Credit Agreement is amended to read in full as follows: 9 "SECTION 6.08 Restrictive Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien in favor of the Administrative Agent or the Collateral Agent upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.08 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof." 1.9 AMENDMENT TO DEFAULT PROVISIONS. Article VII of the Credit Agreement is amended as follows: (a) Clause (d) of Article VII of the Credit Agreement is amended to read in full as follows: "(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Sections 5.01, 5.02, 5.03 (with respect to the Borrower's and its Subsidiaries' existence), 5.08, 5.10, 5.11, 5.12 or in Article VI, in the Security Agreement, in any Mortgage or in the Intercreditor Agreement;". (b) New clauses (n), (o) and (p) are added to Article VII of the Credit Agreement to read in their entireties as follows and the word "or" is deleted from the end of clause (l): "(n) any Lien purported to be created under any Loan Document shall cease to be, or shall be asserted by the Borrower or any of its Subsidiaries not to be, a valid and perfected Lien on any Collateral, with the priority required hereby, except as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents; (o) the occurrence of an Event of Default (as defined in the Intercreditor Agreement); or 10 (p) either any Subsidiary Guaranty, any Security Agreement, the Intercreditor Agreement or any Mortgage shall for any reason cease to be in full force and effect and valid, binding and enforceable in accordance with its terms after its date of execution, or the Borrower or any of its Subsidiaries shall so state in writing." (c) The following provision is added to the end of Article VII of the Credit Agreement: "In addition to the other rights and remedies that the Lenders may have upon the occurrence of an Event of Default, the Required Lenders may direct the Collateral Agent to exercise the rights and remedies available to the Collateral Agent under the Intercreditor Agreement, the Mortgages and the Security Agreements." 1.10 AMENDMENT TO AGENT PROVISIONS. The following provision is added to the end of Article VIII of the Credit Agreement: "The Administrative Agent is authorized to execute the Intercreditor Agreement on behalf of each Lender and bind each Lender to the terms thereof as if each Lender were directly a party thereto." 1.11 AMENDMENT TO WAIVERS AND AMENDMENTS PROVISIONS. Section 9.02(b) of the Credit Agreement is amended to read in full as follows: "(b) Neither this Agreement nor any of the Loan Documents nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) release any Material Subsidiary from its obligations under its Subsidiary Guaranty, without the written consent of each Lender, (vi) release any material portion of the Collateral, without the written consent of each Lender, except as expressly permitted hereby, and provided that the Administrative Agent or the Collateral Agent shall release (without consent from the Lenders) any Collateral sold, transferred or otherwise disposed of as permitted by Section 6.03 hereof, or (vii) change any of the provisions of this Section 9.02(b) or the definition of 11 "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent or the Issuing Bank hereunder without the prior written consent of such Agent or the Issuing Bank, as the case may be." Section 2. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. With the exception of Section 1.11 hereof, this Second Amendment shall be effective automatically and without the necessity of any further action by the Administrative Agent, the Borrower or any Lender when counterparts hereof have been executed by the Administrative Agent, the Borrower and the Required Lenders, and each of the following conditions to the effectiveness hereof have been satisfied: (a) the Administrative Agent shall have received such documents and certificates as the Administrative Agent and its counsel may reasonably request relating to the organization, existence and good standing of the Borrower and each Subsidiary, the power and authority of the Borrower and each Subsidiary (as applicable) to execute, deliver and perform this Second Amendment and any other legal matters relating to the Borrower, any Subsidiary or the Loan Documents, all in form and substance satisfactory to the Administrative Agent and its counsel; (b) the Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursed hereunder or under any other Loan Document; (c) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of the Effective Date as if made on the Effective Date, except for such representations and warranties limited by their terms to a specific date; (d) after giving effect to this Second Amendment, no Default or Event of Default shall exist; and (e) all proceedings taken in connection with the transactions contemplated by this Second Amendment and all documentation and other legal matters incident thereto shall be satisfactory to the Administrative Agent and its counsel. Section 1.11 hereof will be effective automatically and without the necessity of any further action by the Administrative Agent, the Borrower or any Lender when counterparts hereof have been executed by the Administrative Agent, the Borrower and all Lenders, and each of the foregoing conditions to the effectiveness hereof have been satisfied. Section 3. LEGAL FEES. Upon execution of this Second Amendment by the Required Lenders, the Borrower shall pay all reasonable fees and expenses of counsel to the 12 Administrative Agent incurred by the Administrative Agent in connection with this Second Amendment and all related documents and transactions. Section 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. To induce the Lenders and the Administrative Agent to enter into this Second Amendment, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows: 4.1 REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty of the Borrower contained in the Credit Agreement and the other Loan Documents is true and correct on the date hereof after giving effect to the amendments set forth in Section 1 hereof. 4.2 DUE AUTHORIZATION, NO CONFLICTS. The execution, delivery and performance by the Borrower of this Second Amendment are within the Borrower's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any material agreement binding upon the Borrower or its Subsidiaries, or result in the creation or imposition of any Lien upon any of the assets of the Borrower or its Subsidiaries except for Permitted Encumbrances. 4.3 VALIDITY AND BINDING EFFECT. This Second Amendment constitutes the valid and binding obligations of the Borrower enforceable in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (b) the availability of equitable remedies may be limited by equitable principles of general application. 4.4 NO DEFENSES. The Borrower has no defenses to payment, counterclaim or rights of set-off with respect to the indebtedness, obligations and liabilities of the Borrower under the Loan Documents existing on the date hereof. 4.5 ABSENCE OF DEFAULTS. After giving effect to the amendments set forth in Section 1 hereof, neither a Default nor an Event of Default has occurred which is continuing. Section 5. MISCELLANEOUS. 5.1 REAFFIRMATION OF LOAN DOCUMENTS. Any and all of the terms and provisions of the Credit Agreement and the other Loan Documents shall, except as amended and modified hereby, remain in full force and effect. The Borrower hereby agrees that the amendments and modifications herein contained shall in no manner adversely affect or impair the indebtedness, obligations and liabilities of the Borrower under the Loan Documents. 5.2 PARTIES IN INTEREST. All of the terms and provisions of this Second Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 5.3 COUNTERPARTS. This Second Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be 13 bound by this Second Amendment until counterparts hereof have been executed by the Borrower and the Required Lenders. Facsimiles shall be effective as originals. 5.4 COMPLETE AGREEMENT. THIS SECOND AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES. 5.5 HEADINGS. The headings, captions and arrangements used in this Second Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Second Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed by their respective Authorized Officers as of the Effective Date. [Signature Pages Follow] 14 SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS TRINITY INDUSTRIES, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS JPMORGAN CHASE BANK (successor in interest by merger to The Chase Manhattan Bank), individually and as Administrative Agent By: ----------------------------------------- Name: Mike Lister Title: Vice President [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF TOKYO - MITSUBISHI, LTD., as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BANK ONE, NA, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS SUNTRUST BANK, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS WACHOVIA BANK, N.A., as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BNP PARIBAS, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE ROYAL BANK OF SCOTLAND plc, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF NOVA SCOTIA, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF NEW YORK, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS COMERICA BANK, as a Lender By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [Signature Page] EX-10.17.3 14 d94851ex10-17_3.txt 3RD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.17.3 THIRD AMENDMENT TO CREDIT AGREEMENT This Third Amendment to Credit Agreement (this "Third Amendment") is executed effective as of February 8, 2002 (the "Effective Date"), by and among Trinity Industries, Inc., a Delaware corporation (the "Borrower"), JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, as the Administrative Agent (the "Administrative Agent"), and the financial institutions parties hereto as Lenders (individually a "Lender" and collectively the "Lenders"). WITNESSETH: WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties to that certain Credit Agreement dated as of June 8, 2001, as amended by that certain (i) First Amendment to Credit Agreement dated as of October 15, 2001, and (ii) Second Amendment to Credit Agreement dated as of December 10, 2001 (as amended, the "Credit Agreement") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, pursuant to the Credit Agreement, the Lenders have made Loans to the Borrower; and WHEREAS, the Borrower has requested that the Lenders amend certain terms of the Credit Agreement in certain respects; and WHEREAS, subject to the terms and conditions herein contained, the Lenders have agreed to the Borrower's request. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Borrower, the Administrative Agent and each Lender hereby agree as follows: Section 1. AMENDMENTS. In reliance on the representations, warranties, covenants and agreements contained in this Third Amendment, and subject to the terms and conditions contained herein, the Credit Agreement is hereby amended effective as of the Effective Date, in the manner provided in this Section 1. 1.1 ADDITIONAL DEFINITIONS. Section 1.01 of the Credit Agreement is amended to add thereto in alphabetical order the definitions of "Equity Contribution," "ETC Transaction" and "Third Amendment" which shall read in full as follows: "Equity Contribution" means a cash contribution to the equity capital of the Borrower in an amount not less than $20,000,000, such contribution to be made in connection with the Borrower's equity sell program to Acqua Wellington. "ETC Transaction" means the completion, closing and funding of equipment trust certificate financing to the Borrower in a principal amount of not less than $200,000,000. 1 "Third Amendment" means that certain Third Amendment to Credit Agreement dated as of February 8, 2002, among the Borrower, the Administrative Agent and the Lenders. 1.2 AMENDMENT TO DEFINITION. The definition of "Loan Documents" set forth in Section 1.01 of the Credit Agreement is amended to read in full as follows: "Loan Documents" means this Agreement, the First Amendment, the Second Amendment, the Third Amendment, the Notes, the Subsidiary Guaranties, the Security Instruments, the Intercreditor Agreement, the Letters of Credit, any Certificate of Conversion, any Borrowing Request, any Interest Election Request, any Assignment and Acceptance, the Fee Letter, and all other agreements (including Hedging Agreements) relating to this Agreement entered into from time to time between or among the Borrower (or any or all of its Subsidiaries) and the Administrative Agent or any Lender (or, with respect to the Hedging Agreements, any Affiliates of any Lender), and any document delivered by the Borrower or any of its Subsidiaries in connection with the foregoing. 1.3 AMENDMENT TO COLLATERAL PROVISIONS. Section 5.12(b) of the Credit Agreement is amended to read in full as follows: "(b) In the event that the Borrower has timely delivered a Certificate of Conversion to the Administrative Agent in accordance with Section 2.01(b), and either of the following has not occurred: (1) receipt by the Borrower of the Equity Contribution on or before March 31, 2002, or (2) completion, closing and funding of the ETC Transaction on or before March 31, 2002, then in any such event, on or before May 1, 2002 (such date being referred to herein as the "Collateral Delivery Date"), the Borrower shall deliver or cause to be delivered to the Administrative Agent, each of the following, all in form and substance acceptable to the Administrative Agent and the Required Lenders in their sole discretion: (i) a Security Agreement (which may take the form of an amendment and restatement of the Security Agreement delivered pursuant to Section 5.12(a)(ii)) executed by the Borrower and certain of its Subsidiaries, pursuant to which the Borrower and such Subsidiaries grant to the Collateral Agent a valid first and prior Lien on certain equipment, real property and other assets and property of the Borrower and such Subsidiaries (in addition to the Liens granted pursuant to the Security Agreement delivered pursuant to Section 5.12(a)(ii)) as shall be required and determined by the Administrative Agent and the Required Lenders; (ii) Uniform Commercial Code, tax and judgment lien search reports listing all documentation on file against the Borrower, each Subsidiary and such other Persons as the Administrative Agent may require in each jurisdiction in which it has a principal place of business and jurisdiction of organization and in which any Collateral is or has been located; (iii) subject to the terms of the Intercreditor Agreement and the Security Agreements, such executed documentation as the Collateral Agent or the 2 Administrative Agent may require or deem necessary to perfect or protect the Collateral Agent's Liens in the assets of the Borrower and its Subsidiaries granted pursuant to the Security Agreement described in clause (i) above, including, without limitation, (A) financing statements under the Uniform Commercial Code, (B) all Collateral the possession of which is necessary to perfect the Lien therein, (C) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, and (D) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Agreement; (iv) duly executed UCC-3 termination statements and such other documentation as shall be necessary to terminate or release all Liens encumbering the Collateral not otherwise permitted by this Agreement; (v) evidence that the insurance required by Section 5.05 is in effect; (vi) favorable written opinions from counsel to the Borrower and its Subsidiaries addressed to the Lenders and satisfactory to Vinson & Elkins L.L.P., counsel for the Administrative Agent, as to such matters relating to the Security Agreements and the other Loan Documents, as the Administrative Agent may request (and the Borrower hereby instructs its counsel to deliver such opinions to the Administrative Agent for the benefit of the Lenders); (vii) as applicable, a Mortgage with respect to each Mortgaged Property executed on behalf of the record owner of such Mortgaged Property with a metes and bounds or other description of the parcel attached thereto and recorded in the applicable real property records; (viii) with respect to each parcel of the Mortgaged Property, a title insurance commitment, all documentation evidencing any exceptions to title reflected thereon (or other evidence of title satisfactory to the Administrative Agent), and, to the extent available, a survey and environmental report relating to such parcel; and (ix) such additional information and documentation as the Collateral Agent or the Administrative Agent may require to consummate the transactions contemplated by this Section 5.12(b). The Borrower's failure to fully and timely satisfy on or before the Collateral Delivery Date each requirement set forth in clauses (i) through (ix) of this Section 5.12(b) shall constitute an immediate Event of Default." Section 2. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. This Third Amendment shall be effective automatically and without the necessity of any further action by the Administrative Agent, the Borrower or any Lender when counterparts hereof have been executed by the Administrative Agent, the Borrower and the Required Lenders, and each of the following conditions to the effectiveness hereof have been satisfied: 3 (a) the Administrative Agent shall have received such documents and certificates as the Administrative Agent and its counsel may reasonably request relating to the organization, existence and good standing of the Borrower and each Subsidiary, the power and authority of the Borrower and each Subsidiary (as applicable) to execute, deliver and perform this Third Amendment and any other legal matters relating to the Borrower, any Subsidiary or the Loan Documents, all in form and substance satisfactory to the Administrative Agent and its counsel; (b) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of the Effective Date as if made on the Effective Date, except for such representations and warranties limited by their terms to a specific date; (c) after giving effect to this Third Amendment, no Default or Event of Default shall exist; and (d) all proceedings taken in connection with the transactions contemplated by this Third Amendment and all documentation and other legal matters incident thereto shall be satisfactory to the Administrative Agent and its counsel. Section 3. LEGAL FEES. Upon execution of this Third Amendment by the Required Lenders, the Borrower shall pay all reasonable fees and expenses of counsel to the Administrative Agent incurred by the Administrative Agent in connection with this Third Amendment and all related documents and transactions. Section 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. To induce the Lenders and the Administrative Agent to enter into this Third Amendment, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows: 4.1 REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty of the Borrower contained in the Credit Agreement and the other Loan Documents is true and correct on the date hereof after giving effect to the amendments set forth in Section 1 hereof. 4.2 DUE AUTHORIZATION, NO CONFLICTS. The execution, delivery and performance by the Borrower of this Third Amendment are within the Borrower's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any material agreement binding upon the Borrower or its Subsidiaries, or result in the creation or imposition of any Lien upon any of the assets of the Borrower or its Subsidiaries except for Permitted Encumbrances. 4.3 VALIDITY AND BINDING EFFECT. This Third Amendment constitutes the valid and binding obligations of the Borrower enforceable in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (b) the availability of equitable remedies may be limited by equitable principles of general application. 4 4.4 NO DEFENSES. The Borrower has no defenses to payment, counterclaim or rights of set-off with respect to the indebtedness, obligations and liabilities of the Borrower under the Loan Documents existing on the date hereof. 4.5 ABSENCE OF DEFAULTS. After giving effect to the amendments set forth in Section 1 hereof, neither a Default nor an Event of Default has occurred which is continuing. Section 5. MISCELLANEOUS. 5.1 REAFFIRMATION OF LOAN DOCUMENTS. Any and all of the terms and provisions of the Credit Agreement and the other Loan Documents shall, except as amended and modified hereby, remain in full force and effect. The Borrower hereby agrees that the amendments and modifications herein contained shall in no manner adversely affect or impair the indebtedness, obligations and liabilities of the Borrower under the Loan Documents. 5.2 PARTIES IN INTEREST. All of the terms and provisions of this Third Amendment shall bind and insure to the benefit of the parties hereto and their respective successors and assigns. 5.3 COUNTERPARTS. This Third Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this Third Amendment until counterparts hereof have been executed by the Borrower and the Required Lenders. Facsimiles shall be effective as originals. 5.4 COMPLETE AGREEMENT. THIS THIRD AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES. 5.5 HEADINGS. The headings, captions and arrangements used in this Third Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Third Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed by their respective Authorized Officers as of the Effective Date. [Signature Pages Follow] 5 SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS TRINITY INDUSTRIES, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS JPMORGAN CHASE BANK (successor in interest by merger to The Chase Manhattan Bank), individually and as Administrative Agent By: ---------------------------------------- Mike Lister, Vice President [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF TOKYO - MITSUBISHI, LTD., as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BANK ONE, NA, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS SUNTRUST BANK, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS WACHOVIA BANK, N.A., as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BNP PARIBAS, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE ROYAL BANK OF SCOTLAND plc, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF NOVA SCOTIA, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF NEW YORK, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS COMERICA BANK, as a Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signature Page] EX-10.18.1 15 d94851ex10-18_1.txt 1ST AMENDMENT TO TERM CREDIT AGREEMENT Exhibit 10.18.1 FIRST AMENDMENT TO TERM CREDIT AGREEMENT This First Amendment to Term Credit Agreement (this "First Amendment") is executed effective as of December 10, 2001 (the "Effective Date"), by and among Trinity Industries, Inc., a Delaware corporation (the "Borrower"), JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, as the Administrative Agent (the "Administrative Agent"), and the financial institutions parties hereto as Lenders (individually a "Lender" and collectively the "Lenders"). WITNESSETH: WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties to that certain Term Credit Agreement dated as of October 15, 2001 (the "Credit Agreement") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, pursuant to the Credit Agreement, the Lenders have made a term loan to the Borrower; and WHEREAS, the Borrower has requested that the Lenders amend certain terms of the Credit Agreement in certain respects; and WHEREAS, subject to the terms and conditions herein contained, the Lenders have agreed to the Borrower's request. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Borrower, the Administrative Agent and each Lender hereby agree as follows: Section 1. AMENDMENTS. In reliance on the representations, warranties, covenants and agreements contained in this First Amendment, and subject to the terms and conditions contained herein, the Credit Agreement is hereby amended effective as of the Effective Date, in the manner provided in this Section 1. 1.1 ADDITIONAL DEFINITIONS. Section 1.01 of the Credit Agreement is amended to add thereto in alphabetical order the definitions of "Collateral Agent," "Intercreditor Agreement," "Mortgage," "Mortgaged Property," "First Amendment" and "Security Agreement" which shall read in full as follows: "Collateral Agent" means JPMorgan Chase Bank, as collateral agent under the terms of the Intercreditor Agreement, and its successors and assigns. "First Amendment" means that certain First Amendment to Term Credit Agreement dated as of December 10, 2001, among the Borrower, the Administrative Agent and the Lenders. 1 "Intercreditor Agreement" means that certain Intercreditor Agreement to be executed in accordance with Section 5.09 by the Borrower, certain of its Subsidiaries, the Collateral Agent, the Administrative Agent and JPMorgan Chase Bank, as administrative agent for the lenders under the Revolving Credit Agreement, in the form approved by the Required Lenders and as the same may be amended or otherwise modified from time to time. "Mortgage" means any mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien to the Collateral Agent on any Mortgaged Property to secure the obligations described in the Intercreditor Agreement. Each Mortgage shall be satisfactory in form and substance to the Administrative Agent. "Mortgaged Property" means each parcel of real property and improvements thereto owned by the Borrower with respect to which a Mortgage is granted pursuant to Section 5.09 or the Intercreditor Agreement. "Security Agreements" means one or more security agreements to be executed in accordance with Section 5.09, and pursuant to the terms of the Intercreditor Agreement, by the Borrower, certain of its Subsidiaries and the Collateral Agent, which shall be satisfactory in form and substance to the Administrative Agent. 1.2 AMENDMENTS TO DEFINITIONS. The definitions of "Administrative Agent," "Chase," "Collateral," "ETC Indebtedness," "Loan Documents" and "Security Instruments" set forth in Section 1.01 of the Credit Agreement are amended to read in full as follows: "Administrative Agent" means (i) prior to November 10, 2001, The Chase Manhattan Bank, and (ii) from and after November 10, 2001, JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder. "Chase" means (i) prior to November 10, 2001, The Chase Manhattan Bank, and (ii) from and after November 10, 2001, JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, in its individual capacity or as an Issuing Bank, as the case may be, and not as Administrative Agent. "Collateral" means the Mortgaged Property, the "Collateral" as defined in the Security Agreements and any and all property and assets on which Liens have been granted to the Collateral Agent to secure the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries under the Loan Documents. "ETC Indebtedness" means equipment trust certificate or other secured Indebtedness financing created or incurred after the date hereof and secured by leased rail equipment which is pledged to a trustee acting on behalf of the holders of such certificates or other secured Indebtedness. "Loan Documents" means this Agreement, the First Amendment, the Notes, the Subsidiary Guaranties, the Security Instruments, the Intercreditor Agreement, any Interest Election Request, any Assignment and Acceptance, the Fee Letter, and all other agreements (including Hedging Agreements) relating to this Agreement entered into from time to time 2 between or among the Borrower (or any or all of its Subsidiaries) and the Administrative Agent or any Lender (or, with respect to the Hedging Agreements, any Affiliates of any Lender), and any document delivered by the Borrower or any of its Subsidiaries in connection with the foregoing. "Security Instruments" means the Mortgages, the Security Agreements and any and all other mortgages, deeds of trust, security agreements, pledge agreements, financing statements and other agreements, documents or instruments now or hereafter executed and delivered by the Borrower, any of its Subsidiaries or any other Person as security for the payment and performance of the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries under the Loan Documents. 1.3 AMENDMENT TO SECURITY INSTRUMENTS PROVISION. Section 5.05 of the Credit Agreement is amended to read in full as follows: "SECTION 5.05 Security Instruments. If at any time, the ratings established by either S&P or Moody's for the Index Debt are reduced to a category or level (as established in accordance with the terms of this Agreement) below the applicable Security Threshold Rating Level, the Borrower will, and will cause each of its Subsidiaries (as applicable) to, at the Borrower's expense, execute and deliver to the Administrative Agent for the benefit of the Lenders, on or prior to twenty (20) days following the reduction of either of the ratings for the Index Debt to a category or level below the applicable Security Threshold Rating Level (or on or prior to such other date as may be agreed to in writing by the Borrower and the Required Lenders), and at such other times as the Required Lenders shall request, one or more Security Instruments, in form and substance satisfactory to the Administrative Agent, and in such number of counterparts as the Administrative Agent or the Collateral Agent shall request, for the purpose and with the effect of granting to the Collateral Agent as security for the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries described in the Intercreditor Agreement, a valid first and prior Lien on such assets and property of the Borrower and its Subsidiaries as the Required Lenders may require, together with such other executed documentation as the Administrative Agent or any Lender may require or deem necessary to perfect or protect the Collateral Agent's Liens on such assets and properties of the Borrower and its Subsidiaries, including, without limitation, (i) financing statements under the Uniform Commercial Code, (ii) all intellectual property assignments for all intellectual property registered in the United States of America, (iii) all Collateral the possession of which is necessary to perfect the Liens therein, (iv) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, (v) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Instruments, and (vi) opinions of counsel (including, without limitation, local counsel), in form and substance satisfactory to the Administrative Agent, and covering such matters as the Administrative Agent or the Required Lenders shall reasonably request. Notwithstanding the foregoing or anything else to the contrary contained herein, the assets and property of the Borrower and its 3 Subsidiaries on which Liens have been (or will be) granted to secure the indebtedness, obligations and liabilities of the Borrower and such Subsidiaries described in Sections 6.01(i), (j) and (n) of the Revolving Credit Agreement shall not be included as Collateral for purposes of this Section 5.05 (including, without limitation, such assets and property separately identified in writing by the Borrower or the appropriate Subsidiary as reasonably necessary to secure such indebtedness, obligations and liabilities that may be incurred by the Borrower or such Subsidiary under Sections 6.01(i), (j) and (n) of the Revolving Credit Agreement) for as long as such assets and property continue to secure (or be separately identified as reasonably necessary to secure) such indebtedness, obligations and liabilities." 1.4 ADDITIONAL AFFIRMATIVE COVENANTS. Article V of the Credit Agreement is amended to add new Sections 5.08 nd 5.09 thereto to read in full as follows: "SECTION 5.08 Compliance With Security Instruments. The Borrower will, and will cause each of its Subsidiaries to, comply with its obligations under the Intercreditor Agreement and the Security Agreements arising in connection with the formation or acquisition of any Subsidiary within ten (10) Business Days after such Subsidiary is formed or acquired. "SECTION 5.09 Collateral Provisions. (a) On or before December 31, 2001, the Borrower shall deliver or cause to be delivered to the Administrative Agent, each of the following, all in form and substance acceptable to the Administrative Agent and the Required Lenders in their sole discretion: (i) the Intercreditor Agreement executed by the Borrower and certain of its Subsidiaries a party thereto; (ii) a Security Agreement executed by the Borrower and certain of its Subsidiaries a party thereto, pursuant to which the Borrower and such Subsidiaries grant to the Collateral Agent a valid first and prior Lien on all of their accounts receivable and inventory; (iii) a Subsidiary Guaranty executed by each of Trinity Rail Group, LLC, Trinity Tank Car, Inc., Trinity Rail Components & Repair, Inc. and Thrall Trinity Freight Car, Inc.; (iv) Uniform Commercial Code, tax and judgment lien search reports listing all documentation on file against the Borrower, each Subsidiary (as applicable) and such other Persons as the Administrative Agent may require in each jurisdiction in which it has a principal place of business and jurisdiction of organization and in which any Collateral is or has been located; 4 (v) subject to the terms of the Intercreditor Agreement and the Security Agreements, such executed documentation as the Collateral Agent or the Administrative Agent may require or deem necessary to perfect or protect the Collateral Agent's Liens in the assets of the Borrower and its Subsidiaries granted pursuant to the Security Agreement described in clause (ii) above, including, without limitation, (A) financing statements under the Uniform Commercial Code, (B) all Collateral the possession of which is necessary to perfect the Lien therein, (C) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, and (D) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Agreement; (vi) duly executed UCC-3 termination statements and such other documentation as shall be necessary to terminate or release all Liens encumbering the Collateral not otherwise permitted by this Agreement; (vii) evidence that the insurance required by Section 5.05 of the Revolving Credit Agreement is in effect; (viii) favorable written opinions from counsel to the Borrower and its Subsidiaries addressed to the Lenders and satisfactory to Vinson & Elkins L.L.P., counsel for the Administrative Agent, as to such matters relating to the Intercreditor Agreement, the Security Agreements and the other Loan Documents, as the Administrative Agent may request (and the Borrower hereby instructs its counsel to deliver such opinions to the Administrative Agent for the benefit of the Lenders); (ix) an amendment to the Revolving Credit Agreement, in form and substance satisfactory to the Administrative Agent, executed by the Borrower, JPMorgan Chase Bank, as administrative agent for the lenders under the Revolving Credit Agreement, and the lenders a party to such Revolving Agreement; and (x) such additional information and documentation as the Collateral Agent or the Administrative Agent may require to consummate the transactions contemplated by this Section 5.09(a). The Borrower shall, and shall cause each Subsidiary to use, commercially reasonable efforts to obtain on or before February 28, 2002, lien waivers, subordination agreements and/or estoppel certificates with respect to the Collateral from all of the Borrower's and its applicable Subsidiaries' landlords, mortgages and/or lessees. 5 The Borrower's failure to fully and timely satisfy on or before December 31, 2001 each requirement set forth in clauses (i) through (x) of this Section 5.09(a) shall constitute an immediate Event of Default. (b) On or before February 15, 2002, the Borrower shall deliver or cause to be delivered to the Administrative Agent, each of the following, all in form and substance acceptable to the Administrative Agent and the Required Lenders in their sole discretion: (i) a Security Agreement (which may take the form of an amendment and restatement of the Security Agreement delivered pursuant to Section 5.09(a)(ii)) executed by the Borrower and certain of its Subsidiaries, pursuant to which the Borrower and certain of its Subsidiaries grant to the Collateral Agent a valid first and prior Lien on certain equipment, real property and other assets and property of the Borrower and such Subsidiaries (in addition to the Liens granted pursuant to the Security Agreement delivered pursuant to Section 5.09(a)(ii)) as shall be required and determined by the Administrative Agent and the Required Lenders; (ii) Uniform Commercial Code, tax and judgment lien search reports listing all documentation on file against the Borrower, each Subsidiary and such other Persons as the Administrative Agent may require in each jurisdiction in which it has a principal place of business and jurisdiction of organization and in which any Collateral is or has been located; (iii) subject to the terms of the Intercreditor Agreement and the Security Agreements, such executed documentation as the Collateral Agent or the Administrative Agent may require or deem necessary to perfect or protect the Collateral Agent's Liens in the assets of the Borrower and its Subsidiaries granted pursuant to the Security Agreement described in clause (i) above, including, without limitation, (A) financing statements under the Uniform Commercial Code, (B) all Collateral the possession of which is necessary to perfect the Lien therein, (C) all other applicable documentation under the laws of any jurisdiction required with respect to the creation, perfection and protection of Liens, and (D) all third-party or governmental approvals and consents required for the pledge of the Collateral under the Security Agreement; (iv) duly executed UCC-3 termination statements and such other documentation as shall be necessary to terminate or release all Liens encumbering the Collateral not otherwise permitted by this Agreement; 6 (v) evidence that the insurance required by Section 5.05 of the Revolving Credit Agreement is in effect; (vi) favorable written opinions from counsel to the Borrower and its Subsidiaries addressed to the Lenders and satisfactory to Vinson & Elkins L.L.P., counsel for the Administrative Agent, as to such matters relating to the Security Agreements and the other Loan Documents, as the Administrative Agent may request (and the Borrower hereby instructs its counsel to deliver such opinions to the Administrative Agent for the benefit of the Lenders); (vii) as applicable, a Mortgage with respect to each Mortgaged Property executed on behalf of the record owner of such Mortgaged Property with a metes and bounds or other description of the parcel attached thereto and recorded in the applicable real property records; (viii) with respect to each parcel of the Mortgaged Property, a title insurance commitment, all documentation evidencing any exceptions to title reflected thereon (or other evidence of title satisfactory to the Administrative Agent), and, to the extent available, a survey and environmental report relating to such parcel; and (ix) such additional information and documentation as the Collateral Agent or the Administrative Agent may require to consummate the transactions contemplated by this Section 5.09(b). The Borrower's failure to fully and timely satisfy on or before February 15, 2002 each requirement set forth in clauses (i) through (ix) of this Section 5.09(b) shall constitute an immediate Event of Default." 1.5 AMENDMENT TO DEFAULT PROVISIONS. Article VII of the Credit Agreement is amended as follows: (a) Clause (d) of Article VII of the Credit Agreement is amended to read in full as follows: "(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Sections 5.01, 5.02, 5.03 (with respect to the Borrower's and its Subsidiaries' existence), 5.09 or in Article VI, in any Security Agreement, in any Mortgage or in the Intercreditor Agreement;". (b) New clauses (o), (p) and (q) are added to Article VII of the Credit Agreement to read in their entireties as follows and the word "or" is deleted from the end of clause (m): 7 "(o) any Lien purported to be created under any Loan Document shall cease to be, or shall be asserted by the Borrower or any of its Subsidiaries not to be, a valid and perfected Lien on any Collateral, with the priority required hereby, except as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents; (p) the occurrence of an Event of Default (as defined in the Intercreditor Agreement); or (q) either any Subsidiary Guaranty, any Security Agreement, the Intercreditor Agreement or any Mortgage shall for any reason cease to be in full force and effect and valid, binding and enforceable in accordance with its terms after its date of execution, or the Borrower or any of its Subsidiaries shall so state in writing." (c) The following provision is added to the end of Article VII of the Credit Agreement: "In addition to the other rights and remedies that the Lenders may have upon the occurrence of an Event of Default, the Required Lenders may direct the Collateral Agent to exercise the rights and remedies available to the Collateral Agent under the Intercreditor Agreement, the Mortgage and the Security Agreement." 1.6 AMENDMENT TO AGENT PROVISIONS. The following provision is added to the end of Article VIII of the Credit Agreement: "The Administrative Agent is authorized to execute the Intercreditor Agreement on behalf of each Lender and bind each Lender to the terms thereof as if each Lender were directly a party thereto." 1.7 AMENDMENT TO WAIVERS AND AMENDMENTS PROVISIONS. Section 9.02(b) of the Credit Agreement is amended to read in full as follows: "(b) Neither this Agreement nor any of the Loan Documents nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) reduce the principal amount of the Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (ii) postpone the scheduled date of payment of the principal amount of the Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, without the written consent of each Lender affected thereby, (iii) change Section 2.12(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (iv) release any Material Subsidiary from its obligations under its Subsidiary Guaranty, without the written consent of each Lender, (v) 8 release any material portion of the Collateral, without the written consent of each Lender, except as expressly permitted hereby, and provided that the Administrative Agent or the Collateral Agent shall release (without consent from the Lenders) any Collateral sold, transferred or otherwise disposed of as permitted by Section 6.03 of the Revolving Credit Agreement, or (vi) change any of the provisions of this Section 9.02(b) or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent hereunder without the prior written consent of such Agent. Section 2. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. With the exception of Section 1.7 hereof, this First Amendment shall be effective automatically and without the necessity of any further action by the Administrative Agent, the Borrower or any Lender when counterparts hereof have been executed by the Administrative Agent, the Borrower and the Required Lenders, and each of the following conditions to the effectiveness hereof have been satisfied: (a) the Administrative Agent shall have received such documents and certificates as the Administrative Agent and its counsel may reasonably request relating to the organization, existence and good standing of the Borrower and each Subsidiary, the power and authority of the Borrower and each Subsidiary (as applicable) to execute, deliver and perform this First Amendment and any other legal matters relating to the Borrower, any Subsidiary or the Loan Documents, all in form and substance satisfactory to the Administrative Agent and its counsel; (b) the Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursed hereunder or under any other Loan Document; (c) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of the Effective Date as if made on the Effective Date, except for such representations and warranties limited by their terms to a specific date; (d) after giving effect to this First Amendment, no Default or Event of Default shall exist; and (e) all proceedings taken in connection with the transactions contemplated by this First Amendment and all documentation and other legal matters incident thereto shall be satisfactory to the Administrative Agent and its counsel. Section 1.7 hereof will be effective automatically and without the necessity of any further action by the Administrative Agent, the Borrower or any Lender when counterparts hereof have been 9 executed by the Administrative Agent, the Borrower and all Lenders, and each of the foregoing conditions to the effectiveness hereof have been satisfied. Section 3. LEGAL FEES. Upon execution of this First Amendment by the Required Lenders, the Borrower shall pay all reasonable fees and expenses of counsel to the Administrative Agent incurred by the Administrative Agent in connection with this First Amendment and all related documents and transactions. Section 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. To induce the Lenders and the Administrative Agent to enter into this First Amendment, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows: 4.1 REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty of the Borrower contained in the Credit Agreement and the other Loan Documents is true and correct on the date hereof after giving effect to the amendments set forth in Section 1 hereof. 4.2 DUE AUTHORIZATION, NO CONFLICTS. The execution, delivery and performance by the Borrower of this First Amendment are within the Borrower's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any material agreement binding upon the Borrower or its Subsidiaries, or result in the creation or imposition of any Lien upon any of the assets of the Borrower or its Subsidiaries except for Permitted Encumbrances (as defined in the Revolving Credit Agreement). 4.3 VALIDITY AND BINDING EFFECT. This First Amendment constitutes the valid and binding obligations of the Borrower enforceable in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (b) the availability of equitable remedies may be limited by equitable principles of general application. 4.4 NO DEFENSES. The Borrower has no defenses to payment, counterclaim or rights of set-off with respect to the indebtedness, obligations and liabilities of the Borrower under the Loan Documents existing on the date hereof. 4.5 ABSENCE OF DEFAULTS. After giving effect to the amendments set forth in Section 1 hereof, neither a Default nor an Event of Default has occurred which is continuing. Section 5. MISCELLANEOUS. 5.1 REAFFIRMATION OF LOAN DOCUMENTS. Any and all of the terms and provisions of the Credit Agreement and the other Loan Documents shall, except as amended and modified hereby, remain in full force and effect. The Borrower hereby agrees that the amendments and modifications herein contained shall in no manner adversely affect or impair the indebtedness, obligations and liabilities of the Borrower under the Loan Documents. 10 5.2 PARTIES IN INTEREST. All of the terms and provisions of this First Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 5.3 COUNTERPARTS. This First Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this First Amendment until counterparts hereof have been executed by the Borrower and the Required Lenders. Facsimiles shall be effective as originals. 5.4 COMPLETE AGREEMENT. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES. 5.5 HEADINGS. The headings, captions and arrangements used in this First Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this First Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed by their respective Authorized Officers as of the Effective Date. [Signature Pages Follow] 11 SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS TRINITY INDUSTRIES, INC. By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS JPMORGAN CHASE BANK (successor in interest by merger to The Chase Manhattan Bank), individually and as Administrative Agent By: ------------------------------------ Name: Mike Lister Title: Vice President [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF TOKYO - MITSUBISHI, LTD., as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BANK ONE, NA, as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS SUNTRUST BANK, as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BNP PARIBAS, as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE ROYAL BANK OF SCOTLAND plc, as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC. THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF NOVA SCOTIA, as a Lender By: ------------------------------------ Name: --------------------------------- Title: --------------------------------- [Signature Page] EX-10.18.2 16 d94851ex10-18_2.txt 2ND AMENDMENT TO TERM CREDIT AGREEMENT EXHIBIT 10.18.2 SECOND AMENDMENT TO TERM CREDIT AGREEMENT This Second Amendment to Term Credit Agreement (this "Second Amendment") is executed effective as of February 8, 2002 (the "Effective Date"), by and among Trinity Industries, Inc., a Delaware corporation (the "Borrower"), JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, as the Administrative Agent (the "Administrative Agent"), and the financial institutions parties hereto as Lenders (individually a "Lender" and collectively the "Lenders"). WITNESSETH: WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties to that certain Term Credit Agreement dated as of October 15, 2001, as amended by that certain First Amendment to Term Credit Agreement dated as of December 10, 2001 (as amended, the "Credit Agreement") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, pursuant to the Credit Agreement, the Lenders have made a term loan to the Borrower; and WHEREAS, the Borrower has requested that the Lenders amend certain terms of the Credit Agreement in certain respects; and WHEREAS, subject to the terms and conditions herein contained, the Lenders have agreed to the Borrower's request. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Borrower, the Administrative Agent and each Lender hereby agree as follows: Section 1. AMENDMENTS. In reliance on the representations, warranties, covenants and agreements contained in this Second Amendment, and subject to the terms and conditions contained herein, the Credit Agreement is hereby amended effective as of the Effective Date, in the manner provided in this Section 1. 1.1 ADDITIONAL DEFINITION. Section 1.01 of the Credit Agreement is amended to add thereto in alphabetical order the definition of "Second Amendment" which shall read in full as follows: "Second Amendment" means that certain Second Amendment to Term Credit Agreement dated as of February 8, 2002, among the Borrower, the Administrative Agent and the Lenders. 1.2 AMENDMENT TO DEFINITION. The definition of "Loan Documents" set forth in Section 1.01 of the Credit Agreement is amended to read in full as follows: 1 "Loan Documents" means this Agreement, the First Amendment, the Second Amendment, the Notes, the Subsidiary Guaranties, the Security Instruments, the Intercreditor Agreement, any Interest Election Request, any Assignment and Acceptance, the Fee Letter, and all other agreements (including Hedging Agreements) relating to this Agreement entered into from time to time between or among the Borrower (or any or all of its Subsidiaries) and the Administrative Agent or any Lender (or, with respect to the Hedging Agreements, any Affiliates of any Lender), and any document delivered by the Borrower or any of its Subsidiaries in connection with the foregoing. 1.3 AMENDMENT TO COLLATERAL PROVISIONS. Section 5.09(b) of the Credit Agreement is amended to read in full as follows: "(b) [Intentionally Deleted]." Section 2. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. This Second Amendment shall be effective automatically and without the necessity of any further action by the Administrative Agent, the Borrower or any Lender when counterparts hereof have been executed by the Administrative Agent, the Borrower and the Required Lenders, and each of the following conditions to the effectiveness hereof have been satisfied: (a) the Administrative Agent shall have received such documents and certificates as the Administrative Agent and its counsel may reasonably request relating to the organization, existence and good standing of the Borrower and each Subsidiary, the power and authority of the Borrower and each Subsidiary (as applicable) to execute, deliver and perform this Second Amendment and any other legal matters relating to the Borrower, any Subsidiary or the Loan Documents, all in form and substance satisfactory to the Administrative Agent and its counsel; (b) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of the Effective Date as if made on the Effective Date, except for such representations and warranties limited by their terms to a specific date; (c) after giving effect to this Second Amendment, no Default or Event of Default shall exist; and (d) all proceedings taken in connection with the transactions contemplated by this Second Amendment and all documentation and other legal matters incident thereto shall be satisfactory to the Administrative Agent and its counsel. Section 3. LEGAL FEES. Upon execution of this Second Amendment by the Required Lenders, the Borrower shall pay all reasonable fees and expenses of counsel to the Administrative Agent incurred by the Administrative Agent in connection with this Second Amendment and all related documents and transactions. Section 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. To induce the Lenders and the Administrative Agent to enter into this Second Amendment, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows: 2 4.1 REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty of the Borrower contained in the Credit Agreement and the other Loan Documents is true and correct on the date hereof after giving effect to the amendments set forth in Section 1 hereof. 4.2 DUE AUTHORIZATION, NO CONFLICTS. The execution, delivery and performance by the Borrower of this Second Amendment are within the Borrower's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any material agreement binding upon the Borrower or its Subsidiaries, or result in the creation or imposition of any Lien upon any of the assets of the Borrower or its Subsidiaries except for Permitted Encumbrances (as defined in the Revolving Credit Agreement). 4.3 VALIDITY AND BINDING EFFECT. This Second Amendment constitutes the valid and binding obligations of the Borrower enforceable in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (b) the availability of equitable remedies may be limited by equitable principles of general application. 4.4 NO DEFENSES. The Borrower has no defenses to payment, counterclaim or rights of set-off with respect to the indebtedness, obligations and liabilities of the Borrower under the Loan Documents existing on the date hereof. 4.5 ABSENCE OF DEFAULTS. After giving effect to the amendments set forth in Section 1 hereof, neither a Default nor an Event of Default has occurred which is continuing. Section 5. MISCELLANEOUS. 5.1 REAFFIRMATION OF LOAN DOCUMENTS. Any and all of the terms and provisions of the Credit Agreement and the other Loan Documents shall, except as amended and modified hereby, remain in full force and effect. The Borrower hereby agrees that the amendments and modifications herein contained shall in no manner adversely affect or impair the indebtedness, obligations and liabilities of the Borrower under the Loan Documents. 5.2 PARTIES IN INTEREST. All of the terms and provisions of this Second Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 5.3 COUNTERPARTS. This Second Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this Second Amendment until counterparts hereof have been executed by the Borrower and the Required Lenders. Facsimiles shall be effective as originals. 5.4 COMPLETE AGREEMENT. THIS SECOND AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF 3 PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES. 5.5 HEADINGS. The headings, captions and arrangements used in this Second Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Second Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed by their respective Authorized Officers as of the Effective Date. [Signature Pages Follow] 4 SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS TRINITY INDUSTRIES, INC. By: ----------------------------------- Name: --------------------------------- Title: --------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS JPMORGAN CHASE BANK (successor in interest by merger to The Chase Manhattan Bank), individually and as Administrative Agent By: ------------------------------------ Mike Lister, Vice President [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF TOKYO - MITSUBISHI, LTD., as a Lender By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BANK ONE, NA, as a Lender By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS SUNTRUST BANK, as a Lender By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS BNP PARIBAS, as a Lender By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE ROYAL BANK OF SCOTLAND plc, as a Lender By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- [Signature Page] SIGNATURE PAGE TO SECOND AMENDMENT TO CREDIT AGREEMENT BY AND AMONG TRINITY INDUSTRIES, INC., JPMORGAN CHASE BANK, AS ADMINISTRATIVE AGENT AND THE FINANCIAL INSTITUTIONS PARTIES THERETO AS LENDERS THE BANK OF NOVA SCOTIA, as a Lender By: ----------------------------------- Name: --------------------------------- Title: --------------------------------- [Signature Page] EX-21 17 d94851ex21.txt LISTING OF SUBSIDIARIES EXHIBIT 21 TRINITY INDUSTRIES, INC. Listing of Subsidiaries of the Registrant The Registrant has no parent. At March 1, 2002, the operating subsidiaries of the Registrant were:
Percentage of Organized voting securities under the owned by the Name of subsidiary laws of Registrant - ------------------ --------- ----------------- Apromat, S.A. - Arad Romania 50% Astra Vagoane, S.A. - Arad Romania 96% Concrete Supply.Net, Inc. Texas 100% ICPV S.A. - Arad Romania 89% International Industrial Indemnity Co. Vermont 100% MEVA, S.A. - Drobeta Turnu-Severin Romania 80% Reunion General Agency, Inc. Texas 100% Syro, Inc. Ohio 100% Transit Mix Concrete & Materials Company Delaware 100% Transit Mix Concrete - Baytown, Inc. Texas 100% Transit Mix Concrete & Materials Company of Louisiana Louisiana 100% Trinity Argentina S.R.L. Argentina 100% Trinity EE, Inc. Delaware 100% Trinity E-Ventures, Inc. Delaware 100% Trinity Equipment Co., Inc. Delaware 100% Trinity Equipment Manufacturing Company, Inc. Delaware 100% Trinity Fitting & Flange Group, Inc. Delaware 100% Trinity Industries Buffalo, Inc. Delaware 100% Trinity Industries International Holdings AG Switzerland 100% Administradora Especializada, S. de R.L. de C.V Mexico 100% Grupo Tatsa, S. de R.L. de C.V. Mexico 100% Trinity Industries de Mexico, S. de R.L. de C.V. Mexico 100% Servicios Corporativos Tatsa, S. de R.L. de C.V Mexico 100% Trinity Industries do Brasil, Ltda. Brazil 100% Trinity Industries GmbH Switzerland 100% Wagonmarket, spol. s r.o. Slovak Republic 100% Trinity Rail do Brasil, Ltda. Brazil 100% Trinity Industries Leasing Company Delaware 100% Trinity Industries Transportation, Inc. Texas 100% Trinity Marine Products, Inc. Delaware 100% Trinity Materials, Inc. Delaware 100% Trinity Mining Services, Inc. Delaware 100% Trinity Rail Group, LLC Delaware 100% Thrall Europa, s.r.o. Czech Republic 100% Thrall Vagonka Studerka, a.s. Czech Republic 95% Thrall International Holdings LLC Illinois 99% Thrall Europa Gmbh Switzerland 100% Thrall Europa (UK) England & Wales 100% Thrall Company Delaware 100% Rail Project, s.r.o. Slovak Republic 100%
Thrall Trinity Freight Car, Inc. Delaware 100% Trinity DIFCO, Inc. Delaware 100% DIFCO, Inc. Ohio 100% Trinity Rail Components & Repair, Inc Delaware 100% McConway and Torley Corporation Pennsylvania 100% MCT Properties, Inc. Delaware 100% McConway and Torley - Anniston, Inc. Delaware 100% Standard Forged Products, Inc. Delaware 100% Trinity Railcar Repair, Inc. Delaware 100% Trinity Tank Car, Inc. Delaware 100% Trinity Rail, Inc. Delaware 100% Trinity Rail Management, Inc. Delaware 100% TILX GP I, LLC Delaware 100% TILX LP I, LLC Delaware 100% Trinity Structural Towers, Inc. Delaware 100% TRN Investment Company, Inc. Delaware 100% TRN, Inc. Delaware 100% TRM Business Trust Delaware 100% Waldorf Properties, Inc. Delaware 100%
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