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Participation Agreement

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Sectors: Automotive and Transport Equipment
Governing Law: New York, View New York State Laws
Effective Date: November 12, 2003
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EXHIBIT 10.10.5


PARTICIPATION AGREEMENT (TRLIII 2003-1C)


Dated as of November 12, 2003


among


TRINITY RAIL LEASING III L.P.,


as Lessee,


TRINITY RAIL LEASING TRUST II,


TRINITY INDUSTRIES LEASING COMPANY,


as Manager,


TRINITY INDUSTRIES, INC.,


TRLIII 2003-1C RAILCAR STATUTORY TRUST,


U.S. BANK TRUST NATIONAL ASSOCIATION,
as Owner Trustee,


TILC EQUITY OP III-C L.P.,
as Owner Participant


AMBAC ASSURANCE CORPORATION,


as Policy Provider


and


WILMINGTON TRUST COMPANY,
as Indenture Trustee and Pass Through Trustee


Tank Cars and Freight Cars


Table of Contents


Page
---- SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT........................................... 3


SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING; TRANSACTION COSTS.......... 3
Section 2.1 Sale and Purchase of Equipment.......................................................... 3
Section 2.2 Participation in Equipment Cost......................................................... 3
Section 2.3 Closing Date; Procedure for Participation............................................... 4
Section 2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions....... 5
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............................................................ 11


SECTION 3. REPRESENTATIONS AND WARRANTIES.......................................................... 13
Section 3.1 Representations and Warranties of the Trust Company..................................... 13
Section 3.2 Representations and Warranties of the Lessee............................................ 15
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 TRLTII................................................ 32
Section 3.8 Representations and Warranties of the Pass Through Trustee.............................. 33
Section 3.9 Representations and Warranties of Trinity............................................... 34
Section 3.10 Representations and Warranties of the Policy Provider................................... 35
Section 3.11 Opinion Acknowledgment.................................................................. 36


SECTION 4. CLOSING CONDITIONS...................................................................... 36
Section 4.1 Conditions Precedent to Investment by Each Participant.................................. 36
Section 4.2 Additional Conditions Precedent to Investment by the Loan Participant................... 43
Section 4.3 Additional Conditions Precedent to Investment by the Owner Participant.................. 43
Section 4.4 Conditions Precedent to the Obligation of TRLTII and the Lessee......................... 44


SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE, TILC AND TRINITY............................. 45


SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE...................... 47
Section 6.1 Restrictions on Transfer of Beneficial Interest......................................... 47
Section 6.2 Lessor's Liens Attributable to the Owner Participant.................................... 50


i


Table of Contents
(continued)


Page
----
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 Information............................................................................. 52
Section 6.7 Certain Representations, Warranties and Covenants....................................... 52
Section 6.8 Covenants of the Manager................................................................ 52
Section 6.9 Lessee's Purchase in Certain Circumstances.............................................. 52
Section 6.10 Owner Participant as Affiliate of Lessee................................................ 54
Section 6.11 Records; U.S. Income Tax Information.................................................... 54
Section 6.12 Mexico Filings.......................................................................... 55
Section 6.13 Certain Releases........................................................................ 57
"Release Party" means any of Fleet National Bank, The Toronto-Dominion
Bank and Pembina Pipeline Corporation................................................... 58


SECTION 7. LESSEE'S INDEMNITIES.................................................................... 58
Section 7.1 General Tax Indemnity................................................................... 58
Section 7.2 General Indemnification................................................................. 69
Section 7.3 Indemnification by TILC................................................................. 74


SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT....................................................... 77


SECTION 9. SUCCESSOR INDENTURE TRUSTEE............................................................. 77


SECTION 10. MISCELLANEOUS........................................................................... 77
Section 10.1 Consents................................................................................ 77
Section 10.2 Refinancing............................................................................. 78
Section 10.3 Amendments and Waivers.................................................................. 80
Section 10.4 Notices................................................................................. 80
Section 10.5 Survival................................................................................ 82
Section 10.6 No Guarantee of Residual Value or Debt.................................................. 82
Section 10.7 Successors and Assigns.................................................................. 83
Section 10.8 Business Day............................................................................ 83
Section 10.9 GOVERNING LAW........................................................................... 83
Section 10.10 Severability............................................................................ 83
Section 10.11 Counterparts............................................................................ 83
Section 10.12 Headings and Table of Contents.......................................................... 83
Section 10.13 Limitations of Liability; Extent of Interest............................................ 83
Section 10.14 Maintenance of Non-Recourse Debt........................................................ 85
Section 10.15 Ownership of and Rights in Units and Pledged Units...................................... 85
Section 10.16 No Petition............................................................................. 85
Section 10.17 Consent To Jurisdiction................................................................. 86
Section 10.18 WAIVER OF JURY TRIAL.................................................................... 86
Section 10.19 No Partnership Created.................................................................. 86


ii


Table of Contents
(continued)


Page
----
Section 10.20 Amendments to Operative Agreements That Are Not Lessee Agreements....................... 87
Section 10.21 Acknowledgment of Confidentiality Provisions in Subleases............................... 87


SECTION 11. LIMITED GUARANTY........................................................................ 87
Section 11.1 Limited Guaranty........................................................................ 87
Section 11.2 Guaranty Unconditional.................................................................. 88
Section 11.3 Discharge Only Upon Payment and Performance in Full; Reinstatement in
Certain Circumstances................................................................... 90
Section 11.4 Waiver by Trinity....................................................................... 90
Section 11.5 Subrogation............................................................................. 90
Section 11.6 Payments................................................................................ 90
Section 11.7 Withholding Taxes....................................................................... 91


iii


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 Winston & Strawn LLP Opinion Exhibit E-2 -- Form of Trinity Rail Leasing III L.P. and Trinity Industries Leasing
Company Opinion Exhibit E-3 -- Form of Shipman and Goodwin LLP Opinion Exhibit E-4 -- Form of Winston & Strawn LLP Opinion Exhibit E-5 -- Form of Owner Participant in-house counsel Opinion Exhibit E-6 -- Form of Morris, James, Hitchens & Williams LLP Opinion, as special
counsel for the Indenture Trustee, Collateral Agent and Pass Through
Trustee Exhibit E-7 -- Form of Alvord & Alvord Opinion Exhibit E-8 -- Form of Blake Cassels Opinion Exhibit E-9 -- Form of Policy Provider in-house counsel Opinion Exhibit E-10 -- Form of Haynes & Boone, LLP Opinion Exhibit F -- Form of Officer's Solvency Certificate Exhibit G -- Tax Shelter Registration Form Schedule 1-A -- Description of Equipment, Designation of Basic Groups, Designation of
Functional Groups and Equipment Cost Schedule 1-B -- Description of Pledged Equipment Schedule 1-C -- List of Existing Subleases Schedule 1-D -- List of 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 7-A -- List of Units with Bolster Repairs Completed Schedule 7-B -- List of Units with Bolster Repairs Not Completed Schedule 8-A -- List of Units Subject to a Purchase Option Schedule 8-B -- List of Units Subject to a Purchase Option Not for Fair Market Value Schedule 9 -- Permitted Liens Schedule 10 -- List of Subleases and Pledged Equipment Leases Not in Conformity with
Permitted Sublease Definition


iv


PARTICIPATION AGREEMENT (TRLIII 2003-1C)


This PARTICIPATION AGREEMENT (TRLIII 2003-1C), dated as of November 12, 2003 (this "Agreement"), is by and among (i) Trinity Rail Leasing III L.P., a Texas limited partnership (together with its permitted successors and assigns, the "Lessee" or the "Partnership"), (ii) Trinity Rail Leasing Trust II, a Delaware statutory trust ("TLRTII"), (iii) Trinity Industries Leasing Company, a Delaware corporation ("TILC"), (iv) Trinity Industries, Inc., a Delaware corporation ("Trinity"), (v) TRLIII 2003-1C Railcar Statutory Trust, a Delaware statutory trust (the "Trust"), (vi) U.S. Bank Trust National 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), (vi) TILC Equity OP III-C L.P., a Texas limited partnership (together with its permitted successors and assigns, the "Owner Participant"), (vii) Ambac Assurance Corporation, a Wisconsin stock insurance corporation, and (viii) Wilmington Trust Company, a Delaware banking corporation, 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, (i) to purchase from the Lessee on the Closing Date the Equipment described in Schedule 1-A hereto and (ii) to acquire Equipment from time to time in connection with the substitution or replacement of Units in accordance with the Lease and, in each case, to lease such Equipment to the Lessee concurrently with such purchase or acquisition;


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 Trust and the Indenture Trustee will enter into the Indenture, pursuant to which the Trust will agree, among other things, to borrow from the Loan Participant the loan in an amount not to exceed the lesser of $25,785,705 and 80% of the Total Equipment Cost 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;


WHEREAS, TRLTII, an indirect wholly-owned subsidiary of TILC, will on the Closing Date, pursuant to the Transfer and Assignment Agreement (i) sell to the Lessee all of TRLTII's right, title and interest in and to the Equipment described on Schedule 1-A hereto and (ii) assign


and transfer to the Lessee all of TILTII's right, title and interest in and to any Existing Equipment Subleases;


WHEREAS TRLTII will, on the Closing Date, pursuant to the Pledged Equipment Transfer and Assignment Agreement (i) sell to the Partnership all of TRLTII's right, title and interest in and to the Pledged Equipment and (ii) assign and transfer to the Partnership all of TRLTII'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, on behalf of the Trust, and the Trust will, among other things (and subject to the terms and conditions of the Operative Agreements), (i) purchase the Equipment described in Schedule 1-A 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 Trust, (ii) acquire Equipment from time to time in connection with the substitution or replacement of Units in accordance with the Lease, (iii) own the Equipment described in Schedule 1-A hereto as provided in the Operative Agreements, (iv) 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 (v) execute and deliver the Lease, pursuant to which, subject to the terms and conditions set forth therein, the Trust agrees to lease to the Lessee, and the Lessee agrees to lease from the Trust, 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;


WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, TILC, the Trust, 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 Trust and the other Beneficiaries (as defined therein) a security interest in the Collateral (including the Subleases and Pledged Equipment Leases) to secure the performance by the Lessee of its obligations under the Partnership Documents and Operative Agreements (including the Lease) to which the Lessee is a party;


WHEREAS, pursuant to the terms of the Trust Agreement, the Owner Participant has authorized and directed the Owner Trustee to, on behalf of the Trust, and the Trust will, among other things (and subject to the terms and conditions of the Operative Agreements), grant to the Indenture Trustee under the Indenture for the security and the benefit of the holder of the Equipment Note a security interest in the Indenture Estate;


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 in an amount not less than 20% of the Total Equipment Cost pursuant to this Agreement and the Trust Agreement, to effect the purchase of the Equipment described on Schedule 1-A hereto by the Trust from the Lessee as contemplated hereby;


WHEREAS, on or prior to the Closing Date, the Partner made capital contributions to the Lessee in accordance with the Partnership Agreement and on the Closing Date all of the proceeds of such capital contributions will be applied (i) to effect the purchase of the Pledged


2


Equipment by the Lessee from TRLTII as contemplated hereby and (ii) to fund certain reserve accounts of the Lessee as contemplated hereby and by the Collateral Agency 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, the Pledged Equipment, the Subleases and the Pledged Equipment Leases;


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; and


WHEREAS, concurrently with the execution and delivery of this Agreement, the Lessee, the General Partner, the Limited Partner and TILC have entered into the Administrative Services Agreement, pursuant to which TILC will provide certain administrative services with respect to the Partnership, the General Partner and the Limited Partner.


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 (TRLIII 2003-1C), dated as of November 12, 2003, between the Trust 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 Trust, and the Trust 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-A, and, in connection therewith, the Trust agrees to pay to the Lessee the cost for each Unit as specified in Schedule 1-A. On the Closing Date, the Lessee shall deliver each Unit described on Schedule 1-A to the Trust, and the Trust 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


3


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 (not less than 20%) 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) 2.75% 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 the Consideration (as defined in the Pass Through Trust Agreement) received by it from the sale of the Pass Through Trust Certificates, to be evidenced by the Equipment Note, to the Trust, in the amount equal to the product of the Total Equipment Cost for the Units delivered on the Closing Date and the percentage (not in excess of 80%) 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 Trust, the Owner Trustee, the Policy Provider 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 Wilmington Trust Company, ABA No. 031100092, Att.: Mary St. Amand, Account 63640-0. 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 Trust. The making available by the Loan Participant of the amount of the Loan Participant's Commitment for the Total Equipment Cost


4


shall be deemed a waiver of the Notice of Delivery by the Loan Participant and the Indenture Trustee.


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