Exhibit 10.1
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FORM OF
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OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT(1998-1)
Dated as of August 1, 1998
Between
GENERAL AMERICAN RAILCAR CORPORATION II
and
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager
Covered ▇▇▇▇▇▇ and Tank Cars
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Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
Chicago, Illinois
TABLE OF CONTENTS
SECTION 1.
DEFINITIONS
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SECTION 2.
APPOINTMENTS AND DUTIES OF MANAGER
Section 2.1. Appointment......................................... 2
Section 2.2. Duties of the Manager............................... 2
SECTION 3.
MANAGER'S STANDARD OF PERFORMANCE
Section 3.1. Standards........................................... 6
Section 3.2. Conflicts of Interest............................... 9
Section 3.3. Event of Loss; Replacement Units.................... 9
Section 3.4. Similar Services.................................... 10
Section 3.5. Custody of Documents................................ 10
Section 3.6. No Greater Standards................................ 10
SECTION 4.
MODIFICATIONS
Section 4.1. Required Modifications.............................. 10
Section 4.2. Optional Modifications.............................. 11
SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
Section 5.1. Compensation of the Manager......................... 12
Section 5.2. Base Component...................................... 12
Section 5.3. Incentive Component................................. 13
Section 5.4. Reimbursable Services............................... 13
SECTION 6.
PAYMENTS
Section 6.1. Receipt of Payments................................. 14
Section 6.2. Lockboxes; Payments................................. 14
Section 6.3. Successor Lockbox Trustee........................... 16
Section 6.4. Mileage Credits..................................... 17
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SECTION 7.
REPORTS AND INFORMATION
Section 7.1. Monthly Reports..................................... 17
Section 7.2. Annual Reports...................................... 17
Section 7.3. Equipment Reports................................... 18
Section 7.4. Compliance Information.............................. 18
Section 7.5. Company's Financial Reports......................... 18
Section 7.6. Rights of Inspection................................ 19
SECTION 8.
TERM OF AGREEMENT; TERMINATION
Section 8.1. Term................................................ 20
Section 8.2. Termination of Manager for Default.................. 20
Section 8.3. Remedies Upon Default............................... 21
Section 8.4. Replacement of the Manager.......................... 22
Section 8.5. Merger or Sale...................................... 22
SECTION 9.
INDEMNIFICATION
Section 9.1. Indemnification by Manager.......................... 22
Section 9.2. Indemnification by Company.......................... 23
Section 9.3. Claims Excluded..................................... 23
Section 9.4. Third Party Claims.................................. 23
Section 9.5. Cooperation......................................... 24
Section 9.6. Survival............................................ 24
SECTION 10.
REPRESENTATIONS AND WARRANTIES
Section 10.1. Representations of Company.......................... 25
Section 10.2. Representations of Manager.......................... 26
SECTION 11.
MISCELLANEOUS
Section 11.1. Table of Contents and Headings...................... 27
Section 11.2. The Manager as Independent Contractor............... 27
Section 11.3. Relations Among Parties............................. 27
Section 11.4. Governing Law....................................... 27
Section 11.5. Notices............................................. 27
Section 11.6. Entire Agreement; Amendment; Waivers................ 28
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Section 11.7. Assignment.......................................... 28
Section 11.8. Further Assurances.................................. 29
Section 11.9. Third Party Beneficiary............................. 29
Section 11.10. Counterparts........................................ 29
Section 11.11. Severability........................................ 29
Section 11.12. No Petition in Bankruptcy........................... 30
APPENDICES AND SCHEDULES
Appendix A -- Definitions
Schedule 1 -- Description of Equipment
Schedule 6.2 -- Form of Lockbox Agreement with Lockbox Bank
Schedule 6.4 -- List of Marks
Schedule 7.1 -- Monthly Report Form
Schedule 7.2 -- Annual Report Form
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OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT
THIS OPERATION, MAINTENANCE, SERVICING AND REMARKETING AGREEMENT (this
"Agreement"), dated as of August 1, 1998, is made and entered into between
General American Transportation Corporation, a New York corporation, as manager
(in such capacity, together with any successor manager, the "Manager"), and
General American Railcar Corporation II, a Delaware corporation (the "Company").
W I T N E S S E T H
- - - - - - - - - -
A. The Company has acquired from General American Transportation
Corporation, a New York corporation ("GATC"), (i) certain railroad tank cars and
covered ▇▇▇▇▇▇ cars (each railcar individually a "Unit" and all railcars
collectively the "Equipment"), as such Units are more fully described in
Schedule 1 to this Agreement, and (ii) all of GATC's right, title and interest
in and to the lease agreements respecting the Equipment in which GATC is the
lessor, such lease agreements being with customers of GATC (such lease
agreements and future lease agreements entered into by the Manager on behalf of
the Company respecting the Equipment pursuant to this Agreement are hereinafter
referred to as "Car Service Contracts" and such customers and future customers
under Car Service Contracts are hereinafter referred to as "Customers").
B. The Company has sold the Equipment to [Owner Trustee], as Owner
Trustee under [three] separate Trust Agreements, each dated as of August 1,
1998, with the Owner Participants therein named (such Owner Trustees under each
Trust Agreement being herein referred to collectively as the "Owner Trustees"
and, individually, as an "Owner Trustee"), and the Owner Trustees have
simultaneously leased the Equipment to the Company pursuant to the terms of
[three] separate Equipment Lease Agreements, each dated as of August 1, 1998
(collectively, the "Leases" and, individually, a "Lease").
C. The Company, The First National Bank of Chicago, as Collateral Agent
(the "Collateral Agent"), the Owner Trustees, the Indenture Trustees (as
hereinafter defined), the Manager and the Insurance Manager have entered into a
Collateral Agency and Intercreditor Agreement dated as of August 1, 1998 (the
"Intercreditor Agreement") providing, among other things, for the distribution
of Collections (as hereinafter defined) and the exercise of certain rights of
the Company under the Company Documents (as defined in the Intercreditor
Agreement).
D. GATC is engaged in the business of owning, leasing and managing
railcars for itself and others, and the Company desires to retain GATC, on the
terms and conditions set forth in this Agreement, to perform operating,
maintenance, servicing and remarketing services on behalf of the Company in
respect of the Equipment leased by the Company under the Leases and the related
Car Service Contracts.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Company and the Manager hereby agree as follows:
SECTION 1.
DEFINITIONS
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Unless otherwise defined herein, all capitalized terms used but not defined
herein have the meanings assigned to such terms in Appendix A to this Agreement.
SECTION 2.
APPOINTMENTS AND DUTIES OF MANAGER
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Section 2.1. Appointment. The Company hereby appoints the Manager to
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act as the manager with respect to the Equipment, the Leases and the Car Service
Contracts effective as of the Closing Date and grants to the Manager the
authority to operate and maintain the Equipment as required by the terms of the
Leases, to administer the Leases and the Car Service Contracts relating to the
Equipment, to arrange for the storage, maintenance and re-lease of the Equipment
upon termination of the Car Service Contracts or any of them, and to collect
monies and make disbursements on behalf of the Company as contemplated or
required by the Car Service Contracts, the Intercreditor Agreement and the
Leases, and generally to manage and administer the operation of the Equipment,
the Car Service Contracts and the Leases, all on the terms and conditions
contained herein. The Manager shall manage each Unit from the date of its
acquisition by the Company until the date that the Manager's obligations with
respect to such Unit shall terminate pursuant to Section 8.1.
Section 2.2. Duties of the Manager. The Manager hereby accepts its
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appointment as manager under this Agreement and, subject to the terms and
conditions of this Agreement, agrees to use reasonable care and diligence
consistent with customary commercial practice as would be used by a prudent
Person in the railcar leasing industry but in all cases at the level of care and
diligence utilized by the Manager in the management of the Manager's Fleet and
as shall be required in order for the Company to perform its obligations under
the Leases (the "Services Standard"), and to provide and perform the following
services for or on behalf of the Company:
(a) Monitor the creditworthiness and performance of the Customers, as
appropriate, and discharge and perform the obligations of the Company under the
Car Service Contracts; provide all billing and collection services with respect
to collecting all Sublease Payments and payments due from other persons with
respect to the Equipment; maintain separate books and records reflecting the
financial condition and results of operations of the Company in accordance with
generally accepted accounting principles; account for and remit all sums due to
or for the account of the Company, as hereinafter set forth; and employ the
Manager's then
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standard collection procedures (including, where appropriate, the initiation of
litigation, the termination of Car Service Contracts, the repossession of Units
and the exercise of other remedies) in the event Sublease Payments and such
payments due from other persons are not timely paid.
(b) Maintain the Equipment (i) pursuant to the terms of the
applicable Leases and Car Service Contracts; (ii) according to prudent industry
practice, in good working order and in good physical condition for railcars of
similar age and usage, normal wear and tear excepted; (iii) in a manner
consistent with maintenance practices used by the Manager in respect of railcars
owned, leased or managed by the Manager and its Affiliates similar in type to
the Equipment; (iv) in accordance in all material respects with manufacturer's
warranties and all applicable insurance policies; and (v) in compliance in all
material respects with any applicable laws and regulations, including, without
limitation, the AAR rules and the Interchange Rules and FRA Rules and
Regulations.
(c) Prepare or cause to be prepared the necessary returns or other
filings for all Taxes imposed upon or against the Equipment or the Company of
whatever kind or nature and where it deems appropriate (or as otherwise directed
by the Company) protest the application of such taxes or the rate or amount of
assessment thereunder. The Manager shall pay such Taxes on behalf of the
Company using the Company's own funds; provided, however, that any Successor
Manager shall have no responsibility hereunder with respect to Taxes measured by
or upon the income of the Company. In the Manager's discretion (or as otherwise
directed by the Company), contest or defend against any Taxes imposed upon or
against the Equipment and seek revision or appeal from any such Taxes deemed
improper, all such actions to be in the name of the Company or the Manager as
Agent for the Company.
(d) Monitor and record movements of the Units, including (i) keeping
records pertaining to the movement of the Units, mileage and other compensation
earned and mileage and other compensation received with respect to such Units as
well as charges from railroads as a result of mileage adjustments; (ii) subject
to all rules and tariffs of the railroads, crediting such mileage and other
compensation, as and when received from Marks Company, to the appropriate
Customer as provided for in the related Car Service Contract; and (iii) such
other matters as may be reasonably related thereto.
(e) Maintain, to the extent practicable, separate records of the
Company with respect to all transactions relating to the Equipment (including,
without limitation, records relating to maintenance, repair and Car Service
Contracts) and make such records available for inspection by the Company, its
auditors or other designees or the Owner Trustees or any Participant upon
reasonable notice during ordinary business hours in accordance with the terms of
the Participation Agreements.
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(f) Maintain research capability and provide mutually agreeable
railcar market industry research reports to the Company as reasonably requested,
which reports shall be of the type regularly maintained and compiled by the
Manager in the ordinary course of its business and may include market
information with respect to railcar demand in terms of traffic growth,
regulatory and industry requirements for new railcars and other information
relevant to the Company's long-term planning with respect to Car Service
Contracts, market conditions, industry trends and the Equipment; provide copies
of any such reports requested by the Company to the Owner Trustees and each
Participant.
(g) Cause each Unit to be numbered with its reporting ▇▇▇▇ shown on
the Lease Supplement dated the date on which such Unit was delivered under the
Lease and covering such Unit, and 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 may be required by law
in order to protect the Lessor's right, title and interest in and to such Unit,
its rights under the Lease and the rights of the Indenture Trustee.
(h) If a Unit either suffers damage or contamination which, in the
Manager's reasonable judgment, makes repair uneconomic or renders such Unit
unfit for commercial use or if a Unit otherwise suffers an Event of Loss, (i)
investigate the facts and circumstances giving rise to such Event of Loss and
provide such notices and Officer's Certificates with respect thereto on behalf
of the Company as may be required under the applicable Lease, (ii) collect or
arrange for appropriate payment of compensation from the relevant railroad,
Customer, third party or other source, or combination thereof, and take such
other steps, including field inspection and investigation, as deemed appropriate
by the Manager, and (iii) take all steps and actions, including the hiring of
attorneys and consultants, required with respect to such Event of Loss under the
applicable Lease, including an investigation of the availability of a
Replacement Unit for the Unit suffering the Event of Loss. Following such
investigation and consideration of such other facts and circumstances as the
Manager feels are necessary or appropriate, the Manager shall recommend to the
Company whether it should pay the Stipulated Loss Value for such Unit or to
replace such Unit with a Replacement Unit as provided in the applicable Lease,
such recommendation to be made a reasonable period of time before the Company is
required to make such election under the Lease.
(i) Subject to Section 3.1(c), when appropriate or necessary in the
judgment of the Manager (or as otherwise directed by the Company), (i) terminate
Car Service Contracts
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for cause and recover possession of the related Units thereunder and enforce all
rights of the Company with respect thereto, including the rights of the Company
to payment of all amounts owed under Car Service Contracts or otherwise with
respect to the Units; (ii) institute and prosecute legal proceedings in the name
of the Company or the Manager as permitted by applicable laws in order to
terminate Car Service Contracts and/or recover possession of the Units; and
(iii) settle, compromise and/or release such actions or suits or reinstate Car
Service Contracts.
(j) Upon the expiration of any Car Service Contracts, negotiate
appropriate renewals thereof or remarket the related Units on terms and
conditions which are customary at such time for Car Service Contracts with
respect to other railcars owned, leased or managed by the Manager (the
"Manager's Fleet") and with adequate regard as to credit quality in accordance
with the Services Standard; inspect, clean (to the extent not done by the
Customer) and refurbish any Unit which is to be remarketed in a manner
consistent with the Services Standard; and take such steps as may be required to
see that all obligations and duties arising under Car Service Contracts with
respect to the remarketed Units are performed or complied with to the extent
required thereunder.
(k) Store or arrange for the storage of a Unit on tracks designated
by the Manager (whether such tracks are owned by the Manager or otherwise) upon
expiration or termination of its related Car Service Contract until such Unit
shall have been re-leased or until such Unit shall no longer be subject to the
Lease.
(l) Take such actions as the Manager shall deem necessary or
appropriate or as the Company shall request to keep the Company in compliance
with its obligations under any Lease, Participation Agreement, Car Service
Contract or other Operative Agreement.
(m) Make recommendations to the Company as to whether to terminate
any Lease with respect to certain Units which the Manager believes are obsolete
or surplus to the Company's requirements under the terms of such Lease and, if
directed by the Company, provide such notices and Officer's Certificates with
respect thereto as may be required under such Lease to effect such a
termination; if such election is made, take the necessary action on behalf of
the Company to arrange for the sale of such Units and the termination of the
lease of such Units as is required by such Lease.
(n) Make recommendations to the Company as to whether to exercise any
of the Company's purchase options for any of the Units under any Lease and, if
directed by the Company, take the necessary action on behalf of the Company
thereunder to arrange for the purchase of such Units by the Company.
(o) Make recommendations to the Company as to whether to exercise the
Company's renewal option for any of the Units under any Lease and, if directed
by the
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Company, take the necessary action on behalf of the Company thereunder in
connection with any such renewal.
(p) Comply with the return provisions of any Lease with respect to
any Units which are being returned to the Lessor thereunder.
(q) Take such actions as the Manager shall deem necessary or
appropriate or as the Company shall request to keep the Company in compliance
with all laws, rules and regulations applicable to the Company and the
Equipment; provided, however, that, if directed by the Company, the Manager
shall on behalf of the Company, in good faith and by appropriate proceedings
diligently conducted, contest the validity or application of any such law, 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 the Company, any Lessor and any
Indenture Trustee in any Equipment or under any Lease or otherwise expose the
Company, any Lessor, any Indenture Trustee or any Participant to criminal or
financial sanctions or release the Company, from any of its obligations under
the Lease.
(r) Enforce on behalf of the Company the warranties with respect to
all repairs, maintenance and Modifications made with respect to the Units at
facilities not owned by the Manager or an Affiliate of the Manager.
(s) Perform for the Company such other services incidental to the
foregoing as may from time to time be reasonably necessary in connection with
any Operative Agreement or in connection with the operation and maintenance of
the Equipment as required by the terms of the Leases or the providing of the
Equipment to Customers or the entering into of Car Service Contracts.
(t) It is understood and agreed that the Manager shall have no
obligation or responsibility under this Agreement for the placement or
maintenance of insurance on the Equipment, which services are to be provided to
the Company under the Insurance Agreement.
SECTION 3.
MANAGER'S STANDARD OF PERFORMANCE
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Section 3.1. Standards.
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(a) All of the functions, services, duties and obligations of
the Manager under this Agreement shall be performed by the Manager in compliance
with the Services Standard.
(b) The Manager shall employ its standard collection procedures,
including, where appropriate, the appointment of collection agents and
attorneys, in the event Sublease Payments under any Car Service Contract or
payments due from other Persons with respect to
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the Equipment or the Car Service Contracts or use thereof or damage thereto are
not timely paid, but the Manager shall have no responsibility for any failure of
a Customer or such other person to make any payment when due.
(c) Unless otherwise directed by the Company, the Manager shall not
be required to exercise on the Company's behalf any right or rights under any
Car Service Contract or to threaten or commence any legal or other proceedings
before any court or governmental agency or nongovernmental organization in
connection with its performance or actions hereunder if in the Manager's
reasonable judgment the potential expense or risk associated with such exercise
or action is such that the Manager would not undertake such exercise or action
with respect to other railcars owned, leased or managed by the Manager.
(d) If the Manager is rendered unable to perform any of its
obligations under this Agreement as a result of acts beyond the reasonable
control of the Manager or its Affiliates or the control of their agents,
suppliers or subcontractors including, without limitation, acts of God, acts of
civil or military authorities, embargoes, governmental priorities, fires or
other casualties, strikes or other labor disturbances, floods, riots, war, lack
or shortage of transportation facilities, delays in transportation or inability
or difficulty in obtaining necessary labor, materials or goods then the Manager
will be excused from whatever performance is affected by the foregoing, to the
extent so affected; provided that:
(i) the Manager gives the Company, the Owner Trustees, the
Participants and the Indenture Trustee written notice of the occurrence of
the event as soon as practicable after the occurrence thereof describing in
reasonable detail the particulars of such occurrence, including an
estimation of its expected duration and probable impact on the performance
of the Manager's obligations hereunder, and thereafter continues to furnish
timely regular reports with respect thereto during the continuation of such
event (provided that the failure of the Manager to give such notice on a
timely basis shall not impose any additional obligation on the Manager
except to the extent that such failure has a material adverse effect on the
Company);
(ii) the suspension of performance hereunder shall be of no
greater scope and of no longer duration than is reasonably required by such
event;
(iii) no liability of the Manager which arose before the
occurrence of the event which caused the suspension of performance shall be
excused as a result of the occurrence;
(iv) the Manager shall exercise its reasonable efforts to
mitigate or limit damages to the Company, the Owner Trustees, the
Participants and the Indenture Trustees and shall use its reasonable
efforts to remove or terminate, as soon as practicable, the event causing
such suspension;
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(v) the Manager shall use its reasonable efforts to continue
to perform its obligations hereunder; and
(vi) when the Manager is able to resume the performance of its
obligations hereunder, the Manager shall give written notice to that effect
to the Company, the Owner Trustees, the Participants and the Indenture
Trustee and shall promptly resume performance hereunder.
(e) Each Car Service Contract entered into after the date hereof (i)
will be with a Customer with which the Manager would enter into a lease
arrangement with respect to other railcars owned, leased or managed by the
Manager, (ii) will not contain terms and conditions materially different from
those contained in then current similar arrangements utilized by the Manager
with respect to other railcars of similar ages and types owned, leased or
managed by the Manager unless, in the reasonable judgment of the Manager, such
difference is deemed necessary to market the Unit and still not otherwise
adversely affect the market value or utility of such Unit and (iii) will meet
the standards therefor set forth in the Operative Agreements relating to any
Unit, including, without limitation, that such Car Service Contract (A) in all
events be subject and subordinate to the related Lease and the rights and
interests of the related Lessor and its respective successors and assigns
thereunder, (B) contain a consent of the Customer to the Company's collateral
assignment of such Customer Service Contract and confirm such subordination and
consent to assignment by provisions substantially in the form currently
contained in the Company's standard car service contract (including any
applicable riders) delivered to the related Lessor and Indenture Trustee prior
to the date hereof, or otherwise as satisfactory to the related Lessor and
Indenture Trustee, (C) prohibit the Customer from exercising any right of setoff
against the Company, (D) not include any term or provision which is inconsistent
with the terms and conditions of the related Lease (other than the Basic Term of
the related Lease) or which could reasonably be expected to result in material
adverse consequences to the related Lessor, any related Participant or the
related Indenture Trustee, (E) not extend more than three (3) years after the
expiration of the Basic Term of the related Lease and (F) not relieve the
Company of any liability or obligation hereunder, which shall be and remain
those of a principal and not a surety.
(f) The Manager will not enter into any Car Service Contract which
would result in a Unit subject thereto being used in a manner inconsistent with
the provisions of any Lease.
(g) The Manager shall not create or permit to exist any Lien on any
Unit other than a Permitted Lien.
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(h) The Manager shall, in connection with the performance of the
services, comply in all material respects with all laws, rules and regulations
applicable to the Manager, the Company, the Equipment, the Leases and the Car
Service Contracts.
(i) Without limiting the generality of the foregoing and subject to
the requirements of the related Operative Agreements, the Manager shall perform
its obligations in accordance with the Services Standard and deal with the Units
in a manner such that the Units (considered as a single fleet) shall have
characteristics (including, without limitation, rental rates, Car Service
Contract terms, Car Service Contract expiration dates, Customers, credit
quality, location, Customer indemnities, dedication to foreign use, utilization
and purpose of use) substantially equivalent to those with respect to the cars
of a similar type and age in the Manager's Fleet. In this regard, the Manager
understands that, pursuant to Sections 8.2 and 8.3 of the Leases, there are
geographic restrictions on the use of the Units or the sublease to Persons
outside the continental United States. The Company acknowledges that, subject to
compliance with the Services Standard and Section 3.2, the Manager is entitled
to make decisions with respect to the Units of Equipment to reflect Customer
preferences and any other factors it considers with respect to railcars in the
Manager's Fleet (other than the Units) of a similar type, condition and
location.
(j) The duties and obligations of the Manager will be limited to
those expressly set forth in this Agreement, and the Manager will not have any
fiduciary or other implied duties or obligations, except as provided herein.
Section 3.2. Conflicts of Interest. Section 3.4 notwithstanding, the
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Manager shall perform the services under this Agreement on a fair and equitable
basis. Without prejudice to the generality of the foregoing, to the extent that
any particular Units or other particular railcars in the Manager's Fleet are
substantially similar in terms of objectively identifiable characteristics that
are relevant for purposes of the particular services to be performed, the
Manager will not discriminate between the Units and any such other railcars in
the Manager's Fleet on any basis which could reasonably be considered
discriminatory.
Section 3.3. Event of Loss; Replacement Units.
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(a) With respect to any Unit suffering an Event of Loss, and in
accordance with the performance or its services under Section 2.2(h), the
Manager is hereby granted full power and authority, subject to the terms and
conditions of the Leases, to sell (or dispose as scrap) on the Company's behalf
any such Unit which has been settled for under the rules of the AAR or settled
with Customers or any insurer and, upon direction of the Company, the Manager
will effect such sale or disposition in accordance with the Services Standard,
for no additional fee or other compensation. The Manager shall have no other
obligation to the Company in respect of such Unit following such sale or
disposition other than to transfer to the Company any amounts the Manager
receives in respect of such Event of Loss from such sources. The
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Company hereby agrees to execute all necessary powers of attorney and other
documents evidencing such power and authority.
(b) With respect to any Unit suffering an Event of Loss as to which
the Company or the Manager on behalf of the Company has elected to replace such
Unit with a Replacement Unit under any Lease, in addition to the matters set
forth in Section 3.3(a) with respect to such Unit, the Manager is hereby granted
full power and authority on the Company's behalf to obtain such Replacement
Unit, to execute and deliver the ▇▇▇▇ of Sale therefor on behalf of the Company
and to cause it to be conveyed to the applicable Lessor, all in accordance with,
and subject to the terms and conditions of, the applicable Lease. Upon
direction of the Company, the Manager will arrange for the acquisition of such a
Replacement Unit which meets the requirements of the applicable Lease and will
take or cause to be taken all such other actions as shall be required to effect
such replacement pursuant to the applicable Lease.
Section 3.4. Similar Services. It is expressly understood and agreed
----------------
that nothing herein shall be construed to prevent, prohibit or restrict the
Manager or any Affiliate of the Manager from providing the same or similar
services as those provided under this Agreement to any other Person or from
manufacturing, selling, owning, leasing, managing or otherwise dealing in other
railcars; provided that no such activity shall in any way diminish the
obligations of the Manager hereunder, including, without limitation, its
obligation contained in Section 3.2.
Section 3.5. Custody of Documents. The Manager agrees to hold all
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original documents of the Company that relate to the Equipment (other than
those, if any, which are held by the Indenture Trustees under the related
Indentures) in the possession of the Manager in safe custody and according to
the Services Standard.
Section 3.6. No Greater Standards. IT IS OF THE ESSENCE OF THIS
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AGREEMENT THAT THE MANAGER SHALL PERFORM ITS SERVICES AND ACTIVITIES HEREUNDER
IN ACCORDANCE WITH THE SERVICES STANDARD BUT THAT, UNLESS OTHERWISE PROVIDED
HEREIN, THE MANAGER SHALL NOT HAVE ANY OBLIGATION TO PERFORM ANY SUCH SERVICES
OR ACTIVITIES AT A STANDARD OF PERFORMANCE GREATER THAN THE SERVICES STANDARD.
SECTION 4.
MODIFICATIONS
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Section 4.1. Required Modifications. in the event the AAR, the United
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States Department of Transportation or any other United States or state
governmental agency or any other applicable law requires as a condition of
continued use or operation of any such Unit that such Unit be altered or
modified (a "Required Modification"), the Manager agrees to make or have made
such Required Modification in accordance with the applicable Lease on behalf of
the Company in a timely manner; provided, however, that the Manager may, on
behalf of the
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Company, 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 the Company or the applicable Lessor or Indenture Trustee
in the Equipment or under the applicable Lease or other related Operative
Agreement or otherwise expose the Company or such Lessor or such Indenture
Trustee or any Participant to criminal or material financial sanctions or
relieve the Company of the obligation to return the Equipment in compliance with
the provisions of such Lease or other related Operative Agreement (or the
obligations of the Manager hereunder in respect of such return). Promptly after
the Manager becomes aware of the requirement to make a Required Modification,
the Manager shall notify the Company, the Owner Trustees and the Indenture
Trustees thereof, which notice shall also set forth the time period for the
making of such Required Modification and the Manager's reasonable estimate of
the cost thereof. If the Manager believes that any Required Modification to a
Unit would be economically impractical, it shall so advise the Company and, if
directed by the Company, in lieu of making the Required Modification as provided
above, the Manager shall provide written notice to the applicable Lessor that
such Required Modification is economically impractical, and shall treat such
Unit as if an Event of Loss had occurred as of the date of such written notice
with respect to such Unit. In such event the provisions of the related Lease and
this Agreement with respect to Events of Loss shall apply with respect to such
Unit. In reaching any decision as to whether a Required Modification is
economically impractical, the Manager shall assess the cost and timing of the
Required Modification, the anticipated revenues and other sources of funds which
would be available to the Company to fund such costs, the requirements of the
applicable Leases and such other factors as the Manager considers necessary or
appropriate and shall provide a report to the Company, with copies to the Owner
Trustees and the Participants regarding such assessment. The Manager shall not
discriminate against any Unit in making a determination of economic
impracticality as compared with other equipment of the same type and age as such
Unit in the Manager's Fleet and shall so certify in the report referred to in
the immediately preceding sentence.
Section 4.2. Optional Modifications. The Manager is authorized at any
----------------------
time to modify, alter or improve any Unit in a manner which is not a Required
Modification, including any Unit not then under a Car Service Contract
("Optional Modification"), if the Manager concludes in good faith that the
proposed Optional Modification is likely to enhance the marketability of the
Equipment (or such Optional Modification is requested by a Customer), that such
Optional Modification meets the standards set forth in Section 9.2 of the
applicable Lease, and that, following such Optional Modification and taking into
account any costs incurred in connection therewith, it is reasonable to expect
that the Projected Coverage Ratios throughout the remaining Lease term would not
be adversely affected by such Optional Modification.
11
SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
---------------------------------------------
Section 5.1. Compensation of the Manager. As compensation to the
---------------------------
Manager for the performance of its services hereunder, the Company shall pay to
the Manager a management fee (the "Management Fee") consisting of a Base
Component, an Incentive Component and a charge for Reimbursable Services.
Subject to the terms and conditions of the Intercreditor Agreement, the
Management Fee shall be payable to the Manager from the Collection Account, to
the extent monies are available for the payment thereof in accordance with
Section 3.4 of the Intercreditor Agreement, as follows:
(a) on each Monthly Transfer Date, an amount equal to the Base
Component for the calendar month preceding the month in which such payment is
due;
(b) on each Monthly Transfer Date, the amount of any invoice for
Reimbursable Services submitted by the Manager to the Company on or prior to the
last day of the calendar month immediately preceding the month in which such
payment is due; and
(c) on each Monthly Transfer Date, an amount equal to the
Incentive Component measured as of the last day of the calendar month preceding
the date on which such payment is due.
Section 5.2. Base Component.
--------------
(a) The base component of the Management Fee (the "Base
Component") for each calendar month (or any portion thereof) shall be the
product of (i) the Unit Monthly Fee, multiplied by (ii) the number of Units
managed under this Agreement, each as determined on the first day of such month.
The Manager shall, not less than three Business Days before the relevant Monthly
Transfer Date referred to in Section 5.1(a), submit an invoice to the Company
(with copies to the Collateral Agent and the Owner Participant) for the Base
Component of the Management Fee for such month.
(b) The monthly fee under this Agreement (the "Unit Monthly
Fee") shall initially be $[20] per Unit.
(c) The Unit Monthly Fee shall be adjusted annually as follows:
(i) The Unit Monthly Fee shall be automatically adjusted as
of each April 30 during the term of this Agreement, commencing April 30,
1999, for inflation by multiplying the Unit Monthly Fee in effect on such
April 30 by the sum of 1.00 plus the Inflation Factor with respect to the
immediately preceding calendar year; and
12
(ii) In addition, the Unit Monthly Fee may be adjusted once
annually by agreement of the Company and the Manager to reflect changes in
costs (excluding those increases contemplated by clause (i) above), as
certified by the Manager to the Company, the Lessors and the Indenture
Trustees, which arise out of material increases of its duties under the Car
Service Contracts due to either a change in law or a change in the nature
or type of services required in order to be competitive in the full
service railcar leasing industry market place. Any such adjustment
proposed by the Manager shall be accompanied by all relevant information
relating to the proposed adjustment.
(d) The Base Component, as adjusted from time to time under
Section 5.2(c), is intended to include all direct costs and expenses relating to
the performance of the Manager's services, duties and obligations under this
Agreement but shall not include the costs and expenses of the Manager which are
incurred in connection with the Reimbursable Services.
Section 5.3. Incentive Component. The incentive component of the
-------------------
Management Fee (the "Incentive Component") payable by the Company to the Manager
shall be (i) $5 per Unit per month during the period from the date hereof
through December 31, 1999, and (ii) the Current Incentive Amount (as hereinafter
defined) per Unit per month from and after January 1, 2000. The "Current
Incentive Amount" for purposes hereof, shall be an amount determined for each
calendar month, commencing January 1, 2000, which is equal to the product of (x)
the Incentive Factor (as hereinafter defined), and (y) the gross Sublease
revenues of the Company for the preceding calendar month divided by (z) the
number of Units managed under this Agreement. The "Incentive Factor," for
purposes hereof, shall mean a fraction the numerator which is the total amount
of Incentive Component payable for the period from the date hereof through
December 31, 1999 (the "Measuring Period") pursuant to clause (i) above, and the
denominator of which is the total gross Sublease revenues of the Company for the
Measuring Period. Gross revenues shall be determined from the Company's books
and records in accordance with generally accepted accounting principles.
Section 5.4. Reimbursable Services. The Manager shall be separately
---------------------
compensated for the following services rendered on behalf of the Company under
this Agreement (collectively, the "Reimbursable Services") in accordance with
the priorities established therefor in the Intercreditor Agreement:
(a) The Manager shall be reimbursed by the Company for
maintenance and repair services under Section 2.2(b), Required Modifications and
Optional Modifications in an amount equal to (i) the actual cost of such repair
or Modification if performed at a facility not owned or controlled by the
Manager or any Affiliate of the Manager or (ii) the Manager's Cost if performed
at a facility owned or controlled by the Manager or an Affiliate of the Manager.
"Manager's Cost" shall mean the sum of (A) the Manager's actual cost of material
and labor, and (B) applied overhead of the Manager (based upon the aggregate
number of direct labor hours budgeted for the year in which such maintenance and
repair is performed).
13
(b) The Manager shall be reimbursed by the Company for the
amount of all Taxes (other than Income Taxes) paid by the Manager with respect
to the Equipment determined in accordance with Section 2.2(c). It is understood
and agreed that State taxes imposed upon or against the Equipment may be
determined, in the case of the Initial Manager, on a (i) initially pro rata
basis for the Total Manager's Fleet resulting in an average tax cost per railcar
(including the Units) and (ii) then multiplying such average tax cost per Unit
by the tax adjustment factor shown on Schedule 5.4(b) for the applicable year of
the term of the Leases.
(c) The Manager shall be reimbursed by the Company for
demurrage, switching, storage, and all other similar and dissimilar services in
respect of Units or the movement thereof, including, without limitation, those
rendered in connection with the return provisions in any Lease referenced in
Section 2.2(p), in an amount equal to (i) the actual cost of such services if
performed by a third party on behalf of the Manager, or (ii) to the extent such
services shall be performed by the Manager or shall occur on tracks owned or
leased by the Manager, the Manager's Cost of such services.
(d) The Manager shall be reimbursed by the Company for the
amount of any fines, penalties, judgments or similar charges paid by the Manager
to governmental authorities arising out of or in connection with the use and
operation of the Units; provided, however, that such amounts for which the
Company is responsible shall not include any such fines, penalties, judgments or
similar charges resulting from the negligence or willful misconduct of the
Manager.
SECTION 6.
PAYMENTS
--------
Section 6.1. Receipt of Payments. The Manager shall direct that all
-------------------
Sublease Payments from Customers and all other amounts relating to Equipment
which are invoiced by the Manager on behalf of the Company as contemplated by
this Agreement or received by the Manager be deposited either in the lockbox
pursuant to Section 6.2 or, in connection with mileage credits, the lockbox
referred to in Section 6.5, in each case pending transfer to the Collection
Account maintained under the Intercreditor Agreement as required by Section
6.2(d).
Section 6.2. Lockboxes; Payments.
-------------------
(a) The Initial Manager will cause its existing lockbox (the
"Lockbox") for payments under its car service contracts (which, prior to their
assignment to the Company, included the Car Service Contracts for the Units) to
be retitled by the lockbox bank (the "Lockbox Bank") in the name of "General
American Transportation Corporation, as Trustee for itself, individually, and
General American Railcar Corporation II" and such title may include other
Persons for whom the Manager manages railcars ("Additional Lockbox Parties").
The
14
Manager shall not create or permit to exist any lien, charge or encumbrance
on the Lockbox. The Lockbox Agreement with the Lockbox Bank shall be
substantially in the form of Schedule 6.2 to this Agreement.
(b) The Manager will ▇▇▇▇ each Customer monthly, as agent
for the Company, which may be accomplished pursuant to a single invoice
(including electronic invoicing with certain Customers) which separately
designates amounts owing (i) to GATC (in its individual capacity and not as
Manager for the Company or as manager for any other entity) under leases
maintained by GATC with such Customer (the "GATC Leases"), (ii) General American
Railcar Corporation, and (iii) the amount of rent (or other amounts) owed with
respect to railcars (including the Units) by the Customer for which GATC is
acting as manager or agent with respect to such railcars (the "GATC Managed
Leases"). Each invoice will provide a detailed listing of the railcars, and the
applicable amounts due and owing with respect to each railcar, to which the
invoice relates (including the Units). The Units will be sufficiently identified
in the detail of the invoice, by serial or other identification number, to allow
the parties to specifically identify the amounts which are due to the Company.
All invoices will instruct the obligor thereunder to make payment of such
invoice directly into the Lockbox.
(c) The Manager shall arrange with the Lockbox Bank that by 1:00
p.m. on each Business Day (or as soon thereafter as practicable), the Lockbox
Bank will make available to the Manager a computer file or customer checks and
related documentation containing information with respect to all payments
received in the Lockboxes from 12:00 noon of the previous Business Day through
12:00 noon of such Business Day. Using the payment information provided, the
Manager will segregate the individual funds of GATC, General American Railcar
Corporation, the Company and any Additional Lockbox Parties.
(d) If the payment information made available by the Lockbox
Bank to the Manager under Section 6.1(c) is insufficient to determine the proper
allocation of a payment (or any portion thereof) between GATC, the Company and
any Additional Lockbox Parties, the Manager will use such other information as
is available and conduct such procedures as are appropriate to determine the
proper allocation of such payment, including a review of original Customer and
invoice information and contacting Customers. By the close of business on the
second Business Day after receipt of the payment information from the Lockbox
Bank, the Manager will cause to be transferred to the Collection Account
maintained under the Intercreditor Agreement, all funds identified as belonging
to the Company.
(e) In order not to delay the transfer of funds under Section
6.1(d), the Manager will also cause to be transferred to the Company by the
close of business on the second Business Day after receipt of the payment
information from the Lockbox Bank, on a pro rata basis between the Company, GATC
and any Additional Lockbox Parties, any remaining payments reflected in such
information from a Customer or Customers which have not yet been identified as
belonging to the Company or GATC. Such pro rata allocation will be based on the
15
original amounts billed to each such Customer with respect to the Equipment and
its railcars in the Manager's Fleet on an invoice-by-invoice basis. To the
extent that after continued investigation and discussions with Customers, if
necessary, it is determined that the allocation of such remaining amounts was
not actually pro rata, the Manager will notify the Company, GATC or such
Additional Lockbox Parties, as the case may be, of its obligation to pay, and
upon receipt of such notice the Company, GATC or such Additional Lockbox
Parties, as the case may be, will pay the other the amount necessary to reflect
the actual allocations; provided, however, that no such payments by the Company
shall be made from funds which are held pursuant to the Intercreditor Agreement
(other than amounts held in the Excess Cash Account).
(f) If notwithstanding the payment instructions given by the
Manager in its invoices under Section 6.1(b), Sublease Payments or other amounts
in respect of the Equipment are received directly by the Manager, the Manager
agrees to hold any such Sublease Payments or other amounts in trust and
forthwith, upon receipt, to transmit and deliver to the Lockbox Bank (for
transfer pursuant to Section 6.1 to the Collection Account maintained under the
Intercreditor Agreement), in the form received, all cash, checks and other
instruments or writings for the payment of money so received by the Manager.
Section 6.3. Successor Lockbox Trustee. If the Initial Manager is
-------------------------
terminated as the Manager, the Lockbox will be retitled in the name of a third
party as trustee (the "Successor Lockbox Trustee") for each of the Company, GATC
and any Additional Lockbox Parties, which Successor Lockbox Trustee shall be
either the commercial bank previously serving as the Lockbox Bank or a new
institution acceptable to the Successor Manager, GATC, the Owner Trustees, the
Owner Participants and the Collateral Agent. Following any such termination of
the Initial Manager, it is contemplated that the Successor Manager, the Company
and GATC will each use commercially reasonable efforts to implement a process on
a timely basis whereby mutual customers of GATC and the Company will be invoiced
separately. As to the Company ▇▇▇▇▇▇▇▇ following the appointment of a Successor
Manager, the Successor Manager shall re-caption the invoices to refer to the
Successor Manager, as agent for the Company. Effective as of the date of
termination of the Initial Manager, the Successor Manager will submit reports,
as needed, to the Successor Lockbox Trustee indicating the amount billed to
Customers in respect of the Units, and it is contemplated that GATC will
separately submit such reports to the Successor Lockbox Trustee indicating the
amount billed to its customers, or for GATC Managed Leases, for railcars in the
Manager's Fleet. The Successor Lockbox Trustee will first allocate cash received
in the Lockbox to the Company and any Additional Lockbox Parties in an amount
equal to the Company's and any Additional Lockbox Parties, total reported
▇▇▇▇▇▇▇▇ for the applicable period and will allocate the balance of the cash
received to GATC. In instances where a customer of more than one of GATC, the
Company and any Additional Lockbox Parties pays with a single check that is not
in the full amount owed to all such parties, unless it is manifestly clear that
the deduction is allocable to the Company, or an Additional Lockbox Party, the
Successor Lockbox Trustee will be instructed to assume that the deduction is
allocable to GATC and to the extent that such deduction exceeds the amount due
to GATC, any such excess
16
shall be allocated pro-rata (based upon reported ▇▇▇▇▇▇▇▇) among the Company
and any Additional Lockbox Parties. Under the arrangement with the Successor
Lockbox Trustee, GATC will have the right to investigate the deduction taken by
the Customer and, if it is able to demonstrate that the deduction should have
been allocated to the Company, the Company will promptly refund such amount to
GATC; provided however, that no such refund shall be made from funds which are
held pursuant to the Intercreditor Agreement (other than amounts held in Excess
Cash Account).
Section 6.4. Mileage Credits. General American Marks Company, a
---------------
Delaware business trust (the "Marks Company") of which GATC, General American
Railcar Corporation and the Company are presently the owners of the entire
beneficial interest, owns the rights to all the currently used GATC railcar
marks and has made appropriate notification to the AAR of the transfer of such
GATC railcar marks from GATC to the Marks Company. A list of such currently used
GATC railcar marks is attached as Schedule 6.4. As a result of such ownership,
all mileage credit payments for the Units will be paid by the railroads under
their applicable tariffs to the Marks Company by direct deposit in a lockbox in
the name of the Marks Company as trustee for the beneficiaries of the mileage
credits (including the Company), as their interests may appear. If
notwithstanding the ownership of the marks by the Marks Company, mileage credits
or other amounts from the railroads in respect of the Equipment are received
directly by the Manager, the Manager agrees to hold any such amounts in trust
and forthwith, upon receipt, to transmit and deliver to the lockbox of the Marks
Company under the Servicing Agreement, in the form received, all cash, checks
and other instruments or writings for the payment of money so received by the
Manager. The Marks Company has engaged GATC pursuant to the Servicing Agreement
to service the mileage credit payments that are deposited in the lockbox. GATC,
as servicer for the Marks Company, will under the Servicing Agreement on a daily
basis allocate mileage credits or any other amounts received from the railroads
to GATC, the Company, General American Railcar Corporation and any other mileage
credit beneficiaries on a cumulative, historical experience basis. There will be
periodic settlements once GATC, as servicer, is able to determine the allocation
of mileage credit receipts based on then available current information. All
mileage credits received by the Company, or the Manager on behalf of the
Company, will be deposited in the Collection Account maintained pursuant to the
Intercreditor Agreement.
SECTION 7.
REPORTS AND INFORMATION
-----------------------
Section 7.1. Monthly Reports. The Manager will furnish to the Company,
---------------
the Owner Trustees, the Indenture Trustees, the Owner Participants, the
Collateral Agent and the Rating Agencies a report for each month substantially
in the form of Schedule 7.1 to this Agreement on or before the Monthly Report
Date following each calendar month.
17
Section 7.2. Annual Reports. The Manager will within one hundred
--------------
twenty (120) days following the end of each calendar year, furnish to the
Company, the Owner Trustees, the Indenture Trustees, the Owner Participants, the
Collateral Agent and the Rating Agencies an annual report in a form to be agreed
upon by the Company, the Manager, the Owner Participants and the Initial
Purchaser on or before [_______________], 199_.
Section 7.3. Equipment Reports. On or before April 30, 1999, and on or
-----------------
before each April 30 thereafter, the Manager will furnish to the Lessors, Owner
Participants and the Indenture Trustees an accurate statement, as of the
preceding December 31, (a) showing the amount, description and reporting marks
of the Units then leased under the Leases, 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 Equipment as any Lessor may reasonably request, (b) stating that, in the
case of all Equipment repainted during the period covered by such statement, the
markings required by the applicable Lease 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 the Manager's Fleet and the
Equipment, as a whole (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 Marks Company by railroads (provided, that the Manager shall
cooperate with the Owner Participants and Lessors and shall provide such
additional information on such matters as any Owner Participant or any Lessor
may reasonably request to enable such Owner Participant or such Lessor to pursue
or fulfill its respective tax audit and tax litigation rights and obligations),
and (d) stating that the Manager 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 Equipment in interchange.
Section 7.4. Compliance Information. So long as this Agreement is in
----------------------
effect, the Manager shall supply the Company, on a timely basis, with such
information respecting the Units and the Car Service Contracts as is reasonably
necessary to enable the Company to prepare and file any annual, quarterly and
other reports which the Company or any of its Affiliates may be required to file
pursuant to the federal securities laws.
Section 7.5. Company's Financial Reports. So long as this Agreement is
---------------------------
in effect, the Manager shall prepare and furnish to each Participant, the
Collateral Agent and any Indenture Trustee on behalf of the Company:
(a) as soon as available and in any event within [sixty (60)]
days after the end of each quarter, except the last quarter, of each fiscal
year, a balance sheet of the Company as at the end of such quarter, together
with the related statement of income and cash flows of the Company for the
period beginning on the first day of such fiscal year and ending on the last day
18
of such quarter, setting forth 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 (other than
any requirement of footnotes);
(b) as soon as available and in any event within [120] days
after the last day of each fiscal year, a copy of the Company's annual audited
report covering the operations of the Company, including a balance sheet, and a
related consolidated statement of income and retained earnings and consolidated
statement of cash flows of the Company for such fiscal year, setting forth 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 Company;
(c) as soon as available, one copy of each document, if any,
filed by the Company with the Securities and Exchange Commission or any
successor agency pursuant to Section 13(a), 13(c), 14 or 15(d) (or any successor
sections) of the Securities Exchange Act of 1934, as amended (or any successor
statute) (excluding such documents or portions thereof which are treated as
confidential and not available to the public, in accordance with applicable law,
by the Securities and Exchange Commission);
(d) within the time period prescribed in subparagraphs (a) and
(b) above, a certificate, signed by the Treasurer or principal financial officer
of the Manager, to the effect that the signer has reviewed the activities of the
Company during the immediately preceding fiscal quarter or year, as the case may
be, and that he is not aware of any default in compliance by the Company with
any of the covenants, terms and provisions of any Participation Agreement or any
Lease (except as specified), and if a Lease Default pursuant to Sections 14(a),
14(b), 14(g) or (h) of any Lease or Lease Event of Default shall exist,
specifying such Lease Default or Lease Event of Default and the nature and
status thereof;
(e) promptly, such additional information with respect to the
financial condition or business of the Company as any Participant may from time
to time reasonably request; and
(f) such other information and reports as may be required in the
Operative Agreements.
Section 7.6. Rights of Inspection. The Company shall be entitled to
--------------------
inspect from time to time upon reasonable notice during regular business hours
the books and records of the Manager relating to the business and operations of
the Company and the performance of the Manager's obligations hereunder. The
Collateral Agent, any Indenture Trustee and any Participant shall be entitled to
inspect those books and records of the Manager relating to the business and
operations of the Company and otherwise to the extent reasonably necessary to
19
verify the information provided by the Manager hereunder with respect to the
Manager's Fleet or any other information included in the reports provided
pursuant hereto, in each case to the extent permitted in any applicable
Participation Agreement or Lease.
SECTION 8.
TERM OF AGREEMENT; TERMINATION
------------------------------
Section 8.1. Term. The term of this Agreement shall commence on the
----
Closing Date and shall continue in effect until the date that no Operative
Agreement is continuing in effect (as they may be renewed or otherwise
extended); provided, however, that the Company shall have the option to extend
this Agreement for a period of up to 12 months after the latest date of
termination of any Lease.
Section 8.2. Termination of Manager for Default. The services of the
----------------------------------
Manager under this Agreement may be terminated as to all Equipment by the
Company upon giving notice to the Manager in any of the following events:
(a) If the Manager fails to perform any of its obligations under
this Agreement (other than a failure excused as described in Section 3.1(d))
which failure materially and adversely affects the rights of the Owner Trustees,
the Owner Participants or the holders of any Equipment Notes or any Certificate
holders (other than a default set forth in Section 8.2(b) below) and fails to
cure or remedy such failure to perform within 60 days following the receipt by
the Manager of a written notice of the alleged failure to perform; provided,
however, that if the cause of such failure to perform can be cured, but cannot
reasonably be cured within such 60 day period, the period for remedying such
failure to perform shall be extended by the time necessary to effect such cure
(but not in excess of 60 ADDITIONAL days);
(b) If the Manager fails to deliver to the Collateral Agent any
applicable payment required to be paid hereunder, which failure remains uncured
for FIVE (5) Business Days after the Manager become aware of such failure,
including as a result of written notice from any Owner Trustee, Owner
Participant or Collateral Agent, or if the Manager shall breach its covenants
under Sections 8.5 or 11.7;
(c) If the Manager shall 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 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 admit in writing its inability to pay its debts
generally as they come due, or make a general assignment for the benefit of
creditors, or take any corporate action to authorize any of the foregoing;
20
(d) If an involuntary case or other proceeding shall be commenced
against the Manager 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;
(e) If the Manager shall cease to be actively involved in the railcar
management or maintenance businesses;
(f) If there has been an Event of Default as described in Section
14(a) of any Lease and during such time as any Equipment Notes are outstanding
and unpaid which are related to such Lease, the related Owner Trustee or Owner
Participant has made a payment in accordance with Section 4.4(a) of the related
Indenture or the related Owner Trustee has exercised its right to purchase
Equipment Notes pursuant to Section 4.4(b) of the related Indenture; or
(g) Any representation or warranty made by the Manager in the
Participation Agreement or this Agreement 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 for a period of [30] days after receipt
by the Manager of written notice thereof from the Company or any Owner Trustee,
Owner Participant or Indenture Trustee; provided that, if such untruth or
incorrectness is capable of being remedied, no such untruth or incorrectness
shall constitute cause for termination hereunder for a period of 60 days after
receipt of such notice so long as the Manager 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 remedied only after all adverse
consequences thereof, if any, have been remedied.
Notwithstanding anything to the contrary contained in this Agreement,
any failure of the Manager to perform or observe any of its obligations under
this Agreement shall not constitute a default under this Section 8.2 if such
failure is caused solely by reason of an event referred to in the definition of
"Event of Loss" so long as the Manager is continuing to comply on the Company's
behalf with the terms of the applicable Lease with respect to such Event of
Loss.
Section 8.3. Remedies Upon Default. Upon the occurrence and during
---------------------
the continuation of a default by the Manager under Section 8.2, the Company, in
its sole discretion, may (i) terminate this Agreement by written notice to the
Manager, which termination shall be effective as of the date of such notice or
such later date, in the discretion of the Company, as such notice may specify,
(ii) proceed by appropriate court action to enforce performance of this
21
Agreement by the Manager and/or (iii) ▇▇▇ to recover actual direct damages
(including lost rents but not consequential damages) which result from a breach
hereof, and the Manager shall bear the Company's costs and expenses, including
reasonable attorney's fees, in securing such enforcement or damages. Each right,
power and remedy herein specifically given to the Company shall be in addition
to every other right, power and remedy herein specifically given or now or
hereafter existing at law or in equity, and each and every right, power and
remedy may be exercised from time to time and simultaneously and as often and in
such order as may be deemed expedient by the Company. All such rights, powers
and remedies shall be cumulative, and the exercise of one shall not be deemed a
waiver of the right to exercise any other or others. No delay or omission of the
Company in the exercise of any such right, power or remedy and no extension of
time for any payment due hereunder shall impair any such power or shall be
construed to be a waiver of any default or an acquiescence therein.
Section 8.4. Replacement of the Manager. The Manager may not resign
--------------------------
from its obligations and duties as the Manager, nor may the Manager be
terminated in whole or in part, unless a successor Manager ("Successor Manager")
has been appointed by the Company (or, in the case of a removal of the Manager
upon the occurrence of the event described under Section 8.2(f), the Owner
Trustees) with the approval of the Owner Trustees, the Owner Participants and
the Indenture Trustees, and such Successor Manager has accepted such appointment
and, the Company has received written confirmation from the Rating Agencies
that, after giving effect to the selection of the Successor Manager, no lowering
or withdrawal of the then current ratings on the Certificates will occur. Any
Successor Manager shall be a nationally known corporation incorporated in the
United States which is engaged in the railcar leasing or management business, be
capable of performing the services under the Agreement and have a net worth in
excess of $50,000,000. Any Successor Manager, however appointed, shall execute
and deliver to the Company and to the predecessor Manager an instrument
accepting such appointment, including customary confidentiality provisions in
favor of the predecessor Manager and the Company, and thereupon such Successor
Manager, without further act, shall become vested with all the rights, powers,
duties and trusts of the predecessor Manager hereunder with like effect as if
originally named the Manager herein.
Section 8.5. Merger or Sale. Any corporation into which the Manager
--------------
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Manager shall be a party, or any
corporation to which substantially all the business of the Manager may be
transferred, shall be the Manager under this Agreement without further act;
[provided such corporation meets the criteria applicable to a Successor Manager
set forth in Section 8.4].
22
SECTION 9.
INDEMNIFICATION
---------------
Section 9.1. Indemnification by Manager. The Manager agrees to
--------------------------
indemnify the Company, the Owner Trustees, the Owner Participants, the Indenture
Trustees, the Collateral Agent and their respective affiliates and the
directors, officers, employees and agents of each thereof (the "Indemnified
Parties") against, and agrees to hold each Indemnified Party harmless from, any
and all Claims incurred or suffered by such Indemnified Party relating to or
arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by the Manager in this Agreement or in the Participation Agreement
or in any certificate delivered pursuant thereto;
(b) any breach of or failure by the Manager to perform any
covenant or obligation of the Manager set out or contemplated in this Agreement;
(c) the presence, discharge, spillage, release or escape of
Hazardous Substances or damage to the environment or noncompliance with any
applicable law with respect to Hazardous Substances or the environment (i) at or
arising from a facility owned, operated or controlled by the Manager or any
Affiliate of the Manager or (ii) arising from any act, failure to act or
omission by the Manager or any Affiliate of the Manager; or
(d) the negligence, recklessness or wilful misconduct of the
Manager.
Section 9.2. Indemnification by Company. The Company agrees to indemnify
--------------------------
the Manager against, and agrees to hold it harmless from, any and all Claims
incurred or suffered by the Manager relating to or arising out of or in
connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by the Company in this Agreement;
(b) any breach of or failure by the Company to perform any
covenant or obligation of the Company set out or contemplated in this Agreement;
or
(c) the negligence, recklessness or willful misconduct of the
Company.
Section 9.3. Claims Excluded. There are excluded from the agreements to
---------------
indemnify under Section 9.1 and 9.2 with respect to any particular indemnified
Person, Claims to the extent resulting from the breach, failure to perform,
negligence, recklessness or willful misconduct of such indemnified Person.
23
Section 9.4. Third Party Claims. In the event any party to be indemnified
------------------
is entitled to indemnification hereunder based upon a Claim asserted by a third
party, the indemnifying party shall be given prompt notice thereof in reasonable
detail; provided, however, the failure to give prompt notice shall not relieve
the indemnifying party of any liability hereunder to the extent that the failure
to give such notice is not prejudicial. The indemnifying party shall have the
right (without prejudice to the right of any party to be indemnified to
participate at its expense through counsel of its own choosing) to defend such
Claim at its expense and through counsel of its own choosing which is reasonably
acceptable to the party to be indemnified if the indemnifying party gives notice
of its intention to do so not later than twenty (20) days following its receipt
of notice of such Claim from the party to be indemnified (or such shorter time
period as is required so that the interests of the party to be indemnified would
not be materially prejudiced as a result of its failure to have received such
notice from the indemnifying party); provided, however, the indemnifying party
shall not be entitled to control and assume responsibility for the defense of
any Claim if in the good faith opinion of the party to be indemnified, there
exists an actual or potential conflict of interest such that it is advisable for
such party to retain control of such proceeding, in which circumstances the
party to be indemnified shall be entitled to control and assume responsibility
for the defense of such Claim at the expense of the indemnifying party. The
indemnifying party shall not have the power to bind the indemnified party,
without the indemnified party's prior written consent, which shall not be
unreasonably withheld, with respect to any settlement pursuant to which anything
is required other than the payment of money and then only to the extent that the
indemnifying party shall make full payment of such money. If the indemnifying
party does not so choose to defend any such claim asserted by a third party for
which the party to be indemnified would be entitled to indemnification
hereunder, then the party to be indemnified shall be entitled to recover from
the indemnifying party, on a monthly basis, all of its reasonable attorneys'
fees and other costs and expenses of litigation of any nature whatsoever
incurred in the defense of such claim. If the indemnifying party assumes the
defense of any such claim, the indemnifying party will hold the party to be
indemnified harmless from and against any and all damages arising out of any
settlement approved by such indemnifying party or any judgment in connection
with such claim or litigation. Notwithstanding the assumption of the defense of
any claim by an indemnifying party pursuant to this paragraph, the party to be
indemnified shall have the right to approve the terms of any settlement of a
claim (which approval shall not be unreasonably withheld or delayed).
Notwithstanding anything to the contrary contained herein, an indemnifying party
will not be liable for any settlement of a claim effected without its prior
written consent.
Section 9.5 Cooperation. The indemnifying party and the indemnified party
-----------
shall cooperate in furnishing evidence and testimony and in any other manner
which the other may reasonably request, and shall in all other respects have an
obligation of good faith dealing, one to the other, so as not to unreasonably
expose the other to an undue risk of loss. The party to be indemnified shall be
entitled to reimbursement for out-of-pocket expenses reasonably incurred by it
in connection with such cooperation. Except for fees and expenses for which
indemnification is provided pursuant to Sections 9.1 or 9.2 hereof, as the case
may be, and as
24
provided in the preceding sentence, each party shall bear its own fees and
expenses incurred pursuant to this Section 9.5.
Section 9.6. Survival. The indemnity obligations of the parties pursuant
--------
to this Section 9 (including, without limitation, obligations to indemnify
against third party claims made after the expiration or termination of this
Agreement) shall survive the expiration or termination hereof.
SECTION 10.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 10.1. Representations of Company. The Company hereby represents
--------------------------
and warrants to the Manager as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. It has all necessary
corporate power and authority and has taken all corporate action necessary to
enter into this Agreement, to consummate the transactions contemplated hereby
and to perform its obligations hereunder.
(b) This Agreement has been duly executed and delivered by it
and is a legal, valid and binding obligation of it, enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
the effect of bankruptcy, insolvency, reorganization, moratorium, marshaling or
other similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors generally and (ii) general principles of
equity, whether such enforceability is considered in a proceeding in equity or
at law.
(c) Neither the execution and delivery by it of this Agreement,
the performance by it of its obligations hereunder nor the consummation of the
transactions contemplated hereby will (i) with or without the giving of notice
or the passage of time, or both, violate, or be in conflict with, or permit the
termination of, or constitute a default under, or cause the acceleration of the
maturity of, any agreement, debt or obligations of any nature of it or to which
it is a party or bound; (ii) require the consent of any party to any agreement,
instrument or commitment to which it is a party or to which it or its properties
is bound; (iii) violate any statute or law or any judgment, decree, order,
regulation or rule of any court, regulatory authority or other governmental
authority to which it is subject; or (iv) result in the creation of any Lien on
its assets, which in the case of (i), (ii), (iii), or (iv) would cause the
transactions contemplated by this Agreement not to be consummated or which would
have a material adverse effect on the business, financial condition or
operations of the other party to this Agreement.
(d) No consent, approval or authorization of, or declaration,
filing or registration with, any regulatory authority or other governmental
agency or authority is required to be made or obtained by it in connection with
the execution, delivery and performance of this
25
Agreement, the performance by it of its obligations hereunder or the
consummation of the transactions contemplated hereby, the failure of which to
have been made or obtained would have a material adverse effect on the ability
of such party to perform its obligations hereunder, on the right, title or
interest of the Company in the Equipment or on the business, financial
condition, or operations of any party to this Agreement.
Section 10.2. Representations of Manager. The Manager hereby represents
--------------------------
and warrants to the Company as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. It has all necessary
corporate power and authority and has taken all corporate action necessary to
enter into this Agreement and the other Manager Agreements, to consummate the
transactions contemplated hereby and thereby, and to perform its obligations
hereunder and thereunder.
(b) This Agreement and the other Manager Agreements have been
duly executed and delivered by it and are legal, valid and binding obligations
of it, enforceable against it in accordance with their respective terms, except
as such enforceability may be limited by (i) the effect of bankruptcy,
insolvency, reorganization, moratorium, marshaling or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors generally and (ii) general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law.
(c) Neither the execution and delivery by it of this Agreement
or the other Manager Agreements, the performance by it of its obligations
hereunder or thereunder nor the consummation of the transactions contemplated
hereby or thereby will (i) with or without the giving of notice or the passage
of time, or both, violate, or be in conflict with, or permit the termination of,
or constitute a default under, or cause the acceleration of the maturity of, any
agreement, debt or obligations of any nature of it or to which it is a party or
bound; (ii) require the consent of any party to any agreement, instrument or
commitment to which it is a party or to which it or its properties is bound;
(iii) violate any statute or law or any judgment, decree, order, regulation or
rule of any court, regulatory authority or other governmental authority to which
it is subject; or (iv) result in the creation of any Lien on its assets, which
in the case of (i), (ii), (iii), or (iv) would cause the transactions
contemplated by this Agreement or the other Manager Agreements not to be
consummated or which would have a material adverse effect on the business,
financial condition or operations of the other party to this Agreement or the
other Manager Agreements.
(d) No consent, approval or authorization of, or declaration,
filing or registration with, any regulatory authority or other governmental
agency or authority is required to be made or obtained by it in connection with
the execution, delivery and performance of this Agreement or the other Manager
Agreements, the performance by it of its obligations hereunder
26
or thereunder or the consummation of the transactions contemplated hereby or
thereby, the failure of which to have been made or obtained would have a
material adverse effect on the ability of such party to perform its obligations
hereunder or thereunder, on the right, title or interest of the Company in the
Equipment or on the business, financial condition, or operations of the other
party to this Agreement or the other Manager Agreements.
SECTION 11.
MISCELLANEOUS
-------------
Section 11.1. Table of Contents and Headings. The table of contents and
------------------------------
the descriptive headings of the several subsections and sections of this
Agreement are inserted for convenience only and do not constitute part of this
Agreement.
Section 11.2. The Manager as Independent Contractor. Except to the extent
-------------------------------------
specifically set forth in this Agreement, all of the functions, duties and
services performed by the Manager under this Agreement shall be performed by the
Manager as an independent contractor and not as Agent of the Company.
Section 11.3. Relations Among Parties. The parties intend, in entering
-----------------------
into this Agreement, that the Manager is an independent contractor and that no
partnership relationship exists among the Manager and the Company; that the
Manager does not have the authority to act as Agent of, or partner or co-
venturer with, the Company except to the extent specifically provided herein;
that the Manager, in its capacity as such, does not, except as specifically set
forth in this Agreement, have the authority to bind the Company; that the
Company, as such, does not have liability for the acts of the Manager; and that
any fees or other compensation payable by the Company to the Manager are
ordinary and necessary business expenses of the Company.
Section 11.4. Governing Law. This Agreement shall be in all respects
-------------
governed by and construed in accordance with the laws of the State of New York,
including all matters of construction, validity and performance, without regard
to principles of conflicts of laws.
Section 11.5. Notices. Any notice, certificate, document, acceptance or
-------
report required or permitted to be given by either party hereto to the other
party shall be in writing and shall be deemed delivered when deposited in the
United States mails, first-class postage prepaid, or when delivered personally,
by facsimile transmission or reputable air courier, addressed as follows:
If to the Company: General American Railcar Corporation II
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
27
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Manager: General American Transportation Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Secretary
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
or addressed to either party at such other address as such party shall hereafter
furnish to the other party by written notice as provided above.
Section 11.6. Entire Agreement; Amendment; Waivers. This Agreement
------------------------------------
constitutes, with respect to the subject matter hereof, the entire agreement of
the parties and supersedes and cancels all prior agreements, discussions,
negotiations, memoranda or correspondence with respect to such subject matter,
and may not be amended orally, but only by an agreement in writing signed by the
party against which enforcement of such amendment is sought. The failure of
either party hereto at any time or times to require performance of any provision
hereof shall in no manner affect its right at a later time to enforce the same.
No waiver by either party hereto of the breach of any term or agreement
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any breach, or a waiver of the breach of any other term or agreement
contained herein.
Section 11.7. Assignment.
----------
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except as otherwise provided in Section 8.4, the Manager will not, without the
prior written consent of the Lessors and the Indenture Trustees (which consent
shall not be unreasonably withheld), assign any of its rights and/or obligations
hereunder, except as provided herein and in the Participation Agreements;
provided that the Manager may assign any or all of its rights and/or obligations
hereunder without any such consent to (i) any Person which shall consolidate
with the Manager, which the Manager shall merge into or to which the Manager
shall convey, transfer or lease all or substantially all of its assets, and
which meets the requirements of Section 8.4 or (ii) any corporation which is an
Affiliate of the Manager; provided further that in the case of an assignment to
an Affiliate, (a) the Manager shall have received an instrument or instruments
reasonably satisfactory to it, Owner Trustees and the Indenture Trustees under
which such Affiliate assumes the obligations of the Manager hereunder, and (b)
the Manager irrevocably and unconditionally guarantees, pursuant to an Agreement
in form and substance reasonably satisfactory to the Lessors, Owner Participants
and the Indenture Trustees, such assignee's performance of all of such
obligations as primary obligor and not as a surety.
28
(b) The Manager and the Company hereby confirm that concurrently
with the execution and delivery of this Agreement, (i) the Company has executed
and delivered the Intercreditor Agreement which, among other things, assigns as
collateral security and grants a security interest in favor of the Collateral
Agent in the rights of the Company hereunder and (ii) each Owner Trustee has
executed and delivered to its related Indenture Trustee an Indenture, which
assigns as collateral security and grants a security interest in favor of such
Indenture Trustee in the rights of such Owner Trustee under the Intercreditor
Agreement, all as more explicitly set forth in the Intercreditor Agreement and
the respective Indentures. The Company agrees that it shall not otherwise assign
or convey its right, title and interest in and to this Agreement except as
expressly permitted by and subject to the provisions of the Participation
Agreement and except that the Company shall have the right to assign this
Agreement to an Owner Trustee in connection with a return of Equipment as
provided in the applicable Lease.
Section 11.8. Further Assurances. If at any time the parties hereto shall
------------------
consider or be advised that any further assignments, conveyances or assurances
are necessary or desirable to carry out the provisions hereof and the
transactions contemplated hereby, the parties hereto shall execute and deliver
any and all documents, instruments, contracts, leases, assignments and
assurances and do all things necessary or proper to carry out fully the
provisions hereof.
Section 11.9. Third Party Beneficiary. The Company and the Manager hereby
-----------------------
agree that the Collateral Agent, each Owner Trustee, and each Indemnified Party
referred to in Section 9.1 shall each be a third party beneficiary of this
Agreement.
Section 11.10. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.11. Severability. Any provision of this Agreement that may be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof so long as the economic or legal
substance of the transactions contemplated thereby is not affected in any manner
adverse to any party. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereby waive any
provision of law that renders any provision of this Agreement prohibited or
unenforceable in any respect. In addition, in the event of any such prohibition
or unenforceability, the parties agree that it is their intention and agreement
that any such provision which is held or determined to be prohibited or
unenforceable, as written, in any jurisdiction shall nonetheless be in force and
binding to the fullest extent permitted by the law of such jurisdiction as
though such provision had been written in such a manner and to such an extent as
to be enforceable therein under the circumstances.
29
Section 11.12. No Petition in Bankruptcy. The Manager hereby agrees
-------------------------
that, prior to the date which is one year and one day after the later of payment
in full of all outstanding Equipment Notes and Pass Through Certificates and the
expiration of the term of this Agreement, the Manager will not institute
against, or join any other Person in instituting against, the Company 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.
30
IN WITNESS WHEREOF, the Company and the Manager have caused this Agreement
to be duly executed and delivered on the day and year first above written.
GENERAL AMERICAN
RAILCAR CORPORATION II
By:_______________________________
Name:_____________________________
Title:____________________________
GENERAL AMERICAN
TRANSPORTATION CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
31
APPENDIX A
Definitions
-----------
Schedule 1
Description of Equipment
Schedule 6.2
Form of Lockbox Agreement with Lockbox Bank
-------------------------------------------
Schedule 6.4
List of Marks
-------------
Type of
▇▇▇▇ Railcar
---- -------
GPDX......................... Freight
GATX......................... Tank
GACX......................... Freight
GPLX......................... Freight
GPFX......................... Freight
GGPX......................... Freight
POTX......................... Tank
GETX......................... Tank
GARX......................... Tank
LCPX......................... Tank
GUEX......................... Freight
UOCX......................... Tank
TCX ......................... Tank
Schedule 7.1
Monthly Report Form
-------------------
Schedule 7.2
Annual Report Form
------------------
FORM OF
APPENDIX A
OPERATION, MAINTENANCE, SERVICING AND
REMARKETING AGREEMENT (1998-1)
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all purposes of
the Management Agreement, the Insurance Agreement and the Administrative
Services Agreement, unless otherwise defined in any such Agreement or the
context thereof shall otherwise require and such meanings shall be equally
applicable to both the singular and the plural forms of the terms herein
defined. In the case of any conflict between the provisions of this Appendix A
and the provisions of the main body of any such Agreement, the provisions of the
main body of such Agreement shall control the construction of such Agreement.
Unless otherwise required by the context, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
Defined Terms
"AAR" shall mean the Association of American Railroads or any successor
---
thereto.
"Administrative Services Agreement" shall mean the Administrative Services
---------------------------------
Agreement dated as of August 1, 1998, GATC and the Company.
"Administrator" shall have the meaning assigned thereto in the
-------------
Administrative Services Agreement.
"Affiliate" of any Person shall mean any other Person which directly or
---------
indirectly controls, or is controlled by, or is under a common control with,
such Person. The term "control" means the possession, directly or indirectly,
-------
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" shall have meanings
----------- ----------
correlative to the foregoing.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States
---------------
Code, 11 U.S.C. (S)101 et. seq.
--- ----
"Base Component" shall have the meaning assigned thereto in Section 5.2 of
--------------
the Management Agreement.
"Basic Term" shall have the meaning assigned thereto in Section 3.1 of each
----------
Lease.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state in which the principal corporate trust office of
the Owner Trustee is located, or, until the Lien of the Indenture has been
discharged, the city and state in which the principal corporate trust office of
the Indenture Trustee is located.
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital of the Management Agreement.
"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), including, without limitation, all reasonable out-of-
pocket costs, disbursements and expenses (including legal fees and expenses)
paid or incurred in connection therewith or related thereto.
"Closing" shall have the meaning assigned thereto in Section 2.3(b) of the
-------
Participation Agreements.
"Closing Date" shall have the meaning assigned thereto in Section 2.1 of
------------
the Participation Agreements.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral Agent" shall have the meaning assigned thereto in the
----------------
Intercreditor Agreement.
"Company" or "Lessee" shall mean General American Railcar Corporation II, a
------- ------
Delaware corporation.
"Company Documents" shall have the meaning assigned thereto in Section 1.1
-----------------
of the Intercreditor Agreement.
"Customer" shall have the meaning assigned thereto in the first recital of
--------
the Management Agreement.
"Equipment" shall mean collectively those items of railroad rolling stock
---------
described in the Lease Supplements and the Indenture Supplements, together with
any and all accessions, additions, improvements and replacements from time to
time incorporated or installed in any
2
item thereof which are the property of the Owner Trustee pursuant to the terms
of a ▇▇▇▇ of Sale or the Lease, and "Unit" shall mean individually the various
----
items thereof.
"Equipment Notes" shall mean the Equipment Notes issued and outstanding
---------------
under, and as defined in each of the Indentures.
"Event of Loss" shall have the meaning assigned thereto in Section 11.1 of
-------------
the Leases.
"Existing Car Service Contracts" shall have the meaning assigned thereto in
------------------------------
the fourth recital of the Participation Agreements.
"FRA" shall mean the Federal Railroad Administration or any successor
---
thereto.
"GATC" shall mean General American Transportation Corporation, a New York
----
corporation.
"Hazardous Substances" shall mean any hazardous or toxic substances,
--------------------
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR (S)172.101) or by the Environmental Protection Agency as
hazardous substances (40 CFR (S)302.4) and amendments thereto, or such
substances, materials and wastes which are or become regulated under any
applicable local, state or federal law or the equivalent under applicable
foreign laws including, without limitation, any materials, waste or substance
which is (a) petroleum, (b) asbestos, (c) polychlorinated biphenyls, (d) defined
as a "hazardous material," "hazardous substance" or "hazardous waste" under
------------------ ------------------- ---------------
applicable local, state or federal law or the equivalent under applicable
foreign laws, (e) designated as a "hazardous substance" pursuant to Section 311
-------------------
of the Clean Water Act of 1977, (f) defined as "hazardous waste" pursuant to
---------------
Section 1004 of the Resource Conservation and Recovery Act of 1976, or (g)
defined as "hazardous substances" pursuant to Section 101 of the Comprehensive
--------------------
Environmental Response, Compensation, and Liability Act of 1980.
"Incentive Component" shall have the meaning assigned thereto in Section
-------------------
5.3 of the Management Agreement.
"Income Tax" shall have the meaning assigned thereto in Section 7.1(1) of
----------
the Participation Agreements.
"Indemnified Expenses" shall have the meaning assigned thereto in the
--------------------
Administrative Services Agreement.
"Indemnified Parties" shall have the meaning assigned thereto in the
-------------------
Administrative Services Agreement.
3
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreements.
"Indentures" or "Trust Indentures" shall mean the [three] Trust Indenture
---------- ----------------
and Security Agreements [(Trust Nos. 98-1, 98-2 and 98-3)], each dated as of
August 1, 1998 between the related Owner Trustee, in the capacities described
therein, and the Indenture Trustee. The term "Indentures" shall include, except
----------
where the context otherwise requires, each Indenture Supplement entered into
pursuant to the terms of the Indentures.
"Indenture Trustee" shall mean The First National Bank of Chicago, a
-----------------
national banking association, as trustee under the Indenture and its successors
thereunder.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Insurance Agreement" shall mean the Insurance Agreement dated as of August
-------------------
1, 1998 between the Lessee and GATC.
"Insurance Letters" shall mean the [three] letters dated as of August 1,
-----------------
1998 [(Trust Nos. 98-1, 98-2 and 98-3)], each from the Lessee and the Manager to
the Owner Trustee, and each of which contains the acknowledgment and consent of
the Owner Participant, the Pass Through Trustee and the Indenture Trustee.
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustees, the Indenture Trustees, GATC, as Manager,
GATC, as Insurance Manager and certain other Persons.
"Leases" or "Lease Agreements" or "Equipment Leases" shall mean the three
------ ---------------- ----------------
Equipment Lease Agreements [(Trust Nos. 98-1, 98-2 and 98-3)], each dated as of
August 1, 1998, between the related Owner Trustee, in the capacities described
therein, as Lessor, and the Lessee. The term "Leases" shall, except where the
------
context otherwise requires, include each Lease
Supplement entered into pursuant to the terms of the Leases.
"Lease Default" shall mean an event which with notice or lapse of time or
-------------
both would become a Lease Event of Default.
"Lease Event of Default" shall mean a Lease Event of Default under the
----------------------
related Lease as specified in Section 14 thereof.
"Lessor" shall have the meaning assigned thereto in the recitals to each
------
Lease.
4
"Lien" shall mean any mortgage, pledge, security interest, lien,
----
encumbrance, lease, disposition of title or other charge of any kind on
property.
"Lockbox" shall have the meaning assigned thereto in Section 6.2(a) of the
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Management Agreement.
"Lockbox Agreement" shall mean the agreement by and between GATC, as
-----------------
Trustee for itself, individually, and General American Railcar Corporation II,
such other Persons as may be named parties thereto from time to time and the
Lockbox Bank.
"Lockbox Bank" shall have the meaning assigned thereto in Section 6.2(a) of
------------
the Management Agreement.
"Management Agreement" shall mean the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement dated as of August 1, 1998 between the Company and the
Manager.
"Management Fee" shall have the meaning assigned thereto in the Management
--------------
Agreement.
"Manager" shall have the meaning assigned thereto in the Management
-------
Agreement.
"Manager Agreements" shall mean the Operative Agreements to which the
------------------
Manager is or is to be a party.
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
--------------
of the Management Agreement.
"Manager's Fleet" shall have the meaning assigned thereto in Section 2.2(j)
---------------
of the Management Agreement.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Modification" shall have the meaning assigned thereto in Section 9.2 of
------------
each Lease.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
-------
"Officer's Certificate" shall mean a certificate signed (i) in the case of
---------------------
a corporation by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner or a member, as the case may be, and (iii) in the case of a commercial
bank or trust company, by the Chairman or Vice Chairman of the Executive
Committee or the Treasurer, any Trust Officer, any Vice President, any Executive
or Senior or Second or Assistant Vice
5
President, or any other officer or assistant officer customarily performing the
functions similar to those performed by the persons who at the time shall be
such officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject, and (iv) in the case
of a limited liability company, any Manager thereof and any President, Managing
Director or Vice President thereof.
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
--------------------
the GATC ▇▇▇▇ of Sale, the Participation Agreements, the Bills of Sale, the
Trust Agreements, the Pass Through Trust Agreement, the Pass Through Trust
Supplement, the Pass Through Certificates, the Equipment Notes, the Leases, the
Lease Supplements, the Indentures, the Indenture Supplements, the Tax Indemnity
Agreements, the Intercreditor Agreement, the Purchase Agreement, the Management
Agreement, Insurance Agreement, the Insurance Letters and the Lockbox Agreement.
"Optional Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of each Lease.
"Owner Participants" shall mean _____________________________, and their
------------------
respective successors and permitted assigns.
"Owner Trustee" shall mean [Owner Trustee], not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreements and its successors
thereunder.
"Parent" shall mean GATX Corporation, a New York corporation.
------
"Participants" shall mean the Loan Participant and the Owner Participants.
------------
"Participation Agreements" shall mean the three Participation Agreements
------------------------
[(Trust Nos. 98-1, 98-2 and 98-3)], each dated as of August 1, 1998, among the
Lessee, the Manager, the Pass Through Trustee, the related Owner Participant,
the related Owner Trustee and the related Indenture Trustee.
"Pass Through Certificates" or "Certificates" shall mean the Pass Through
------------------------- ------------
Certificates issued pursuant to the Pass Through Trust Supplement and the Pass
Through Trust Agreement.
"Permitted Liens" with respect to the Equipment and each Unit thereof shall
---------------
mean: (i) the interests of the Lessee and the related Owner Trustee under the
related Lease and the related Lease Supplements; (ii) the interest of the Lessee
and any sublessee as provided in any Permitted Sublease; (iii) any Liens for
taxes, assessments, levies, fees and other governmental and similar charges not
yet due and payable or the amount or validity of which is being contested in
good faith by appropriate proceedings so long as there exists no material risk
of sale, forfeiture, loss, or loss of or interference with use or possession of
any Unit or interference with the payment of Rent; (iv) any Liens of mechanics,
suppliers, materialmen, laborers, employees, repairmen and other like Liens
arising in the ordinary course of Lessee's (or if a sublease is then in effect,
any
6
sublessee's) business securing obligations which are not yet due and payable
or the amount or validity of which is being contested in good faith by
appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent; (v) the Lien granted to the related
Indenture Trustee under and pursuant to the related Indenture, and the
respective rights of the Loan Participant, the related Indenture Trustee, the
related Owner Participant and the related Owner Trustee under the Operative
Agreements; (vi) Liens arising out of any judgment or award against the Lessee
(or any sublessee permitted pursuant to Section 8.3 of the related Lease) with
respect to which an appeal or proceeding for review is being presented in good
faith and for the payment of which adequate reserves have been provided as
required by generally accepted accounting principles or other appropriate
provisions have been made and with respect to which there shall have been
secured a stay of execution pending such appeal or proceeding for review and
there exists no material risk of sale, forfeiture, loss, or loss of or
interference with the use or possession of any Unit or any interest therein or
interference with the payment of Rent, and (vii) salvage rights of insurers
under insurance policies maintained pursuant to Section 12 of the related Lease.
"Permitted Subleases" shall have the meaning assigned thereto in Section
-------------------
8.3 of the Leases.
"Person" shall mean an individual, partnership, limited liability company,
------
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
"Projected Coverage Ratio" shall have the meaning set forth in Section 1.1
------------------------
of the Intercreditor Agreement.
"Railroad Mileage Credits" shall mean the mileage credit payments made by
------------------------
the railroads under their applicable tariffs to the owner of the marks on the
railcar.
"Rating Agencies" shall mean, at any time, S&P's and Moody's, or any
---------------
successor to any such corporation's business of rating securities which is then
providing a rating for the Pass Through Certificates.
"Reimbursable Services" shall have the meaning assigned thereto in Section
---------------------
5.4 of the Management Agreement.
"Replacement Unit" shall mean a covered ▇▇▇▇▇▇ car or tank car, as the case
----------------
may be, which shall have been leased under the Lease pursuant to Section 11.4 of
each Lease.
"Required Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of each Lease.
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"Responsible Officer" shall mean, with respect to the subject matter of any
-------------------
covenant, agreement or obligation of any party contained in any Operative
Agreement, the President, or any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer, who in the normal performance
of his operational responsibility would have knowledge of such matters and the
requirements with respect thereto; and when used in connection with the Lessee,
"Responsible Officer" shall include any such officer of the Manager or the
-------------------
Insurance Manager acting on behalf of the Lessee under the Management Agreement
or the Insurance Agreement, as the case may be.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
---
Hill, Inc.
"Services Standard" shall have the meaning assigned thereto in Section 2.2
-----------------
of the Management Agreement.
"Servicing Agreement" shall mean the Management and Servicing Agreement
-------------------
dated as of September 30, 1997 between GATC and the Marks Company.
"Stipulated Loss Value" for any Unit as of any date of determination shall
---------------------
mean the amount determined by multiplying the Equipment Cost for such Unit by
the percentage set forth in Schedule 4 to the related Participation Agreement
opposite the Rent Payment Date on which such Stipulated Loss Value is being
determined; provided that during any Renewal Term, "Stipulated Loss Value" shall
-------- ---------------------
be determined as provided in Section 22.6 of the related Lease. Anything
contained in the related Lease or in the related Participation Agreement to the
contrary notwithstanding, Stipulated Loss Value for such Unit (both before and
after any adjustment pursuant to Section 2.6 of the related Participation
Agreement) will, under any circumstances and in any event, be an amount which,
together with any other amounts required to be paid by Lessee under the related
Lease in connection with an Event of Loss, will be at least sufficient to pay in
full as of the date of payment thereof the aggregate unpaid principal of the
Equipment Notes issued in respect of such Unit, together with all unpaid
interest, Late Payment Premium and Make-Whole Amount, if any, thereon accrued to
the date on which such amount is paid in accordance with the terms hereof and
all other amounts then due to the holders of the Equipment Notes.
"Sublease Payments" shall mean all amounts paid or payable by or on behalf
-----------------
of, or credited to, the Company under, or in respect of, a Car Service Contract,
including, without limitation, all service charges, rentals, excess mileage
charges, delivery costs reimbursed by Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the Customer as
reimbursement, indemnity, fees or commissions, or on account of assumed
financial responsibility or liability or otherwise.
"Subsidiary" of any Person shall mean any corporation, association, or
----------
other business entity of which more than 50% (by number of votes) of the voting
stock at the time outstanding shall at the time be owned, directly or
indirectly, by such Person or by any other corporation,
8
association or trust which is itself a Subsidiary within the meaning of this
definition, or collectively by such Person and any one or more such
Subsidiaries.
"Successor Insurance Manager" shall have the meaning assigned thereto in
---------------------------
the Insurance Agreement.
"Successor Lockbox Trustee" shall have the meaning assigned thereto in
-------------------------
Section 6.3 of the Management Agreement.
"Successor Manager" shall have the meaning assigned thereto in Section 8.4
-----------------
of the Management Agreement.
"Taxes" shall have the meaning assigned thereto in Section 7.1(b) of the
-----
Participation Agreement.
"Trust Agreements" shall mean those three certain Trust Agreements [(Trust
----------------
Nos. 98-1, 98-2 and 98-3)], dated as of August 1, 1998, between the related
Owner Participant and the related Owner Trustee.
"Unit" shall mean each unit or item of Equipment.
----
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
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