EXHIBIT 10.1
FORM OF
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OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT (GARC II)
Dated as of September 1, 1998
between
GENERAL AMERICAN RAILCAR CORPORATION II
and
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager
Tank Cars and Covered Xxxxxx Cars
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TABLE OF CONTENTS
SECTION 1.
DEFINITIONS
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............................... 8
Section 3.3. Event of Loss; Replacement Units.................... 8
Section 3.4. Similar Services.................................... 9
Section 3.5. Custody of Documents................................ 9
Section 3.6. No Greater Standards................................ 9
SECTION 4.
MODIFICATIONS
Section 4.1. Required Modifications.............................. 9
Section 4.2. Optional Modifications.............................. 10
SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
Section 5.1. Compensation of the Manager......................... 11
Section 5.2. Base Component...................................... 11
Section 5.3. Incentive Component................................. 12
Section 5.4. Reimbursable Services............................... 12
SECTION 6.
PAYMENTS
Section 6.1. Receipt of Payments................................. 13
Section 6.2. Lockboxes; Payments................................. 13
Section 6.3. Successor Lockbox Trustee........................... 15
Section 6.4. Mileage Credits..................................... 16
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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................................... 17
Section 7.4. Compliance Information.............................. 17
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................................................ 19
Section 8.2. Termination of Manager for Default.................. 19
Section 8.3. Remedies Upon Default............................... 20
Section 8.4. Replacement of the Manager.......................... 21
Section 8.5. Merger or Sale...................................... 21
SECTION 9.
INDEMNIFICATION
Section 9.1. Indemnification by Manager.......................... 22
Section 9.2. Indemnification by Company.......................... 22
Section 9.3. Claims Excluded..................................... 22
Section 9.4. Third Party Claims.................................. 23
Section 9.5. Cooperation......................................... 23
Section 9.6. Survival............................................ 24
SECTION 10.
REPRESENTATIONS AND WARRANTIES
Section 10.1. Representations of Company.......................... 24
Section 10.2. Representations of Manager.......................... 25
SECTION 11.
MISCELLANEOUS
Section 11.1. Table of Contents and Headings...................... 26
Section 11.2. The Manager as Independent Contractor............... 26
Section 11.3. Relations Among Parties............................. 26
Section 11.4. Governing Law....................................... 26
Section 11.5. Notices............................................. 26
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Section 11.6. Entire Agreement; Amendment; Waivers............... 27
Section 11.7. Assignment......................................... 27
Section 11.8. Further Assurances................................. 28
Section 11.9. Third Party Beneficiary............................ 28
Section 11.10. Counterparts....................................... 28
Section 11.11. Severability....................................... 28
Section 11.12. No Petition in Bankruptcy.......................... 29
APPENDICES AND SCHEDULES
Schedule 1 -- Description of Equipment
Schedule 5.4 -- Average Tax per Unit Adjustment Factor
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 (GARC II)
THIS OPERATION, MAINTENANCE, SERVICING AND REMARKETING AGREEMENT (GARC II)
(this "Agreement"), dated as of September 1, 1998, is made and entered into
between General American Transportation Corporation, a New York corporation,
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 ("Lessee Parent"), (i) certain railroad tank
cars and covered xxxxxx cars, as such railcars are more fully described in
Schedule 1 to this Agreement, and (ii) all of Lessee Parent's right, title and
interest in and to the lease agreements respecting such railcars in which Lessee
Parent is the lessor, such lease agreements being with customers of Lessee
Parent (such lease agreements and future lease agreements entered into by the
Manager on behalf of the Company respecting the Equipment (as hereinafter
defined) pursuant to this Agreement are hereinafter referred to as "Car Service
Contracts" and such customers and future customers under Car Service Contracts
at any given time are hereinafter referred to as "Customers").
B. The Company has sold the Equipment to Business Trust, Business Trust
and Business Trust, in each case by Wilmington Trust Company, as Owner Trustee
under three separate Trust Agreements, each dated as of September 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 September 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 defined
in each Lease), the Manager and the Insurance Manager have entered into a
Collateral Agency and Intercreditor Agreement dated as of September 1, 1998 (the
"Intercreditor Agreement") providing, among other things, for the distribution
of Collections (as defined in the Intercreditor Agreement) and the exercise of
certain rights of the Company under the Company Documents (as defined in each
Lease).
D. The Manager is engaged in the business of owning, leasing and managing
railcars for itself and others, and the Company desires to retain the Manager,
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 the Intercreditor Agreement.
SECTION 2.
APPOINTMENTS AND DUTIES OF MANAGER
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Section 2.1. Appointment. The Company hereby appoints the Manager to act
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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 such Unit
becomes property of any Lessor 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 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 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.
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(b) Maintain the Equipment in all material respects (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 with manufacturer's warranties and all
applicable insurance policies; and (v) in compliance 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.
(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,
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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 xxxx 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 applicable Lessor's right, title and interest in and to
such Unit, its rights under the related Lease and the rights of the applicable
Indenture Trustee.
(h) If a Unit 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 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 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.
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(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 in 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
applicable Lease.
(l) 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.
(m) 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.
(n) 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 Company, take the necessary action on behalf of the Company thereunder
in connection with any such renewal.
(o) Comply with the return provisions of any Lease with respect to
any Units which are being returned to the Lessor thereunder.
(p) Take such actions as the Manager shall deem necessary or
appropriate or as the Company shall request so that the Company shall be 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
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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.
(q) 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.
(r) 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.
(s) To the extent not otherwise specifically set forth above, take
such actions as the Manager shall deem necessary or appropriate or as the
Company shall request so that the Company shall be in compliance with its
obligations under any Lease, Participation Agreement, Car Service Contract or
other Operative Agreement or Company Document.
(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
---------------------------------
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 at a level of
care and diligence as shall be required (i) in order for the Company to perform
its obligations under the Leases and the other Operative Agreements and (ii) in
any event consistent with customary commercial practice as would be used by a
prudent Person in the railcar leasing industry and the level of care and
diligence utilized by the Manager in its business and in the management of the
Manager's Fleet (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 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.
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(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 or managed by the Manager.
(d) 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 the payment of Basic Rent) 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.
(e) 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.
(f) The Manager shall not create or permit to exist any Lien on any
Unit other than a Permitted Lien.
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(g) 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.
(h) 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 expiration dates, Customers, credit quality, location, Customer
indemnities, Car Service Contract terms 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 and, except as expressly
permitted hereunder, shall not have characteristics which are not substantially
equivalent to those with respect to 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.
(i) 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 or adverse.
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
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the Manager receives in respect of such Event of Loss from such sources. The
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 Xxxx 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
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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 AGREEMENT
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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
----------------------
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
9
Company in a timely manner; provided, however, that the Manager may, on behalf
of the 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, on a non-discriminatory basis,
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.
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.
SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
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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
10
(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
(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
11
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 a certification by Manager that any
increase in the Unit Monthly Fee reflects increases in costs which are also
being incurred in respect of all similar railcars in Manager's Fleet and
such costs are being similarly charged to others whose railcars are being
managed by Manager under agreements pursuant to which the Manager provides
substantially similar services utilizing substantially similar payment
terms. The reasonableness of the amount of such cost increase (without
regard to whether its incurrence is appropriate) will, at an Owner
Trustee's request, be verified by a third party consultant or railcar
manager selected by the Owner Trustees and reasonably satisfactory to the
Manager.
(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 per Unit determined
for each calendar month, commencing January 1, 2000, which is equal to the
product of (x) .000238%, 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. Gross Sublease revenues shall be net of any write-offs and 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 either (i) 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), or (ii) where the Manager has established
a standard cost system used by the Manager for charging all or
12
substantially all of the third parties for whom it provides maintenance and
repair services described in this Section 5.4(a), such standard cost rate.
(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 Managed 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 services similar to any of the foregoing 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,
General American Railcar Corporation, and General American Railcar
13
Corporation II" and such title may include other Persons for whom the Manager
manages railcars ("Additional Lockbox Parties"). The 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 xxxx 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 (i)
amounts owing 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"), and (ii) 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
14
identified as belonging to the Company or GATC. Such pro rata allocation will be
based on the original amounts billed to each such Customer with respect to the
Equipment and its railcars in the Total Managed 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 Additional Lockbox
Parties, 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
xxxxxxxx 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
GATC will separately submit 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 xxxxxxxx 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
15
and to the extent that such deduction exceeds the amount due to GATC, any such
excess shall be allocated pro-rata (based upon reported xxxxxxxx) 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.
16
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 substantially in the form
attached hereto as Schedule 7.2.
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 Total Managed 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 of
such quarter, setting forth in comparative form the figures for the
corresponding periods of the
17
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 Lease Default (except as specified), and if
a Lease Default shall exist, specifying such Lease 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
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.
18
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 all obligations of the Company
under any Operative Agreement have been satisfied or waived or assumed by the
Manager under an agreement in form and substance satisfactory to each of the
Owner Participants and the Indenture Trustees.
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 (each,
a "Manager Default"):
(a) If the Manager fails to perform any of its obligations under this
Agreement which failure materially and adversely affects the rights of the Owner
Trustees, the Owner Participants or the holders of any Equipment Notes (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 becomes aware of such failure,
including as a result of written notice from any Owner Trustee, Owner
Participant or the 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;
(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
19
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, other than pursuant to this Agreement, the Manager shall
cease to be actively involved in the railcar management or maintenance
businesses;
(f) 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 ; 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 30 days after
receipt of notice from the Company or any Owner Trustee, Owner Participant or
Indenture Trustee 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 remediable or remedied only after all adverse
consequences thereof, if any, can be and have been remedied as applicable.
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
Agreement by the Manager and/or (iii) xxx 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 attorneys' 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.
20
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 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 that such corporation meets the criteria applicable to a successor
manager set forth in Section 8.4. Any successor corporation resulting from such
merger or consolidation shall deliver to the Company, the Owner Trustees, the
Owner Participants and the Indenture Trustees an agreement, in form and
substance reasonable satisfactory to the Company, the Owner Trustees, the Owner
Participants and the Indenture Trustees, which is a legal, valid, binding and
enforceable assumption by such successor corporation, of the due and punctual
performance and observance of each covenant and condition of Manager under this
Agreement.
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;
21
(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 or in any
other Operative 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 to the extent occurring or arising at a
time when the Company and the Manager are not Affiliates:
(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,
gross negligence, recklessness or willful misconduct of such indemnified Person.
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) which notice acknowledges
22
that the indemnifying party is in fact liable in respect of such Claim;
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 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.
23
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 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:
24
(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 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.
25
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 received, if or
when delivered personally, by facsimile transmission or reputable air courier,
addressed as follows:
If to the Company: General American Railcar Corporation II
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Treasurer
Re: GARC II
Facsimile No.: (000) 000-0000
Confirmation No.: (000) 000-0000
26
If to the Manager: General American Transportation Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Secretary
Re: GARC II
Facsimile No.: (000) 000-0000
Confirmation No.: (000) 000-0000
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, 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.
27
(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.
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.
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
28
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.
* * *
29
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:__________________________________
30
Schedule 1
Description of Equipment
------------------------
Schedule 5.4
Average Tax per Unit Adjustment Factor
--------------------------------------
Schedule 6.2
Form of Lockbox Agreement with Lockbox Bank
-------------------------------------------
Schedule 6.4
List of Marks
-------------
Type of
Xxxx 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
------------------
