Narcat Management Agreement

EXHIBIT 10.10


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NARCAT LLC,
CARCAT ULC and
NARCAT MEXICO, S. DE R.L. DE C.V.,
as the Companies


THE ANDERSONS, INC.,
as the Manager


and


WELLS FARGO BANK, NATIONAL ASSOCIATION,
as the Indenture Trustee and as the Backup Manager


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MANAGEMENT AGREEMENT


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Dated as of February 12, 2004


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TABLE OF CONTENTS


SECTION HEADING PAGE ARTICLE I DEFINITIONS........................................................................... 2
Section 1.01. Defined Terms......................................................................... 2
Section 1.02. Terms Defined in the Indenture, Sale Agreements or Servicing Agreement................ 10


ARTICLE II MANAGEMENT OF RAILCARS................................................................ 10
Section 2.01. The Manager to Act as Manager; Standard of Care;
Covenants Concerning Railcars and Leases.......................................... 10
Section 2.02. Authority of Manager; Delegation of Management........................................ 12
Section 2.03. Duties of Manager..................................................................... 13
Section 2.04. Required Modifications and Optional Modifications..................................... 19
Section 2.05. Manager Fee and Supplemental Manager Fee.............................................. 20
Section 2.06. Authorized Deductions from Earnings................................................... 20
Section 2.07. Responsibility for Loss of, Distribution of, or Damage to Railcars.................... 22
Section 2.08. Denial or Refusal of Insurance........................................................ 23
Section 2.09. Conflicts of Interest................................................................. 23
Section 2.10. Separate Corporate Existence Covenants................................................ 23


ARTICLE III ACCOUNTINGS, STATEMENTS AND REPORTS................................................... 24
Section 3.01. Monthly Manager Report................................................................ 24
Section 3.02. Financial Statements; Certification as to Compliance; Notice of Default............... 24
Section 3.03. Annual Accountants' Reports........................................................... 25
Section 3.04. Delivery of Accountings, Statements and Reports....................................... 26
Section 3.05. Annual Security Interest Opinion...................................................... 26


ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................ 27
Section 4.01. Initial Manager Representations and Warranties........................................ 27
Section 4.02. Company Representations and Warranties................................................ 30
Section 4.03. Initial Manager Representations and Warranties with Respect to the Collateral......... 31
Section 4.04. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties.................................................... 37


ARTICLE V INITIAL MANAGER COVENANTS............................................................. 38
Section 5.01. Corporate Existence; Status as Manager; Merger........................................ 38
Section 5.02. The Manager Not to Resign; No Assignment.............................................. 39
Section 5.03. Car Mark Agreement, GNRR Agreement and Railcar Storage Agreement...................... 40


Section 5.04. Manager Indemnification............................................................... 40
Section 5.05. Expense Reimbursement................................................................. 41
Section 5.06. Agreements with respect to the Car Mark Agreement and the Railcar Storage Agreement... 41


ARTICLE VI MANAGER TERMINATION................................................................... 41
Section 6.01. Manager Events of Termination......................................................... 41
Section 6.02. Backup Manager to Act; Appointment of Successor....................................... 44
Section 6.03. Notification to Holders............................................................... 45
Section 6.04. Waiver of Breaches and Defaults....................................................... 45
Section 6.05. Effects of Termination of Manager..................................................... 45
Section 6.06. Rights Cumulative..................................................................... 47


ARTICLE VII THE BACKUP MANAGER.................................................................... 47
Section 7.01. Representations of Backup Manager..................................................... 47
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, Backup Manager....... 48
Section 7.03. Backup Manager Resignation............................................................ 48
Section 7.04. Duties and Responsibilities........................................................... 48
Section 7.05. Backup Manager Compensation........................................................... 49


ARTICLE VIII MISCELLANEOUS PROVISIONS.............................................................. 49
Section 8.01. Termination of Agreement.............................................................. 49
Section 8.02. Amendments............................................................................ 49
Section 8.03. Governing Law......................................................................... 50
Section 8.04. Notices............................................................................... 50
Section 8.05. Severability of Provisions............................................................ 50
Section 8.06. Inspection and Examination Rights..................................................... 51
Section 8.07. Binding Effect........................................................................ 51
Section 8.08. Article Headings...................................................................... 51
Section 8.09. Legal Holidays........................................................................ 52
Section 8.10. Assignment for Security for the Notes................................................. 52
Section 8.11. Third-Party Beneficiaries............................................................. 52
Section 8.12. No Bankruptcy Petition................................................................ 52


SCHEDULE I Manager Employee Benefits SCHEDULE II Permitted Adjustments SCHEDULE III Lease Delivery Exceptions


EXHIBIT A Form of Monthly Manager Report EXHIBIT B Forms of Leases


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MANAGEMENT AGREEMENT, dated as of February 12, 2004 (this "Agreement"), by and among NARCAT LLC ("NARCAT"), a Delaware limited liability company, CARCAT ULC ("CARCAT"), a Nova Scotia unlimited liability company, and NARCAT MEXICO, S. DE R.L. DE C.V. ("NARCAT Mexico"), a Mexican limited liability company with variable capital, (each, a "Company" and collectively, the "Companies"), THE ANDERSONS, INC. ("The Andersons"), an Ohio corporation, as the manager (the "Manager"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo"), a national banking association, as the indenture trustee (the "Indenture Trustee") and as the backup manager (the "Backup Manager").


PRELIMINARY STATEMENT


The Companies are entering into an Indenture, dated as of February 12, 2004 (as amended or supplemented from time to time, the "Indenture"), among the Companies and the Indenture Trustee, pursuant to which the Companies will issue, jointly and severally, $29,000,000 aggregate principal amount of their 2.79% Class A-1 Railcar Notes due 2019, $21,000,000 aggregate principal amount of their 4.57% Class A-2 Railcar Notes due 2019, $31,400,000 of their 5.13% Class A-3 Railcar Notes due 2019 and $5,000,000 aggregate principal amount of their 14.00% Class B Railcar Notes due 2019 (collectively, the "Notes"). The obligations of the Companies under the Notes and the Indenture will be secured by the Railcars, Leases and the other Railcar Assets (as such capitalized terms are defined herein).


NARCAT is entering into a Sale Agreement, dated as of February 12, 2004 (the "NARCAT Sale Agreement"), with Cap Acquire, LLC (the "NARCAT Seller") providing for, among other things, the sale by the NARCAT Seller to NARCAT of certain Railcars, Leases and the other Railcar Assets which NARCAT is and will be pledging to the Indenture Trustee, and in which NARCAT is granting to the Indenture Trustee a security interest.


CARCAT is entering into a Sale Agreement, dated as of February 12, 2004 (the "CARCAT Sale Agreement"), with Cap Acquire Canada ULC (the "CARCAT Seller") providing for, among other things, the sale by the CARCAT Seller of certain Railcars, Leases and other Railcar Assets which CARCAT is and will be pledging to the Indenture Trustee, and in which CARCAT is granting to the Indenture Trustee a security interest.


NARCAT Mexico is entering into a Sale Agreement, dated as of February 12, 2004 (the "NARCAT Mexico Sale Agreement" and, together with the NARCAT Sale Agreement and the CARCAT Sale Agreement, the "Sale Agreements"), with Cap Acquire Mexico, S. de R.L. de C.V. (the "NARCAT Mexico Seller" and, together with the NARCAT Seller and the CARCAT Seller, the "Sellers") providing for, among other things, the sale by the NARCAT Mexico Seller of certain Railcars, Leases and other Railcar Assets which NARCAT Mexico is and will be pledging to the Indenture Trustee, and in which NARCAT Mexico is granting to the Indenture Trustee a security interest.


It is a condition precedent to the issuance of the Notes under the Indenture that, on or prior to the Closing Date (as defined in the Indenture), the Companies enter into this Agreement


with the Manager and the Backup Manager to provide for the management of the Railcars. In order to further secure each Company's obligations under the Indenture and the Notes, each Company is granting to the Indenture Trustee a security interest in, among other things, such Company's rights derived under this Agreement, and the Manager agrees that all covenants and agreements made by the Manager herein with respect to the Railcars, Leases and the other Railcar Assets shall also be for the benefit and security of the Class A Note Insurer (as defined herein), the Indenture Trustee and all Holders of the Notes. For its services hereunder, the Manager will receive the Manager Fee and the Supplemental Manager Fee as set forth in Section 2.05.


On the date hereof, the Companies, Wells Fargo, as the Indenture Trustee and as the backup servicer, and The Andersons (the "Servicer") are entering into a servicing agreement (the "Servicing Agreement") for the purpose of engaging the Servicer to receive and apply, as required under the Indenture, all collections received with respect to the Railcars and Leases and to perform Lessee monitoring, collection and enforcement activities, to perform record keeping and to prepare servicer reports, among other things, all as described in the Servicing Agreement.


The Manager is engaged in the business of owning, leasing, managing and servicing railcars for itself and for others, and each Company desires to retain the Manager, on the terms and conditions set forth in this Agreement, to perform operating, maintenance, insurance and remarketing services on behalf of each Company in respect of the Railcars and Leases of each such Company.


ARTICLE I


DEFINITIONS


Section 1.01. Defined Terms. Subject to Section 1.02, except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Agreement, and the definitions of such terms are equally applicable both to the singular and plural forms of such terms and to the masculine, feminine and neuter genders of such terms:


"AAR" shall have the meaning set forth in the Indenture.


"Action" shall mean any action, claim, suit, litigation, arbitration or governmental investigation.


"Advance Rate" shall mean 90% of the Stated Value of any Railcar.


"Affiliate" shall have the meaning set forth in the Indenture.


"Agreement" shall mean this Management Agreement as amended, restated or supplemented from time to time as permitted hereby.


"Anderson Family" shall mean any of (i) any child or descendant of Harold Anderson, the founder of The Andersons, Inc., (ii) any spouse or former spouse of any individual described in the preceding clause (i), and (iii) any trust, the beneficiaries of which are any one or more of the individuals described in the preceding clauses (i) or (ii). For purposes of this definition, an adopted child shall be considered a lineal descendant.


"APA Seller Documents" shall mean the Asset Purchase Agreement, the Car Mark Agreement, the GNRR Agreement, the Railcar Storage Agreement and all other agreements, instruments and/or documents executed by any Railcar Entity in favor of a Seller or a Company.


"Asset Purchase Agreement" shall have the meaning set forth in the Indenture.


"Authorized Officer" shall have the meaning set forth in the Indenture.


"Backup Manager" shall have the meaning set forth in the preamble to this Agreement.


"Backup Manager Fee" shall mean the fees of the Backup Manager set forth in that certain fee letter, dated February 12, 2004, and acknowledged on February 12, 2004 by the Companies.


"Board of Directors" shall mean the Board of Directors of the Manager or any duly authorized committee of such Board.


"Business Day" shall have the meaning set forth in the Indenture.


"Canadian Registry" shall mean the Office of the Registrar General of Canada, which maintains the database pursuant to Section 105 of the Canada Transportation Act.


"Car Mark Agreement" shall have the meaning set forth in the Indenture.


"CARCAT" shall have the meaning set forth in the preamble to this Agreement.


"CARCAT Collection Account" shall have the meaning set forth in the Indenture.


"CARCAT OER Subaccount" shall have the meaning set forth in the Indenture.


"CARCAT Sale Agreement" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"CARCAT Seller" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"Change of Control" shall mean (a) any Person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) shall own directly or indirectly, beneficially or of record, shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the


Manager; provided, however, that any Person which shall be a member of the Anderson Family shall be excluded from determinations made under this clause (a); or (b) a majority of the seats (other than vacant seats) on the Board of Directors of the Manager shall at any time be occupied by persons who were neither (i) nominated by the Board of Directors of the Manager, nor (ii) appointed by directors so nominated.


"Class A Note Insurer" shall mean MBIA Insurance Corporation, a stock insurance company incorporated under the laws of the State of New York, or its successors in interest.


"Class A Note Insurer Default" shall have the meaning set forth in the Indenture.


"Closing Date" shall have the meaning set forth in the Indenture.


"Collateral" shall have the meaning set forth in the Indenture.


"Collection Accounts" shall have the meaning set forth in the Indenture.


"Collection Period" shall have the meaning set forth in the Indenture.


"Collections" shall have the meaning set forth in the Indenture.


"Company" or "Companies" shall have the meaning set forth in the preamble to this Agreement.


"Concentration Limits" shall have the meaning set forth in the Indenture.


"Continued Errors" shall have the meaning set forth in Section 6.05(d).


"Controlling Party" shall have the meaning set forth in the Indenture.


"Determination Date" shall have the meaning set forth in the Indenture.


"DOT" shall mean the United States Department of Transportation.


"Eligible Railcar" shall have the meaning set forth in the Indenture.


"Environmental Law" shall have the meaning set forth in the Indenture.


"Errors" shall have the meaning set forth in Section 6.05(d).


"Event of Default" shall have the meaning set forth in the Indenture.


"Event of Loss" shall have the meaning set forth in the Indenture.


"FRA" shall mean the Federal Railroad Administration.


"Full Service Lease" shall have the meaning set forth in the Indenture.


"GAAP" shall have the meaning set forth in the Indenture.


"GNRR Agreement" shall have the meaning set forth in the Indenture.


"Governmental Authority" shall have the meaning set forth in the Indenture.


"Hazardous Commodities" shall have the meaning set forth in the Indenture.


"Holder" or "Holders" shall have the meaning set forth in the Indenture.


"Indemnified Parties" shall have the meaning set forth in Section 5.04.


"Indenture" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"Indenture Trustee" shall have the meaning set forth in the preamble to this Agreement.


"Initial Manager" shall mean The Andersons and any of its Affiliates.


"Insurance Policy" shall have the meaning set forth in the Indenture.


"Insurance Proceeds" shall have the meaning set forth in the Indenture.


"Insurers" shall have the meaning set forth in the Indenture.


"Interchange Rules" shall have the meaning set forth in the Sale Agreements.


"Knowledge of the Manager" shall mean the actual knowledge, after due inquiry, of the officers of the Manager or any Affiliate of the Manager responsible for matters relating to the Manager's performance of its obligations hereunder.


"Law" shall have the meaning set forth in the Indenture.


"Lease" shall have the meaning set forth in the Indenture.


"Lease File" and "Lease Files" shall have the meanings set forth in the Servicing Agreement.


"Lease and Railcar Schedule" shall have the meaning set forth in the Indenture.


"Lessee" shall have the meaning set forth in the Indenture.


"Lessor" shall mean the lessor under each related Lease, or a successor or assignee of such lessor.


"Liens" shall have the meaning set forth in the Indenture.


"Lockbox Account" shall have the meaning set forth in the Servicing Agreement.


"Lockbox Agreements" shall have the meaning set forth in the Servicing Agreement.


"Lockbox Bank" shall have the meaning set forth in the Servicing Agreement.


"Maintenance Expense Reimbursement Request" shall have the meaning set forth in Section 2.06(b).


"Majority Holders" shall have the meaning set forth in the Indenture.


"Manager" shall have the meaning set forth in the preamble to this Agreement, or any Successor Manager appointed pursuant to Section 6.01.


"Manager Events of Termination" shall mean each of the occurrences or circumstances enumerated in Section 6.01.


"Manager Fee" shall mean a monthly fee equal to $25.00 per Railcar per month (whether or not such Railcar is then subject to a Lease); provided, however, that the Manager Fee, at the direction of the Controlling Party, may be increased to up to $37.50 per Railcar (whether or not such Railcar is then subject to a Lease) per month in the event that any Person other than the Initial Manager shall be the Manager.


"Manager Standard" shall have the meaning set forth in Section 2.01(b).


"Manager Termination Notice" shall have the meaning set forth in Section 6.01(b).


"Material Adverse Effect" shall have the meaning set forth in the Indenture.


"Modified Lease" shall mean any Lease in which the Lessee is responsible for repairs to specific items such as gates, hatch covers, doors, or other items specified in the Lease, and the Lessor is responsible for all other maintenance.


"Monthly Manager Report" shall have the meaning set forth in Section 3.01.


"NARCAT" shall have the meaning set forth in the preamble to this Agreement.


"NARCAT Collection Account" shall have the meaning set forth in the Indenture.


"NARCAT Mexico" shall have the meaning set forth in the preamble to this Agreement.


"NARCAT Mexico Sale Agreement" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"NARCAT Mexico Seller" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"NARCAT OER Subaccount" shall have the meaning set forth in the Indenture.


"NARCAT Sale Agreement" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"NARCAT Seller" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"Note Principal Balance" shall have the meaning set forth in the Indenture.


"Note Register" shall have the meaning set forth in the Indenture.


"Notes" shall have the meaning set forth in the Preliminary Statement of this Agreement.


"Officer's Certificate" shall mean a certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a Vice President, the Treasurer or the Secretary of the Manager.


"Operating Expense Reserve Account" shall have the meaning set forth in the Indenture.


"Operating Expense Reserve Subaccounts" shall mean, collectively, the CARCAT OER Subaccount and the NARCAT OER Subaccount.


"Operating Expenses" shall have the meaning set forth in Section 2.06(a).


"Opinion of Counsel" shall mean a written opinion of counsel who, unless otherwise specified, may be in-house counsel employed full time by the Person (or an affiliate of such Person) required to deliver the opinion.


"Optional Modification" shall have the meaning set forth in Section 2.04(b).


"Outstanding" shall have the meaning set forth in the Indenture.


"Payment Date" shall have the meaning set forth in the Indenture.


"Permitted Adjustments" shall mean any of the adjustments described on Schedule II hereto.


"Permitted Liens" shall have the meaning set forth in the Indenture.


"Person" shall have the meaning set forth in the Indenture.


"PPSA" shall mean the Personal Property Security Act (Nova Scotia).


"Predecessor Manager Work Product" shall have the meaning set forth in Section 6.05(d).


"Prefunded Existing Lease" shall have the meaning set forth in the Indenture.


"Prefunded Lease and Railcar Schedule" shall have the meaning set forth in the NARCAT Sale Agreement.


"Prefunded Railcar" shall have the meaning set forth in the Indenture.


"Prefunded Railcar Acquisition Date" shall have the meaning set forth in the Indenture.


"Prime Rate" shall have the meaning set forth in the Indenture.


"Purchase" shall mean a purchase by the Manager of a Railcar and any related Lease and other related Railcar Assets pursuant to Section 4.04.


"Purchase Price" shall have the meaning set forth in Section 4.04(c).


"Railcar" or "Railcars" shall have the meaning set forth in the Indenture.


"Railcar Assets" shall have the meaning set forth in the Indenture.


"Railcar Entities" shall have the meaning set forth in the Indenture.


"Railcar Storage Agreement" shall mean that certain Railcar Storage Agreement, dated as of February 12, 2004, by and between Progress Rail Services Corporation, Cap Acquire, LLC, Cap Acquire Canada ULC and Cap Acquire Mexico, S. de R.L. de C.V. as the same may be amended, restated, supplemented or otherwise modified from time in accordance with its terms.


"Railroad Mileage Credits" shall have the meaning set forth in the Indenture.


"Rapid Amortization Event" shall have the meaning set forth in the Indenture.


"Rating Agencies" shall have the meaning set forth in the Indenture.


"Rating Agency Condition" shall have the meaning set forth in the Indenture.


"Relevant Company" shall have the meaning set forth in the Servicing Agreement.


"Relevant Sale Agreement" shall mean (i) with respect to CARCAT, the CARCAT Sale Agreement, (ii) with respect to NARCAT Mexico, the NARCAT Mexico Sale Agreement and (iii) with respect to NARCAT, the NARCAT Sale Agreement.


"Reported Companies" shall mean The Andersons, if the Manager is The Andersons, or for any Successor Manager appointe ...