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                                                                   Exhibit 10.39

GENERAL ELECTRIC RAILCAR SERVICES CORPORATION

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                                                         RAILCAR LEASE AGREEMENT

     THIS RAILCAR LEASE AGREEMENT (the "Lease") is made as of the      day of
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September, 2001, by and between GENERAL ELECTRIC RAILCAR SERVICES CORPORATION,
its successors and assigns ("Lessor"), and PACER INTERNATIONAL, INC., its
successors and permitted assigns ("Lessee").

     The parties agree that Lessee shall lease from Lessor the railcars
(collectively the "Cars") described in the Equipment Schedules to be executed
pursuant hereto (collectively, the "Equipment Schedule"), subject to the terms
set forth herein, in the Riders attached hereto and in the Equipment Schedule.
Each Equipment Schedule incorporates by reference the terms and conditions of
this Lease and constitutes a separate instrument of lease. Certain definitions
and construction of certain of the terms used herein are provided in Section 23
hereof.

     1. TERM. The term of lease with respect to each Car shall consist of the
term set forth in the Equipment Schedule relating thereto; provided, however,
that this Lease shall be effective from and after the date of execution hereof.

     2. RENT. Lessee shall pay Lessor rent ("Basic Rent") for the use of the
Cars in the aggregate amounts specified in the Equipment Schedule, and all other
amounts payable pursuant to this Lease, without prior notice or demand. Each
Equipment Schedule constitutes a non-cancellable net lease, and Lessee's
obligation to pay Basic Rent, and otherwise to perform its obligations under
this Lease, each Equipment Schedule and all of the other documents and
agreements entered into in connection herewith (the "Lease Documents"), are and
shall be absolute and unconditional and shall not be affected by any right of
setoff, counterclaim, recoupment, deduction, defense or other right which Lessee
now has or hereafter may have against Lessor, the manufacturer or vendor of the
Cars, or anyone else, for any reason whatsoever. Basic Rent is payable as and
when specified in the Equipment Schedule by mailing the same to Lessor at its
address specified pursuant to this Lease and shall be allocated and accrue for
the use of the Cars as set forth in the Equipment Schedule; and shall be
effective upon receipt. Time is of the essence. If any Basic Rent is not paid on
the due date, Lessor may collect, and Lessee agrees to pay, a charge (the "Late
Charge") calculated as the product of the late charge rate specified in the
Equipment Schedule (the "Late Charge Rate") and the amount in arrears for the
period such amount remains unpaid. Lessor expressly acknowledges and agrees that
nothing contained in this Section 2 shall constitute a waiver by the Lessee of
any of its rights under this Lease, the Equipment Schedule or any of the other
Lease Documents or of its right to assert and sue upon any claims it may have
against Lessor or any other person in one or more separate actions so long as
such claims or actions in no way diminish or discharge Lessee's obligation to
pay Basic Rent, and otherwise to perform its obligations under the Lease
Documents without any right of setoff, counterclaim, recoupment, deduction, or
defense.

     3. REPRESENTATIONS AND WARRANTIES. (a) Representations and Warranties of
Lessee. Lessee represents and warrants that: (i) Lessee is a corporation duly
organized and validly existing in good standing under the laws of the State of
Tennessee. (ii) The execution, delivery and performance of this Lease, the
Equipment Schedule and all related instruments and documents: (A) have been duly
authorized by all necessary corporate action on the part of Lessee; (B) do not
require the approval of any stockholder, trustee or holder of any obligations of
Lessee except such as have been duly obtained; and (C) do not and will not
contravene any law, governmental rule, regulation or order now binding on
Lessee, or the charter or by-laws of Lessee, or contravene the provisions of, or
constitute a default under, or result in the creation of any lien or encumbrance
upon the property of Lessee under, any indenture, mortgage, contract or other
agreement to which Lessee is a party or by which it or its property is bound.
(iii) This Lease, the Equipment Schedule and all related instruments and
documents, when entered into, will constitute legal, valid and binding
obligations of Lessee enforceable against Lessee in accordance with the terms
thereof, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally, and except as such enforceability may be subject to the application
of equitable principles, legal or equitable. (iv) There are no actions, suits or
proceedings pending to which Lessee is a party, and there are no other actions,
suits or proceedings threatened of which Lessee has knowledge, before any court,
arbitrator or administrative agency, which, either individually or in the
aggregate have a Material Adverse Effect. As used herein, "Material Adverse
Effect" shall mean (1) a materially adverse effect on the business, condition

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(financial or otherwise), operations, performance or properties of Lessee, or
(2) a material impairment of the ability of Lessee to perform its obligations
under or to remain in compliance with the Lease Documents. Further, to the best
of its knowledge, Lessee is not in default under any obligation for the payment
of borrowed money, for the deferred purchase price of property or for the
payment of any rent under any lease agreement which, either individually or in
the aggregate, would have the same such effect. (v) The financial statements of
Lessee (copies of which have been furnished to Lessor) have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"), and fairly present Lessee's financial condition and the results of its
operations as of the date of and for the period covered by such statements, and
since the date of such statements there has been no material adverse change in
such conditions or operations. (vi) The address stated below the signature of
Lessee is the chief place of business and chief executive office of Lessee; and
Lessee does not conduct business under a trade, assumed or fictitious name.
(vii) (A) Lessee has conducted, and will continue to conduct, its business
operations, and throughout the term of this Lease will use the Cars, so as to
comply with all Environmental Laws (as hereinafter defined), and (B) when not in
possession of the Cars, Lessee will use its best efforts to ensure that the Cars
are operated in a manner that is in compliance with all Environmental Laws,
provided, however, the foregoing clause (B) shall no way diminish Lessee's
obligations under any of the Lease Documents.

     (b) Representations and Warranties of Lessor: Lessor represents and
warrants: (i) Lessor is a corporation duly organized and validly existing in
good standing under the law of the State of Delaware. (ii) The execution,
delivery and performance of the Lease Documents: (A) have been duly authorized
by all necessary corporate action on the part Lessor; and (B) do not require the
approval of every stockholder, trustee or holder of any obligations of Lessor
except such as has been duly obtained. (iii) This Lease, the Equipment Schedule
and all related instruments and documents, when entered into, will constitute
legal, valid and binding obligations of Lessor enforceable against Lessor in
accordance with the terms thereof, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally, and except that such enforceability may be
subject to the application of equitable principles in any proceeding, legal or
equitable.

     4. CONDITIONS PRECEDENT. (a) Lessor's obligations hereunder are conditioned
upon satisfaction of the following conditions: Lessor having received the
following, in form and substance satisfactory to Lessor: (1) evidence as to due
compliance with the insurance provisions hereof; (2) certificate of Lessee's
Secretary certifying: (i) resolutions of Lessee's Board of Directors duly
authorizing the leasing of the Cars hereunder and the execution, delivery and
performance of this Lease, the Equipment Schedule and all other related
instruments and documents, and (ii) the incumbency and signature of the officers
of Lessee authorized to execute such documents; and (3) a commitment letter from
Lessee.

     (b) Lessor's obligations to enter into an Equipment Schedule (each such
date of execution to be hereinafter referred to as a "Closing Date") are
conditioned upon satisfaction of the following conditions: (1) Lessor having
received the following, in form and substance satisfactory to Lessor: (i) an
Equipment Schedule with respect to the Cars to be anticipated to be leased
thereunder; (ii) a tax opinion of special counsel of Lessor; (iii) an appraisal
("Appraisal") of the Cars dated the date of the related Equipment Schedule from
an appraiser reasonably acceptable to Lessor, such Appraisal to be at Lessor's
expense, (iii) a lien search with respect to Thrall Car Manufacturing Company
("Seller"), Lessee and the Equipment in such places within the United States and
Canada as the Lessor may reasonably request, and (iv) written confirmation from
Seller identifying the Cars expected to be delivered during the following
calendar month; (2) all representations and warranties provided in favor of
Lessor herein shall be true and correct on the effective date of the Equipment
Schedule with the same effect as though made as of such date (and Lessee's
execution and delivery of the Equipment Schedule shall constitute an
acknowledgment of the same); and (3) there shall be no Default.

     Upon execution of each Equipment Schedule, Lessor will (1) cause a
memorandum of this Lease and the related Equipment Schedule to be duly filed and
recorded with the Surface Transportation Board ("STB"), in accordance with 49
U.S.C. Section. 11301, (2) cause a memorandum of this Lease and the related
Equipment Schedule to be deposited with the Registrar General of Canada pursuant
to Section 105 of The Canada Transportation Act and cause notice of such deposit
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to be forthwith given in The Canada Gazette in accordance with said Section 105,
and (3) cause such filings and notices to be filed or made as necessary or
appropriate to protect the interests of the Lessor in such other places within
the United States as Lessor reasonably shall determine.

     (c) Lessor's obligation to make a payment for the Cars related to a
particular Equipment Schedule to Seller pursuant to the Purchase Agreement
Assignment dated the date hereof between the Lessor and Lessee (the "Purchase
Agreement Assignment") (each such date of payment to be hereinafter referred to
as a "Funding Date"), are conditioned upon satisfaction of the following
conditions: (1) Lessor shall have received the following, in form and substance
satisfactory to Lessor (i) a Certificate of Acceptance with respect to each Car
evidencing delivery of and acceptance of such Car by Lessee on behalf of Lessor
during the preceding calendar month (but in no event later than January 31,
2002) , (ii) a bill of sale from Seller, (iii) an invoice pursuant to the
Purchase Agreement, (iv) a letter from the appraiser, as of the Funding Date,
confirming the conclusions set forth in the Appraisal; (v) a confirmation from
Lessor's tax counsel, as of the Funding Date, confirming that the conclusions
set forth in the tax opinion delivered pursuant to Section 4(b)(ii) are valid as
of the Funding Date and (vi) an amended and restated Equipment Schedule which
shall amend and restate the related Equipment Schedule (and Annex A thereto) to
reflect (A) any difference between Lessor's assumed cost of funds and Lessor's
actual cost of funds as of the Funding Date, (B) any change in tax law or the
judicial or administrative interpretations thereof enacted, issued or effected
on or prior to the Funding Date that in the judgment of the Lessor adversely
affects

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the Lessor and (C) the failure of any Car anticipated to be delivered pursuant
to such Equipment Schedule to become subject to the Lease and the corresponding
decrease in the Total Invoice Cost; and (2) there shall be no Default.

     In the event that Lessor does not make payment for any Car as set forth
above because of any of the conditions listed in item (c) above is not
satisfied, Lessor will convey to Lessee or its designee all right, title and
interest of Lessor in and to those Cars subjected to this Lease pursuant to the
execution of the related Certificate of Acceptance and for which payment is not
made to Seller by Lessor "AS IS", "WHERE IS", without recourse or warranty other
than a warranty that whatever title to such Cars was originally conveyed to
Lessor has been conveyed to Lessee, free and clear of any Liens created by or
through Lessor, and shall execute and deliver to Lessee or its designee such
bill(s) of sale and other documents and instruments as Lessee or its designee
reasonably may request to evidence such conveyance and Lessee shall be obligated
to make all payments in respect of such Cars to Seller as provided in the
Purchase Agreement Assignment. Lessee hereby agrees to pay all taxes (including,
without limitation, transfer taxes), costs and expenses (including attorneys'
fees) incurred by Lessor in connection with such conveyance,

     5. FINANCIAL STATEMENTS; FURTHER ASSURANCES. (a) Lessee will furnish Lessor
(1) within one hundred twenty (120) days after the end of each fiscal year of
Lessee, a balance sheet of Lessee as at the end of such year, and the related
statement of income and statement of changes in financial position of Lessee for
such fiscal year, prepared in accordance with GAAP, all in reasonable detail and
certified by independent certified public accountants of recognized standing
selected by Lessee (it being agreed that if Lessee files a Form 10-K with the
Securities and Exchange Commission, that delivery of such Form 10-K shall be
deemed to satisfy the requirements of this Section 5(a)(1)); and (2) within
sixty (60) days after the end of each quarter of Lessee's fiscal year, a balance
sheet of Lessee as at the end of such quarter, and the related statement of
income and statement of changes in financial position of Lessee for such
quarter, prepared in accordance with GAAP (it being agreed that if Lessee files
a Form 10-Q with the Securities and Exchange Commission, that delivery of such
Form 10-Q shall be deemed to satisfy the requirements of this Section 5(a)(2)).
(b) Lessee will duly execute and deliver to Lessor such further documents and
assurances and take such further action as Lessor may from time to time
reasonably request in order to effectively carry out the intent and purpose of
this Lease and to establish and protect the rights and remedies created in favor
of Lessor hereunder, including, without limitation, if requested by Lessor, the
execution and delivery of supplements or amendments hereto, in recordable form,
subjecting to this Lease any Replacement Car (as hereinafter defined), and the
recording or filing of counterparts hereof or thereof in accordance with the
laws of such jurisdiction as Lessor may from time to time deem advisable, and
the filing of Uniform Commercial Code financing statements with respect thereto.

     6. ACCEPTANCE BY LESSEE ON BEHALF OF LESSOR. From time to time Lessor and
Lessee shall execute Equipment Schedules including a list of Cars anticipated to
be delivered in the calendar month immediately following the date of such
Equipment Schedule. From time to time Lessee shall execute and deliver to Lessor
Certificates of Acceptance containing a complete description of the Cars
accepted for delivery by Lessee on behalf of Lessor and accepted by Lessee on
its own behalf; whereupon, as between Lessor and Lessee the same shall be deemed
to have been finally accepted by Lessee on its own behalf pursuant to this
Lease.

     7. OWNERSHIP AND MARKING OF THE CARS. Lessor shall and hereby does retain
all incidents of ownership with respect to the Cars notwithstanding the delivery
of the Cars to Lessee on behalf of Lessor hereunder. Each Car is and will be
numbered with its reporting mark shown on the Equipment Schedule relating
thereto. Lessee will not change the reporting mark of any Car except in
accordance with a statement of new reporting marks to be substituted therefor,
which statement shall be delivered to Lessor by Lessee and a supplement to this
Lease with respect to such new marks shall be filed or recorded in all public
offices where this Lease (or a memorandum thereof) shall have been filed or
recorded. Except for any insignia and other markings that appear on any Car as
originally accepted by Lessee, Lessee will not allow the name of any person to
be placed on any Car as a designation that might reasonably be interpreted as a
claim of ownership; provided, however, that subject to the delivery of the
statement specified in the preceding sentence, Lessee may cause the Cars to be
lettered with the names or initials or other insignia customarily used by Lessee
or any permitted sublessee of railroad equipment used by it of the same or a
similar type. If Lessor requests, Lessee agrees that it will cause the UMLER
register with respect to each Car to reflect the name of Lessor in the owner
field.

     8. DISCLAIMER OF WARRANTIES.

     LESSEE ACKNOWLEDGES AND AGREES THAT, AS BETWEEN LESSOR AND LESSEE (I) EACH
CAR IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO
LESSEE, (II) LESSEE IS SATISFIED THAT EACH CAR IS SUITABLE FOR ITS PURPOSES,
(III) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (IV)
EACH CAR IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL
REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (V) LESSOR LEASES TO LESSEE
AND LESSEE TAKES EACH CAR "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", AND LESSEE
ACKNOWLEDGES THAT LESSOR HAS NOT MADE, AND LESSOR HEREBY EXPRESSLY DISCLAIMS,
ANY AND ALL WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE, OF THE CARS, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR

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OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, it being agreed that
all such risks, as between Lessor and Lessee, are to be borne by Lessee. During
the term of this Lease, so long as Lessee is not then in Default hereunder,
Lessee may assert and enforce, from time to time, in the name and for the
account of Lessor and Lessee, as their interests may appear, but in all cases at
the sole cost and expense of Lessee, whatever claims and rights Lessor may have
as owner of the Cars against the manufacturers or any prior owner thereof.

     9. MAINTENANCE; OPERATION; POSSESSION; COMPLIANCE WITH LAWS.

     Lessee, at its own cost and expense, shall maintain, repair and keep, or
caused to maintained, repaired or kept, each Car (a) in accordance with prudent
Class I railroad industry maintenance practices in existence from time to time,
(b) in a manner consistent with the maintenance practices used by Lessee in
respect of equipment owned or leased by Lessee similar in type to such Car, (c)
in accordance with maintenance requirements of insurance policies covering such
Car, (d) eligible for interchange service, and (e) in compliance with all
orders, statutes, rules, regulations, directives and other laws and requirements
of the United States of America, and any and all jurisdictions in which its
operations involving any of the Cars may extend, with the Interchange Rules and
with all rules of the United States Department of Transportation, the Surface
Transportation Board, the Federal Energy Regulatory Commission, the Federal
Railroad Administration, the United States Environmental Protection Agency and
any other legislative, executive, administrative, regulatory or judicial body,
agency or commission (whether Federal, state, local or otherwise) exercising any
power or jurisdiction over the Cars or any of the parties to this Lease or the
Lease Documents, to the extent that the foregoing affect the title, operation,
possession or use of, or any other undertaking with respect to, the Cars or are
necessary to comply with applicable health, safety or environmental standards
(all of the foregoing, the "Applicable Standards"), the enforcement of which
would adversely affect Lessor or Lessor's title to, or ownership of, or residual
interest in, the Cars. For the purposes hereof, "Interchange Rules" means all
codes, rules, regulations, interpretations, laws and orders governing the hire,
use, condition, repair and all other matters pertaining to the interchange of
freight traffic reasonably interpreted within the rail industry as being
applicable to the Cars, as adopted and in effect from time to time by the
Association of American Railroads, or any successor, and in the event that such
Applicable Standards require any alteration, replacement or addition of or to
any part of the Cars, Lessee will conform therewith at its own expense. Lessee
will prepare and deliver to Lessor within a reasonable time prior to the
required date of filing (or, to the extent permissible, file on behalf of
Lessor) any and all reports (other than income tax returns) to be filed by
Lessor with any Federal, state or other regulatory authority by reason of
Lessor's right, title and interest in the Cars or the leasing thereof to Lessee.
Notwithstanding the foregoing, Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any
such law, regulation, requirement or rule in any reasonable manner which does
not materially adversely affect the rights or interests of Lessor in the Cars or
hereunder or otherwise expose Lessor to criminal sanctions or release Lessee
from the obligation to return the Cars in compliance with the provisions of
Section 16 hereof.

     Lessee shall be entitled to the possession of the Cars and to the use of
the Cars upon lines of railroad owned or operated by it, upon lines of railroad
over which Lessee has trackage or other operating rights, or over which railroad
equipment of Lessee is regularly operated pursuant to contract and on railroad
lines of other railroads in the United States, Canada, and Mexico in the usual
interchange of traffic or in through or run-through service and shall be
entitled to permit the use of such Cars upon connecting and other carriers in
the usual interchange of traffic or pursuant to in-through or run-through
agreements. Notwithstanding the foregoing, Lessee shall not permit any Car to be
physically located outside the United States during more than fifty (50) percent
of any taxable year. Nothing shall be deemed to constitute permission by Lessor
to any Person that acquires possession of any Car to take any action
inconsistent with the terms and provisions of this Lease.

     10. MODIFICATIONS.

     In the event the Association of American Railroads, the United States
Department of Transportation, or any other United States governmental agency
having jurisdiction over the operation, safety or use of railroad equipment
requires that any Car be altered, replaced or modified (a "Required
Modification"), Lessee agrees to make such Required Modification at its own cost
and expense; provided, however, that Lessee may, in good faith and by
appropriate proceedings diligently conducted, contest the validity or
application of any such law, regulation, requirement or rule in any reasonable
manner which does not materially adversely affect the rights or interests of
Lessor in the Cars or hereunder or otherwise expose Lessor to criminal sanctions
or relieve Lessee of the obligation to return the Cars in compliance with the
provisions of Section 16 hereof. Title to any Required Modification immediately
shall vest in Lessor. Notwithstanding anything herein to the contrary, if Lessee
determines in good faith that any Required Modification to a Car would be
economically impractical, it shall provide written notice of such determination
to Lessor and the parties hereto shall treat such Car as if an Event of Loss had
occurred as of the date of such written notice with respect to such Car and the
provisions of Section 13 hereof with respect to Basic Rent, termination and
disposition shall apply with respect to such Car. The Lessee shall be permitted
at any time to request that Lessor finance any Required Modification provided
that Lessor may, in its sole discretion, refuse such financing request of
Lessee; provided, however, Lessor's refusal to finance any Required Modification
shall in no way excuse Lessee's performance of its obligations under this Lease.

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     Lessee at any time may modify, alter or improve any Car (a "Modification");
provided that no Modification shall adversely affect the fair market value,
utility, or remaining useful life of such Car below the fair market value,
utility, or remaining useful life thereof immediately prior to such
Modification, assuming such Car was then in the condition required to be
maintained by the terms of this Lease. Title to each such Modification shall
remain with Lessee so long as it is readily removable from such Car and upon its
removal will not interfere with the normal use and operation of the Car (each, a
"Severable Modification"). In all other instances, title to such Modifications
immediately shall vest in Lessor. If Lessee shall, at its sole cost and expense,
cause such Severable Modification to be made to any Car and such Severable
Modification is reasonably necessary for the economic operation of such Car,
Lessor shall have the right, prior to the return of such Car to Lessor
hereunder, to purchase such Severable Modification at its then fair market
value. If Lessor does not elect to purchase such Severable Modification, Lessee
may remove, and shall remove if requested by Lessor, such Severable Modification
at Lessee's sole cost and expense.

     11. FEES AND TAXES. (a) To the extent permitted by law, Lessee shall file
any necessary report and return for, shall pay promptly when due, shall
otherwise be liable to reimburse Lessor (on an after-tax basis, taking into
account all relevant, current, and future tax costs and benefits) for, and
agrees to indemnify and hold Lessor harmless from: (1) all titling, filing,
publication, recordation, documentary stamp and other fees; and (2) taxes (other
than taxes calculated solely on the basis of net income), assessments and all
other charges or withholdings of any nature (together with any penalties, fines
or interest thereon) relating to the Cars or this Lease or the delivery,
acquisition, ownership, use, operation, substitution, leasing or subleasing of
the Cars, or upon the rentals payable hereunder, whether the same be assessed to
Lessor or Lessee, provided that Lessee shall not be required to pay, or to
reimburse or indemnify Lessor for, any of the following: (i) any tax imposed on
or with respect to or measured by the gross or net income, gross receipts,
capital, net worth or franchise of Lessor or the conduct of business by Lessor
unless (A) such tax is a sales, use, rental, goods and services or similar tax,
or (B) such tax is imposed by a jurisdiction outside the United States of
America, or a jurisdiction within the United States of America in which Lessor
would not have otherwise been subject to tax, as the result of the use,
operation or presence of any Car or any activity of Lessee, any permitted
sublessee or any other permitted user of any Car in such jurisdiction; (ii) any
tax imposed on or with respect to any sale, assignment, transfer or other
disposition by Lessor of any interest in any Car or this Lease or any Equipment
Schedule unless caused by an Event of Loss with respect to such Car or by an
exercise of remedies after the occurrence of a Default, or unless made at the
request of Lessee; (iii) any tax imposed with respect to any Car for any period
after the expiration or earlier termination of this Lease with respect to such
Car and the return of such Car (if and as required by this Lease) to Lessor;
(iv) any interest or penalty resulting from the failure of Lessor to file any
tax return or other tax document, or to pay any tax, in a timely and proper
manner unless such failure results from the failure by Lessee to perform its
obligations under this Lease; (v) any tax to the extent such tax would not have
been incurred but for, or is increased as a result of, (A) the gross negligence
or willful misconduct of Lessor, or (B) any sale-leaseback, loan, assignment of
receivables or other transaction between Lessor and a third party with respect
to any Cars, this Lease or any Equipment Schedule; and (vi) any United States
federal withholding tax. Upon request, Lessor shall furnish to Lessee all
documentation and other information necessary to file such reports and returns
and to pay the amount of such fees, taxes or other sums then due; provided,
however, nothing contained herein shall require that Lessor deliver copies of
tax returns or other information that it considers (in its sole discretion)
confidential.

     (b) If any report, return or property listing, or any fee, tax or
assessment for which Lessee is required to indemnify Lessor pursuant to sub-part
(a) hereof ("Imposition") is, by law, required to be filed by, assessed or
billed to, or paid by, Lessor, Lessee at its own expense will do all things
required to be done by Lessor (to the extent permitted by law) in connection
therewith and is hereby authorized by Lessor to act on behalf of Lessor in all
respects, including (but not limited to), the contest or protest, in good faith
and by appropriate proceedings, of the validity of any Imposition or of the
amount thereof, and Lessor agrees to notify Lessee promptly in writing of
Lessor's receipt of any assessment, bill or other claim by any taxing authority
for any such Imposition, provided that (x) Lessor's failure to provide such
notice shall not relieve Lessee of its obligations under this Section 11 unless
such failure precludes a contest of such Imposition, (y) Lessor will have the
right to elect (by giving Lessee written notice of such election together with
Lessor's notice of receipt of such claim) to control any contest of such
Imposition that may result in any material unindemnified loss, cost or expense
to Lessor, and (z) Lessee shall not be permitted to contest any such claim
unless the amount of the Imposition that is the subject of such claim (plus the
amount of all other Impositions that may be asserted with respect to the Cars in
the same or any other tax period) exceeds $10,000. Lessor agrees to cooperate
with Lessee in any such contest unless such cooperation would cause any material
unindemnified loss, cost or expense to Lessor, and Lessee agrees promptly to
indemnify Lessor for all reasonable expenses incurred by Lessor in the course of
such cooperation. An Imposition shall be paid, subject to refund proceedings, if
failure to pay would create a material danger of the sale, forfeiture or loss of
the Cars or any interest therein. If Lessor obtains a refund of any Imposition
which has been paid (by Lessee, or by Lessor and for which Lessor has been
reimbursed by Lessee), Lessor shall promptly pay such refund to Lessee, provided
that Lessor shall not be required to pay such refund to Lessee if a Default is
continuing unless and until such Default ceases to exist, provided further that
the amount payable by Lessor under this sentence shall not exceed the amount
paid by Lessee with respect to such Imposition. To the extent that any tax
liability of Lessor for which Lessee is not required to indemnify Lessor is
reduced as a result of an Imposition which Lessee has paid or for which Lessee
has indemnified Lessor, Lessor shall pay to Lessee the amount of such tax
savings plus the amount of any additional tax savings resulting from such
payment, provided that (i) the amount payable by Lessor under this sentence
shall not exceed the amount paid by Lessee with respect to such Imposition, and
(ii) Lessor shall not be required to make any such payment if a Default has
occurred and is continuing unless and until such Default ceases to exist. Lessee
shall indemnify Lessor for any refund or tax saving paid by Lessor to Lessee
which

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subsequently becomes disallowed or recaptured. Lessee will cause all billings of
such charges to Lessor to be made to Lessor in care of Lessee (to the extent
permitted by applicable law) and will, in preparing any report or return
required by law with respect to any Imposition (to the extent permitted on such
report or return), show the ownership of the Cars in Lessor, and shall send a
copy of any such report or return to Lessor. If Lessee fails to pay any such
Impositions when due, except any Imposition being contested in good faith and by
appropriate proceedings as above provided for a reasonable period of time,
Lessor at its option may do so, in which event the amount so paid (including any
penalty or interest incurred as a result of Lessee's failure), plus interest
thereon at the Late Charge Rate shall be paid by Lessee to Lessor with the next
periodic payment of Basic Rent. (c) As used herein, the term "Lessor" shall mean
and include Lessor and the consolidated Federal taxpayer group of which Lessor
is a member, Lessor shall cause each of its Affiliates to comply with the
obligations of "Lessor" under this Section 11. At Lessee's written request,
Lessor's calculation of an indemnity payment under this Section 11 which is at
least $50,000 Dollars shall be submitted to a nationally recognized public
accounting firm selected by Lessor reasonably acceptable to Lessee to verify the
accuracy of Lessor's calculations. If Lessee pays an indemnity payment before
completion of such review, appropriate adjustments will be made after completion
of the review to take into account any redetermination of such indemnity made by
the accounting firm. Lessee shall pay the fees and expenses charged by the
accounting firm for such review unless such an accounting firm concludes that
the indemnity payment calculated by Lessor exceeds the indemnity payment
properly due by an amount exceeding 10% of the indemnity payment calculated by
Lessor.

     12. LIENS. Lessee agrees to maintain the Cars free from all claims, liens,
attachments, rights of others and legal processes ("Liens") of creditors of
Lessee or other persons claiming by, through or under Lessee, other than Liens
for: (a) fees, taxes, levies, duties or other governmental charges of any kind,
Liens of mechanics, materialmen, laborers, employees or suppliers and similar
Liens arising by operation of law incurred by Lessee in the ordinary course of
business for sums that are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof (provided, however, that such proceedings do not involve any material
danger (as determined in Lessor's sole reasonable discretion) of the sale,
forfeiture or loss of the Cars or any interest therein); (b) Liens arising out
of any judgments or awards against Lessee with respect to which a stay of
execution has been obtained pending an appeal or proceeding for review; (c)
Liens for taxes of Lessor for which Lessee has no indemnification obligation
pursuant to this Lease; and (d) Liens created by or through Lessor (such Liens
in clauses (a) through (d) being hereinafter referred to as "Permitted Liens").
Lessee will defend, at its own cost and expense, Lessor's title to the Cars from
such claims, Liens or legal processes (other than Permitted Liens). Lessee shall
also notify Lessor promptly upon receipt of notice of any Lien (other than
Permitted Liens) affecting the Cars in whole or in part.

     13. LOSS, DESTRUCTION, REQUISITION, ETC.

     (a) Lessee hereby assumes the risk of direct and consequential loss and
damage to the Cars. Except as otherwise provided herein, no loss or damage to
the Cars or any part thereof shall release or impair any obligations of Lessee
under this Lease. Lessee agrees that Lessor shall not incur any liability to
Lessee for any loss of business, loss of profits, expenses, or any other damages
resulting to Lessee by reason of any failure of or delay in delivery or any
delay caused by any non-performance, defective performance, or breakdown of the
Cars, nor shall Lessor at any time be responsible for personal injury or the
loss or destruction of any other property resulting from the Cars. In the event
of loss or damage to any Car which does not constitute an Event of Loss (as
hereinafter defined), Lessee shall, at its sole cost and expense, promptly
repair and restore such Car to the condition required by this Lease. Provided
that Lessee is not then in Default, upon receipt of evidence reasonably
satisfactory to Lessor of completion of such repairs, Lessor will apply any
insurance proceeds received by Lessor on account of such loss to the cost of
repairs.

     (b) In the event that any Car (i) shall suffer destruction, damage,
contamination or wear which, in Lessee's good faith opinion, makes repair
uneconomic or renders such Car unfit for commercial use, (ii) shall suffer theft
or disappearance, (iii) shall be permanently returned to the manufacturer
pursuant to any patent indemnity or warranty provision, (iv) shall have title
thereto taken or appropriated by any governmental authority under the power of
eminent domain or otherwise, (v) shall be taken or requisitioned for use by any
governmental authority (other than the United States government or any agency or
instrumentality thereof) under the power of eminent domain or otherwise, (vi)
shall be taken or requisitioned for use by the United States government or any
agency or instrumentality thereof and such taking or requisition is continuing
on the last day of the term of this Lease or (vii) shall become obsolete or not
usable for the purposes for which it was placed in service (any such occurrence
being hereinafter called an "Event of Loss"), Lessee, in accordance with the
provisions hereof, shall promptly and fully inform Lessor of such Event of Loss.

     (c) Upon the occurrence of an Event of Loss with respect to any Car, Lessee
shall within thirty (30) days thereafter notify Lessor of such Event of Loss and
of its election to perform one of the following options (it being agreed that if
Lessee shall not have given notice of said election within said thirty (30) day
period, or if providing a Replacement Car could cause adverse tax consequences
to Lessor, Lessee shall be deemed to have elected to perform the option set
forth in the following paragraph (ii)):

          (i) as promptly as practicable, and in any event on or before the
     Business Day (as hereinafter defined) next preceding the sixtieth (60th)
     day next following the date of such notice, in replacement for such Car,
     Lessee shall convey or cause to be conveyed to Lessor a Replacement Car (as
     defined below) to be leased to Lessee hereunder, such Replacement Car to be
     free and clear of all liens (other than Permitted Liens), to be of a
     similar make and model to the Car so replaced and to have a fair

                                       6

<PAGE>

     market value, utility and remaining useful life at least equal to the Car
     so replaced (assuming such Car was in the condition required to be
     maintained by the terms of this Lease); provided that, if Lessee shall not
     perform its obligation to effect such replacement under this paragraph (i)
     during the period of time provided herein, then Lessee shall pay on the
     next succeeding date for the payment of Basic Rent to Lessor the amounts
     specified in paragraph (ii) below; provided, further that, if Lessee is
     diligently undertaking to convey such Replacement Car but is unable to do
     so within the allotted time due to circumstances beyond its control, then
     Lessee shall not be required to make the payments specified in paragraph
     (ii) below so long as it (A) provides Lessor written notice within
     forty-five (45) days of such notice of Event of Loss that Lessee will be
     unable to convey a Replacement Car within sixty (60) days of such notice of
     Event of Loss and (B) Lessee pays the Stipulated Loss Value of such Car as
     a deposit to Lessor, which deposit shall be applied against the purchase of
     the Car, which amount shall be payable on the ninetieth (90th) day
     following the date of such notice if no Replacement Car has been delivered
     by such date; or

         (ii) on the next succeeding date for the payment of Basic Rent that is
     at least sixty (60) days after the date of notice of such Event of Loss or
     deemed Event of Loss, Lessee shall pay or cause to be paid on such Basic
     Rent payment date to Lessor (A) an amount equal to the Stipulated Loss
     Value of each such Car, determined as of such Basic Rent payment date, (B)
     all Basic Rent payable on such date in respect of such Car, and (C) all
     other sums then due and payable hereunder, it being understood that until
     such Stipulated Loss Value is paid, there shall be no abatement or
     reduction of Basic Rent.

     (d) Upon the sale or replacement of any Car in compliance with this Section
13 or upon the payment of all sums required to be paid pursuant hereto in
respect of any Car for which Lessee has elected to pay or is deemed to have
elected to pay the amounts specified above, the term of this Lease with respect
to such Car and the obligation to pay Basic Rent for such Car accruing
subsequent to the date of payment of the Stipulated Loss Value pursuant to the
terms hereof shall terminate; provided that Lessee shall be obligated to pay all
Basic Rent in respect of such Car which has accrued up to and including the date
of payment of the Stipulated Loss Value. Upon the payment of all sums required
to be paid pursuant hereto in respect of any Car, Lessor will convey to Lessee
or its designee all right, title and interest of Lessor in and to such Car, "AS
IS", "WHERE IS", without recourse or warranty other than a warranty that
whatever title to such Cars was originally conveyed to Lessor has been conveyed
to Lessee, free and clear of any Liens created by or through Lessor, and shall
execute and deliver to Lessee or its designee such bill(s) of sale and other
documents and instruments as Lessee or its designee reasonably may request to
evidence such conveyance. As to each Car so disposed of, Lessee or its designee
shall be entitled to any amounts arising from such disposition, plus any awards,
insurance or other proceeds and damages (including any Association of American
Railroads interline settlement paid upon an Event of Loss) received by Lessee or
Lessor by reason of such Event of Loss after having paid the Stipulated Loss
Value attributable thereto; provided, however, that, with respect to any Event
of Loss referred to in clauses (v) and (vi) of sub-part (b) above, any excess of
such condemnation awards over the amount of the Stipulated Loss Value of such
Car shall be paid to Lessee so long as the result of such condemnation was not
directly or proximately caused by Lessee's neglect, in which such case, any
excess of such condemnation awards over the amount of the Stipulated Loss Value
of such Car shall be paid to Lessor. At the time of or prior to any replacement
of any Car, Lessee, at its own cost and expense, will (A) furnish Lessor with a
bill of sale and an assignment of warranties with respect to the Replacement
Car, (B) execute and deliver to Lessor an amendment in form and substance
acceptable to Lessor, subjecting such Replacement Car to this Lease, and duly
executed by Lessee, to be delivered to Lessor for execution and, upon such
execution and to the extent required by Lessor, to be filed for recordation in
the same manner as provided for the original Lease, (C) furnish Lessor with
copies of all filings made with the STB and the Registrar General of Canada that
are necessary or appropriate to perfect and protect Lessor's interests in the
Replacement Car, and (D) furnish Lessor with a certificate of a qualified
engineer (who may be the system chief mechanical officer of Lessee) certifying
that the Replacement Car has a fair market value, utility and remaining useful
life at least equal to the Car so replaced (assuming such Car was in the
condition required to be maintained by the terms of this Lease) and setting
forth a reasonable basis for such conclusion in reasonable detail. For all
purposes hereof, upon passage of title thereto to Lessor, the Replacement Car
shall be deemed part of the property leased hereunder and the Replacement Car
shall be deemed a "Car" as defined. Upon such passage of title, Lessor will
transfer to Lessee, without recourse or warranty other than a warranty that
title to such Car has been conveyed to Lessee, free and clear of any Liens other
than any Liens created by or through Lessee, all Lessor's right, title and
interest in and to the replaced Car.

     (e) In the event that during the term of this Lease the use of any Car is
requisitioned or taken by any governmental authority under the power of eminent
domain or otherwise for a period which does not constitute an Event of Loss,
Lessee's obligation to pay all installments of Basic Rent shall continue for the
duration of such requisitioning or taking. Lessee shall be entitled to receive
and retain for its own account all sums payable for any such period by such
governmental authority as compensation for requisition or taking of possession.
Any amount referred to herein which is payable to Lessee shall not be paid to
Lessee, or if it has previously been paid directly to Lessee, shall not be
retained by Lessee, if at the time of such payment a Default shall have occurred
and be continuing, but shall be paid to and held by Lessor as security for the
obligations of Lessee under this Lease, and at such time as there shall not be
continuing any such Default, such amount shall be paid to Lessee.

     (f) As used in this Lease, "Stipulated Loss Value" shall mean the product
of the Total Cost of the Cars (as specified on the applicable Equipment
Schedule) and the applicable percentage factor set forth on the Equipment
Schedule of Stipulated Loss Values attached to the Equipment Schedule. After
payment of the final payment of Basic Rent due under the term of this Lease,
Stipulated

                                       7

<PAGE>

Loss Value shall be determined as of the date of termination of this Lease,
after payment of any Basic Rent due on such date, and the applicable percentage
factor shall be the last percentage factor set forth on the Equipment Schedule
of Stipulated Loss Values.

     14. INSURANCE.

     (a) Lessee will, at all times prior to the return of the Cars to Lessor, at
its own cost and expense, cause to be carried and maintained (1) property damage
insurance in respect of the Cars, and (2) public liability insurance with
respect to third-party personal and property damage, and Lessee will continue to
carry such insurance in such amounts and for such risks and with such insurance
companies and subject to such self-insurance as reasonably may be acceptable to
Lessor, but in any event not less comprehensive in amounts and against risks
customarily insured against by Lessee in respect of equipment owned or leased by
it similar in type to the Cars and consistent with prudent Class I railroad
industry standards, if any, at such time. Any policies of insurance carried in
accordance with this Section 14 and any policies taken out or altered in any
material way, in substitution or replacement for any of such policies (i) shall
provide that, if any such insurance is cancelled for any reason whatever or is
altered in any material way, Lessor shall receive thirty (30) days' prior notice
of such cancellation or alteration, (ii) shall name Lessor as an additional
insured, (iii) with respect to property damage insurance shall provide that in
respect of the respective interest of Lessor, the insurance shall not be
invalidated by any action or inaction of Lessee or any additional insured and
shall insure Lessor's interest as it appears, regardless of any breach or
violation of any warranty, declaration or condition contained in such policies
by Lessee or any additional insured and (iv) shall provide for a waiver of
subrogation in favor of Lessor. Lessee shall cause the property insurance on the
Cars to provide that the proceeds up to the amount of the Stipulated Loss Value,
for any loss or damage to any Car, if any, shall be payable to Lessor. Lessee
shall, at its own cost and expense and so long as it is not then in Default, be
entitled to make all proofs of loss and take all other steps necessary to
collect the proceeds of such insurance.

     (b) Lessee shall, upon execution hereof and with respect to each renewal,
furnish Lessor with (or cause to be furnished to Lessor) a certificate of
insurance showing the insurance then maintained by Lessee pursuant to this
Section 14 and specifically enumerating the special provisions referenced in
Section 14(a).

     (c) So long as there is no Default which is then occurred or is continuing,
fifty percent (50%) of the entire proceeds of any property or casualty insurance
or third party payments for damages to any Car (including any Association of
American Railroads interline settlements) received by Lessor shall be held by
Lessor until, with respect to such Car, the repairs referred to in clause (x)
below are made as specified therein or payment of the Stipulated Loss Value is
made, and such entire proceeds will be paid either: (x) to Lessee promptly
following receipt by Lessor of a written application signed by Lessee for
payment to Lessee for repairing or restoring the Car which has been damaged, so
long as (1) Lessee shall have complied with the applicable provisions of this
Lease, and (2) Lessee shall have certified that any damage to such Car shall
have been fully repaired or restored; or (y) if this Lease is terminated with
respect to such Car because of an Event of Loss and Lessee has paid or cause to
be paid the Stipulated Loss Value and all other amounts then due as a result
thereof, such proceeds promptly shall be paid over to, or retained by, Lessee.
The remaining fifty percent (50%) of the proceeds from any property and casualty
insurance or third party payment for damages to any Car will paid immediately to
Lessee, by Lessor, conditional on the use of these proceeds by Lessee for
immediate full repair and restoration of the damaged Car(s) and further
conditional on the fact that there has been no Default which is then occurred or
is continuing.

     (d) At any time Lessor may, at its own cost and expense, carry insurance
with respect to its interest in the Cars, provided that such insurance does not
interfere with Lessee's ability to insure the Cars as required by this Section
14 or adversely affect Lessee's insurance or the cost thereof, it being
understood that all salvage rights to each Car shall remain with Lessee's
insurers at all times. Any insurance payments received from policies maintained
by Lessor pursuant to the previous sentence shall be retained by Lessor without
reducing or otherwise affecting Lessee's obligations hereunder.

     15. REPORTS; INSPECTION. (a) From time to time, at the reasonable request
of Lessor, Lessee shall furnish Lessor with an accurate statement, as to the
amount, description and reporting marks of the Cars then leased hereunder, and
such other information concerning the condition or repair of the Cars as Lessor
reasonably may request. (b) Lessor shall have the right, but not the obligation,
at its expense to inspect the Cars and Lessee's records with respect thereto,
during Lessee's normal business hours and upon reasonable prior notice to Lessee
and provided that the Cars are on Lessee property (if the Cars are not on Lessee
property Lessee agrees to use its best efforts in assisting Lessor to obtain
access to such premises); provided, however, that Lessee shall not be liable for
any injury to, or the death of, any person exercising, on behalf of Lessor or
any prospective user, the rights of inspection granted hereunder. No inspection
pursuant to this Section 15 shall interfere with the use, operation or
maintenance of the Cars or the normal conduct of Lessee's business, and Lessee
shall not be required to undertake or incur any additional liabilities in
connection therewith. Lessor agrees that Lessor shall bear the risk of loss to
any persons or property resulting from the exercise of Lessor's inspection
rights, and Lessor agrees to hold Lessee harmless and indemnify Lessee against
any loss or damage to any persons or property resulting from the exercise, of
Lessor's inspection rights so long as such loss or damage is not the result of
Lessee's gross negligence or the gross negligence of any person acting by,
through or under Lessee.

                                       8

<PAGE>

     16. REDELIVERY OF CARS. Lessee shall provide to Lessor not less than one
hundred eighty (180) and not more than two hundred forty (240) days' prior
written notice before the end of the then applicable term of this Lease before
returning the Cars. Upon expiration of the term of this Lease with respect to
any Car which has not been purchased by Lessee pursuant to the exercise by
Lessee of its purchase option hereunder or for which the Lessee has not already
paid Lessor the Stipulated Loss Value thereof pursuant to Section 13 hereof,
Lessee will, at its own cost and expense, redeliver or cause to be redelivered
possession of such Car to Lessor (a) in the same condition as when delivered to
Lessee hereunder, ordinary wear and tear resulting from proper use thereof alone
excepted, (b) free and clear of all liens, encumbrances or rights of others
whatsoever (other than Permitted Liens), (c) in the condition required by
Sections 9 and 10 hereof and in compliance with the provisions of Rider No. 2
attached hereto, (d) empty, clean and free from all Hazardous Substances (as
hereinafter defined), and otherwise fully in compliance with all Environmental
Laws (as hereinafter defined) and other applicable laws, (e) free of any
markings other than markings pursuant to Section 7 hereof, and (f) having
attached or affixed thereto any parts, alterations or additions and replacements
considered a Required Modification. For the purpose of delivering possession of
the Cars as required herein, Lessee shall, at Lessor's request and at Lessee's
cost, risk and expense: (1) cause the Cars to be stored on such storage tracks
at Lessee's facility or otherwise as Lessee reasonably may designate at not more
than ten (10) locations, for up to one hundred twenty (120) days of such return
date, without charge for rent or storage, and at Lessee's risk (and Lessee shall
provide insurance during the storage period), until the Cars have been sold,
leased or otherwise disposed of or repossessed by Lessor, and/or (2) forthwith
return the Cars to any location or locations specified by Lessor within the
Continental United States on or adjacent to tracks on which the Cars can be
operated; provided, however, Lessor shall only be permitted to make a single
election pursuant to Clause (1) or (2) for each Car. Upon request of Lessor and
at Lessee's own cost and expense, three (3) copies of all maintenance logs kept
by Lessee with respect to the Cars shall be made available to Lessor or its
designee as soon as practicable after the return of such Car.

     The assembling, delivery, storage and transporting of the Cars as
hereinabove provided shall be at the expense of Lessee and are of the essence of
this Lease, and upon application to any court of equity having jurisdiction in
the premises, Lessor shall be entitled to a decree against Lessee requiring
specific performance of the covenants of Lessee so to assemble, deliver, store
and transport the Cars. Subject to the restrictions in Section 15, during any
storage period, Lessee will permit Lessor or any person designated by it,
including the authorized representative or representatives of any prospective
purchaser or user of the Cars, to inspect the Cars. In the event that any Cars
are not purchased by the Lessee as provided in the Lease Documents and such Cars
are not returned on the day following the termination for such Cars as set forth
in the relevant Equipment Schedule, Lessee shall pay to Lessor rent at the rate
set forth in Section 2 (pro-rated daily) ("Base Rent") which shall accrue from
the date of termination for such Cars as set forth in the relevant Equipment
Schedule until the first to occur of (i) the redelivery of such Cars to Lessor
pursuant to the conditions required by this Lease, and (ii) the sixtieth (60th)
day from the day of termination of the term for such Cars. Any Cars that have
not been delivered to Lessor pursuant to and in the condition required by this
Lease within sixty (60) days following termination of the term for such Cars
shall thereafter accrue rent at a rate equal to one hundred twenty-five percent
(125%) of Base Rent (pro-rated daily), increasing by an additional twenty-five
percent (25%) of Base Rent on each thirty (30) day period thereafter until such
Cars are returned in accordance with this Lease. All such amounts ("Holdover
Rent") shall be payable at the end of each calendar month through and including
the month in which such Car has been returned and acceptance of any Holdover
Rent by the Lessor shall neither constitute a waiver of any of the terms of this
Lease or constitute a renewal of this Lease; provided, however, that Holdover
Rent shall not continue to accrue for each group of fifty (50) Cars (or the
balance of all Cars should the remaining balance of Cars be less than fifty
(50)) upon confirmation by Lessor that (i) such a group of Cars is assembled
(pursuant to this Section 16), and (ii) all Cars in such group are in the
condition required by this Lease. Lessor may, in its sole discretion, cause the
Cars to be inspected by an inspector selected by Lessor at least sixty (60) days
prior to the scheduled return or storage of the Cars, and, if Lessor causes such
inspection, Lessor promptly shall provide Lessee with such inspector's written
report identifying those repairs necessary to put the Cars in the condition
required by this Lease. If any Car is not in the condition required by this
Lease, Lessee shall pay the reasonable cost of such inspection. Lessee may
complete such repairs prior to the return or storage of the Cars. If Lessee does
not so repair, Lessee agrees to pay the cost of such repairs and further agrees
to pay Lessor rent for the period of time reasonably necessary to accomplish
such repairs based on a daily pro-rated amount of the previously prevailing
rent. Lessor's acceptance of such rent on account of such delay or repair does
not constitute a renewal of the term of this Lease or a waiver of Lessor's right
to prompt return of such Car in proper condition.

                                       9

<PAGE>

                                                                       EXECUTION
                                                                         VERSION

     17. INDEMNITY. (a) General. Lessee assumes and agrees to indemnify, defend
                        -------
and keep harmless Lessor, and any assignee of Lessor's rights, obligations,
title or interests under any Equipment Schedule, its affiliates and their agents
and employees ("Indemnitees"), from and against any and all Claims (other than
such as may directly and proximately result from the gross negligence or willful
misconduct of such Indemnitees), by paying (on an after-tax basis taking into
account all relevant, current, and future costs and benefits) or otherwise
discharging same, when and as such Claims shall become due. Lessor shall give
Lessee prompt notice of any Claim hereby indemnified against, provided that
Lessor's failure to provide such notice shall not preclude Lessee's obligation
to indemnify for any Claim so long as such failure does not materially prejudice
Lessee. Lessee shall be entitled to control the defense thereof, so long as no
Default has occurred and is then continuing and so long as there is no conflict
of interest between Lessor and Lessee which, in Lessor's reasonable judgment,
makes it inadvisable for Lessee to control the defense thereof. Lessor shall
have the right to retain separate counsel to represent it in connection with any
claim at its own expense, provided that if Lessor shall have retained such
counsel as a result of a conflict of interest which would preclude Lessee and
Lessor from being represented by the same counsel, the fees and expenses of such
counsel shall be indemnified by Lessee hereunder. Lessor agrees that it will
cooperate (at Lessee's expense) with all reasonable requests of Lessee in the
defense of any action to which Lessor is entitled to indemnification and defense
hereunder. For the purposes of this Lease, the term "Claims" shall mean all
claims, allegations, harms, judgments, good faith settlements entered into,
suits, actions, debts, obligations, damages (whether incidental, consequential
or direct), demands (for compensation, indemnification, reimbursement or
otherwise), losses, penalties, fines, liabilities (including strict liability),
charges that Lessor has incurred or for which it is responsible, in the nature
of interest, Liens, and costs (including attorneys' fees and disbursements and
any other legal or non-legal expenses of investigation or defense of any Claim,
whether or not such Claim is ultimately defeated or enforcing the rights,
remedies or indemnities provided for hereunder, or otherwise available at law or
equity to Lessor), of whatever kind or nature, contingent or otherwise, matured
or unmatured, foreseeable or unforeseeable, by or against any person, arising on
account of (a) any Lease Document, or (b) the Cars, or any part thereof,
including the ordering, acquisition, delivery, installation or rejection of the
Cars, the possession, maintenance, use, condition, ownership or operation of any
Car, and by whomsoever owned, used or operated, during the term of any Equipment
Schedule with respect to that Car, the existence of latent and other defects
(whether or not discoverable by Lessor or Lessee), any claim in tort for
negligence or strict liability, any claim for patent, trademark or copyright
infringement, and any Environmental Claim or Environmental Loss (as such terms
are hereinafter defined), or the loss, damage, destruction, removal, return,
surrender, sale or other disposition of the Cars, or any item thereof.
Notwithstanding the foregoing, Lessee shall not have any obligation for any
Claim to the extent that such Claim results from (i) the willful misconduct or
gross negligence of the party or entity seeking indemnification, (ii) the
incorrectness or inaccuracy of any representation made by the party or entity
seeking indemnification hereunder, (iii) any taxes other than as provided in
Section 17(b) (taxes being the subject of a separate indemnity in Section
17(b)), (iv) any Claims attributable to a Lien created by or through Lessor, (v)
any Claims resulting from an assignment by Lessor pursuant to Section 21 (except
an assignment in connection with the exercise by Lessor of its remedies in
Section 18), (vi) and Claims arising in connection with any Cars after such Cars
have been returned by Lessee to Lessor in the condition required by Section 16
following the expiration or early termination of the term for such Cars;
provided, however, nothing contained herein shall relieve Lessee of its
obligation to indemnify the Indemnitees for Claims which relate to or arise out
of facts or conditions giving rise to any Claim which occurred or were in
existence prior to such return, or (vii) any Liens created by or through Lessor.

     (b) Tax. (1) Lessee represents and warrants that: (A) Lessee shall not
         ---
permit any Car to be physically located outside the United States during more
than fifty (50) percent of any taxable year of Lessee; and (B) the Cars are, and
will be used by Lessee so as to remain, property eligible for the MACRS
Deductions (as defined below).

          (2) If (A) by reason of (i) any act or failure to act of Lessee
(including a breach of any covenant of Lessee set forth herein), or (ii) the
misrepresentation of or breach by Lessee of any of the warranties and
representations set forth in subpart (b)(1) of this Section, Lessor in computing
its taxable income or liability for tax, shall lose, or shall not have, or shall
lose the right to claim or there shall be disallowed or recaptured for Federal
and/or state income tax purposes, in whole or in part, the benefit of MACRS
Deductions; or (B) Lessor shall become liable for additional tax as a result of
Lessee having replaced any

                                       10

<PAGE>

Car pursuant to the terms of the Lease, or having added an attachment or made an
alteration to the Cars, including (without limitation) any such attachment or
alteration which would increase the productivity or capability of the Cars so as
to violate the provisions of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156, or Rev.
Proc. 2001-29, 2001-19 I.R.B. 1160 (as either or both may hereafter be modified
or superseded); or (C) Lessor shall be entitled to claim a lesser credit for
foreign taxes against its Federal income tax liability for any taxable year than
that to which Lessor would have been entitled if each item of income, gain, loss
and deduction with respect to the Cars had been treated as income from sources
within the United States pursuant to Section 861 of the Code; (any event in (A),
(B) or (C) hereinafter referred to as a "Loss"); then Lessee shall pay Lessor
the Tax Indemnification Payment as additional rent and Lessor shall revise the
Equipment Schedule(s) of Stipulated Loss Values to reflect the Loss. As used
herein, "MACRS Deductions" shall mean with respect to any Car the deductions
under Section 167 of the Internal Revenue Code of 1986, as now or hereafter
amended (the "Code"), commencing in the taxable year in which the Funding Date
for such Car occurs, determined in accordance with the modified Accelerated Cost
Recovery System with respect to the Total Cost of such Car using the accelerated
method set forth in Section 168(b)(1) of the Code as in effect on the date of
this Lease for property assigned to the 7-year class of property; "Lessor" shall
be deemed to include the consolidated Federal taxpayer group of which Lessor or
any Assignee (as applicable) is a member; and "Tax Indemnification Payment"
shall mean such amount as, after consideration of (i) all taxes required to be
paid by Lessor in respect of the receipt thereof under the laws of any
governmental or taxing authority in the United States, and (ii) the amount of
any interest or penalty which may be payable by Lessor in connection with the
Loss, shall be required to cause Lessor's after-tax net return, calculated using
the same assumptions used by Lessor to calculate the Basic Rent specified for
the affected Cars on the date of the Equipment Schedule in which such Cars are
listed except to the extent that the Loss changes (or any prior Loss changed)
any of those assumptions, (the "Net Return") to be equal to, but no greater
than, the Net Return computed consistently with current tax laws (and with the
assumption that Lessor is taxed at the highest marginal Federal and state tax
rates) as of the date of this Lease that would have been available to Lessor had
the Loss not occurred.

          (3) Lessor shall be responsible for, and shall not be entitled to a
Tax Indemnification Payment by Lessee on account of, any Loss to the extent
arising as a result of the occurrence of any one or more of the following
events: (a) the failure of Lessor to timely and properly claim MACRS Deductions
in the tax return of Lessor unless in the reasonable opinion of Lessor's tax
counsel there is no reasonable basis for such claim (a copy of which written
opinion shall have been received by Lessee at least 30 days before the filing of
the return on which Lessor failed to claim such MACRS Deductions); or (b) the
failure of Lessor to have sufficient taxable income before application of the
MACRS Deductions to offset the full amount of such MACRS Deductions; or (c) any
event which by the terms of the Lease requires payment by Lessee of the
Stipulated Loss Value if such payment is thereafter actually made to Lessor; or
(d) a sale of any item of the Cars or the Lease by Lessor unless in connection
with an exercise of remedies after the occurrence of a Default.

          (4) Lessor promptly shall notify Lessee in writing of such Loss
(provided that Lessor's failure to provide such notice shall not affect Lessee's
obligation to indemnify Lessor unless such failure precludes a contest of such
Loss) and Lessee shall pay to Lessor the Tax Indemnification Payment within
thirty (30) days after the latest of the following dates: (i) the date on which
Lessor gives Lessee such notice of the occurrence of such Loss (which notice
shall include a description in reasonable detail of such Loss and the
calculation of the Tax Indemnification Payment requested by Lessor), (ii) the
date on which Lessor files its federal income tax return, or makes a payment of
estimated tax, in which such Loss is taken into account, and (iii) if Lessee has
requested that such Loss be contested pursuant to Section 17(b)(5), the date of
the final determination of such contest. For these purposes, a Loss shall occur
upon the earliest of: (A) the happening of any event (such as disposition or
change in use of any of the Cars) which will cause such Loss, (B) the payment by
Lessor to the Internal Revenue Service or state taxing authority of the tax
increase (including an increase in estimated taxes) resulting from such Loss;
(C) the date on which the Loss is realized by Lessor; or (D) the adjustment of
the tax return of Lessor to reflect such Loss.

          (5) If Lessor receives from the Internal Revenue Service a written
notice of a proposed adjustment or notice of deficiency which, if accepted by
Lessor, would result in a Loss (a "Tax Claim"), Lessor shall send a copy of such
notice (or the portion thereof relating to such Loss) to Lessee within thirty
(30) days after receiving such notice. Provided that no Default has occurred and
is continuing, if Lessee so requests in writing within thirty (30) days after
Lessee receives such written notice, accompanied by a

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<PAGE>

written opinion of independent tax counsel selected by Lessee and reasonably
acceptable to Lessor ("Tax Counsel") to the effect that there is a reasonable
basis (within the meaning of ABA Formal Opinion 85-352) for contesting such Tax
Claim, and discussing the authority in support of such opinion, Lessor shall in
good faith contest such Tax Claim in appropriate administrative and/or judicial
proceedings so long as the amount of such Tax Claim, together with any similar
Tax Claim that may be made with respect to the Cars, is greater than $100,000
and Lessee acknowledges in writing its obligation to indemnify for such Loss
unless the final determination of the contest demonstrates that Lessee is not
required by this Section 17(b) to indemnify Lessor for such Loss (including all
available appeals requested by Lessee in writing, and, in the case of an appeal
of an adverse court decision, accompanied by a written opinion of Tax Counsel to
the effect that there is a meritorious basis for appeal, but provided that
Lessor shall not be required to seek Supreme Court review of an adverse decision
). Lessor shall control all aspects of the contest, considering in good faith
any suggestions made by Lessee. Lessee shall pay all reasonable professional
fees and other reasonable out-of-pocket expenses incurred by Lessor to contest
such Tax Claim. Lessor may refuse to conduct a contest otherwise required under
this Section 17(b)(5), or may settle any Tax Claim that Lessee has requested
Lessor to contest without the prior written consent of Lessee, provided that in
such event Lessee shall be relieved of its obligation under this Section 17(b)
to pay Lessor any Tax Indemnification Payment for any Loss that was the subject
of such Tax Claim or for any related Loss in any other taxable year to the
extent that such settlement materially adversely affects a contest of such
related Loss.

          (6) To the extent Lessor obtains a refund of any tax, penalty,
addition to tax and/or interest for which Lessee has indemnified Lessor, Lessor
shall pay to Lessee the amount of such refund plus the amount of any interest
received by Lessor with respect to such refund, plus the amount of any Lessor
tax saving resulting from such payment, provided that (i) the amount payable by
Lessor under this Section 17(b)(6) (excluding the amount thereof, if any,
representing interest received by Lessor with respect to such refund) shall not
exceed the amount paid by Lessee with respect to such Loss, and (ii) Lessor
shall not be required to pay such refund if a Default is continuing unless and
until such Default ceases to exist.

          (7) To the extent that the income tax liability of Lessor with respect
to any taxable year is reduced as a result of a Loss for which Lessee paid a Tax
Indemnification Payment to Lessor, Lessor shall pay to Lessee the amount of such
tax saving plus the amount of any additional Lessor tax saving resulting from
such payment, provided that (i) the amount payable by Lessor under this Section
17(b)(7) shall not exceed the amount paid by Lessee with respect to such Loss,
and (ii) Lessor shall not be required to make any such payment if a Default has
occurred and is continuing unless and until such Default ceases to exist. Lessee
shall indemnify Lessor for any refund or tax saving paid by Lessor to Lessee
which subsequently becomes disallowed or recaptured.

          (8) Lessor shall cause each of its Affiliates to comply with the
obligations of "Lessor" under this Section 17.

          (9) At Lessee's written request, Lessor's calculation of a Tax
Indemnification Payment which is at least $50,000 Dollars shall be submitted to
a nationally recognized public accounting firm selected by Lessor and reasonably
acceptable to Lessee to verify the accuracy of Lessor's calculations. If Lessee
pays a Tax Indemnification Payment before completion of such review, appropriate
adjustments will be made after completion of the review to take into account any
redetermination of such Tax Indemnification Payment by the accounting firm.
Lessee shall pay the fees and expenses charged by the accounting firm for such
review unless such accounting firm concludes that the Tax Indemnification
Payment calculated by the Lessor exceeds the Tax Indemnification Payment
properly due by an amount exceeding 10% of the Tax Indemnification Payment
calculated by Lessor.

          (c) The obligations of Lessee and Lessor under this Section, which
accrue during the term of this Lease, shall survive the expiration or
termination of this Lease.

     18. DEFAULT; REMEDIES. (a) Lessee shall be deemed to be in default
hereunder ("Default") if (1) Lessee shall fail to make any payment of Basic Rent
or any other payment hereunder within ten (10) days after the same shall have
become due; or (2) Lessee shall fail to obtain and maintain the insurance
required herein; or (3) Lessee shall fail to perform or observe any other
covenant, condition or agreement to be performed or observed by it hereunder and
such failure shall continue unremedied for a period of thirty (30) days after
written notice thereof to Lessee by Lessor, unless such failure is not curable
within such

                                       12

<PAGE>

thirty (30) days, and Lessee is diligently pursuing a cure, in which case Lessee
shall have ninety (90) days after written notice thereof to Lessee by Lessor to
effect such cure; or (4) Lessee shall (A) not pay its debts generally as they
become due within the meaning of the Bankruptcy Code; or (B) take action for the
purpose of invoking the protection of any bankruptcy or insolvency law, or any
such law is invoked against or with respect to Lessee or its property, and any
such petition filed against Lessee is not dismissed within ninety (90) days; or
(5) Lessee shall make or permit any unauthorized assignment or transfer of this
Lease, an Equipment Schedule, the Cars or any interest therein; or (6) any
certificate, statement, representation, warranty or audit contained herein or
heretofore or hereafter furnished with respect hereto by or on behalf of Lessee
proving to have been false in any material respect at the time as of which the
facts therein set forth were stated or certified, or having omitted any material
contingent or unliquidated liability or claim against Lessee; or (7) Lessee
shall be in default under any (i) loan, lease, guaranty, installment sale or
other financing agreement or financing contract, of which Lessor or any of its
affiliates is a party or beneficiary, involving amounts owed in the aggregate in
excess of Ten Million Dollars ($10,000,000) or (ii) any material obligation for
the payment of borrowed money, for the deferred purchase price of property or
any payment under any lease agreement involving amounts owed in the aggregate in
excess of Ten Million Dollars ($10,000,000), and such default shall have been
declared and not yet cured; or (8) (i) Lessee shall have terminated its
corporate existence, consolidated with, merged into, or conveyed or leased
substantially all of its assets as an entirety to any Person or (ii) if Lessee
is a privately-held corporation and effective control of Lessee's voting stock,
issued and outstanding from time to time, is not retained by the present
stockholders excluding any initial public offering conducted by Lessee on or
before September 14, 2002 (such actions under this Section 18(a)(8) being
referred to as an "Event"), unless immediately prior to such Event: (A) such
Person executes and delivers to Lessor an agreement satisfactory in form and
substance to Lessor, in its reasonable discretion, containing such Person's
effective assumption, and its agreement to pay, perform, comply with and
otherwise be liable for, in due and punctual manner, all of Lessee's obligations
having previously arisen, or thereafter arising, under any Lease Document or
Lessor shall have consented to the proposed disposition of stock in writing, as
the case may be; and (B)(1) such Person or the new entity has a Net Worth equal
to or greater than Lessee's Net Worth as of June 29, 2001, as published in
Lessee's 10-Q as filed with the Securities and Exchange Commission and has a
credit rating from Standard & Poor's equal to or better than B+; or (2) such
Person or the new entity has a Net Worth of at least $25,000,000 greater than
Lessee's Net Worth as of June 29, 2001, as published in Lessee's 10-Q as filed
with the Securities and Exchange Commission. For the avoidance of doubt, the
parties agree that the occurrence of an "Event" as defined in the Railcar Lease
Agreement dated as of January 2, 2001 between Lessee and LaSalle National
Leasing Corporation, as incorporated into Equipment Schedules 2, 3 and 4 thereto
(the "Existing Lease Agreement"), which occurs later than the date set forth in
Section 18(a)(8) of the Existing Lease Agreement, may constitute a Default
hereunder pursuant to Section 18(a)(7) hereof even if such "Event" would not
constitute a Default pursuant to Section 18(a)(8) hereof. Accounting terms used
herein (including the term "Net Worth") shall be as defined, and all
calculations shall be made, in accordance with GAAP.

     (b) The occurrence of a Default with respect to any Equipment Schedule
shall, at the sole discretion of Lessor, constitute a Default with respect to
each or any Equipment Schedule. Notwithstanding anything set forth herein,
Lessor may exercise all rights and remedies hereunder independently with respect
to each Equipment Schedule.

     (c) Upon the occurrence of a Default Lessor may, at its option, declare
this Lease and/or an Equipment Schedule to be in default by written notice to
Lessee (without election of remedies), and at any time thereafter, may do any
one or more of the following, all of which are authorized by Lessee:

          (i) require Lessee to assemble any or all of the Cars to such
interchange point on the tracks of Lessee as Lessor shall designate; and/or to
return promptly, at Lessee's expense, any or all of the Cars to Lessor at the
location, in the condition and otherwise in accordance with all of the terms of
Section 6 hereof; and/or take possession of and render unusable by Lessee any or
all of the Cars, wherever they may be located, without any court order or other
process of law and without liability for any damages occasioned by such taking
of possession (other than to premises) not attributable to the gross negligence
or willful misconduct of Lessor or its agents (any such taking of possession
shall constitute an automatic cancellation of this Lease as it applies to those
items taken without further notice, and such taking of possession shall not
prohibit Lessor from exercising its other remedies hereunder);

                                       13

<PAGE>

          (ii) sell, re-lease or otherwise dispose of any or all of the Cars,
whether or not in Lessor's possession, in a commercially reasonable manner at
public or private sale with notice to Lessee (the parties agreeing that ten (10)
days' prior written notice shall constitute adequate notice of such sale), with
the right of Lessor to apply the net proceeds of such disposition, after
deducting all costs of such disposition (including, but not limited to, costs of
transportation, possession, storage, refurbishing, advertising and brokers'
fees), to the obligations of Lessee pursuant to this sub-part (ii), with Lessee
remaining liable for any deficiency and with any excess being retained by
Lessor; or retain any or all of the Cars; and recover from Lessee damages, not
as a penalty, but herein liquidated for all purposes as follows:

               (1) if Lessor elects to dispose of the Cars pursuant to a lease
which is substantially similar to this Lease: in an amount equal to the sum of
(A) any accrued and unpaid Basic Rent due under this Lease as of the date of
commencement (the "Commencement Date") of the term of the new lease, and (B) the
present value as of the Commencement Date of the total Basic Rent for the then
remaining term of this Lease minus the present value as of the Commencement Date
of the rent under the new lease applicable to that period of the new lease term
which is comparable to the then remaining term of this Lease, and (C) any
incidental damages allowed under Uniform Commercial Code Article 2A - Leases
("Article 2A"), less expenses saved by Lessor in consequence of the Default
("Incidental Damages");

               (2) if Lessor elects to retain the Cars or to dispose of the Cars
by sale, by re-lease (pursuant to a lease which is not substantially similar to
this Lease), or otherwise: in an amount equal to the sum of: (A) any accrued and
unpaid Basic Rent as of the date Lessor repossesses the Cars or such earlier
date as Lessee tenders possession of the Cars to Lessor, (B) the present value
as of the date determined under clause (A) of the total Basic Rent for the then
remaining term of this Lease minus the present value as of the same date of the
"market rent" (as defined in Article 2A) at the place where the Cars were
located on that date computed for the same lease term, and (C) any Incidental
Damages (provided, however, that if the measure of damages provided is
inadequate to put Lessor in as good a position as performance would have, the
damages shall be the present value of the profit, including reasonable overhead,
Lessor would have made from full performance by Lessee, together with any
incidental damages allowed under Article 2A, due allowance for costs reasonably
incurred and due credit for payments or proceeds of disposition);

          (iii) In lieu of the damages specified in subpart (ii), Lessor may
recover from Lessee, as liquidated damages for loss of a bargain and not as a
penalty, an amount calculated as the sum of (1) the Stipulated Loss Value of the
Cars (as determined as of the next date on which a payment is or would have been
due after the declaration of a Default), together with all other sums due
hereunder through the date of such payment with respect to such Cars; plus (2)
the amount of all commercially reasonable cost and expenses incurred by Lessor
in connection with repossession, recovery, storage, repair, sale, release or
other disposition of the Cars, including reasonable attorneys' fees and costs
incurred in connection therewith or otherwise resulting from Lessee's Default;
provided, however, if Lessor has repossessed and disposed of the Cars, Lessor
shall apply the Net Proceeds of such disposition to reimburse Lessee for an
amount up to, but in no event exceeding, that portion of the Stipulated Loss
Value that Lessee has paid to Lessor pursuant to this subpart (iii); as used
herein, "Net Proceeds" shall mean (a), in the case of a disposition by sale, the
gross selling price actually received, or (b), in the case of a disposition by
lease, the present value of the rent actually due during that period of the new
lease term which is comparable to the then remaining term of this Lease, or, if
shorter, the new lease term plus the present value of the Lessor Risk Amount (as
defined in the applicable Equipment Schedule) at the end of the Lease term, in
each case less (A) amounts which (if not paid) would constitute a lien on the
Cars for which Lessee is responsible for under this Lease, and (B) applicable
sales, transfer, use or comparable taxes paid by Lessor. For purposes of the
definition of Net Proceeds, the new lease payments shall be discounted at a rate
equal to the rate implicit in the Basic Rent due during the term of this Lease
in which the Default occurs;

          (iv) cancel this Lease as to any or all of the Cars; and/or

          (v) proceed by appropriate court action, either at law or in equity
(including an action for specific performance), to enforce performance by Lessee
or to recover damages for the breach hereof; or exercise any other right or
remedy available to Lessor at law or in equity.

                                       14

<PAGE>

         All amounts to be present valued shall be discounted at a rate equal to
the discount rate of the Federal Reserve Bank of Richmond in effect on the
applicable date. Unless otherwise provided above, a cancellation hereunder shall
occur only upon written notice by Lessor to Lessee and only with respect to such
items of the Cars as Lessor specifically elects to cancel in such notice. Except
as to such Cars with respect to which there is a cancellation, this Lease shall
remain in full force and effect and Lessee shall be and remain liable for the
full performance of all its obligations hereunder. In addition, Lessee shall be
liable for all reasonable legal fees and other expenses incurred by reason of
any Default or the exercise of Lessor's remedies, including all expenses
incurred in connection with the return of any Cars in accordance with the terms
of Section 16 hereof or in placing such Cars in the condition required by said
Section. No right or remedy referred to in this Section is intended to be
exclusive, but each shall be cumulative and shall be in addition to any other
remedy referred to above or otherwise available at law or in equity, and may be
exercised concurrently or separately from time to time. The failure of Lessor to
exercise the rights granted hereunder upon any Default by Lessee shall not
constitute a waiver of any such right upon the continuation or reoccurrence of
any such Default. In no event shall the execution of an Equipment Schedule
constitute a waiver by Lessor of any pre-existing Default in the performance of
the terms and conditions hereof.

     19. [INTENTIONALLY OMITTED.]

     20. LESSOR'S RIGHT TO PERFORM. If Lessee fails to make any payment required
to be made by it hereunder or fails to perform or comply with any of its other
agreements contained herein and such failure can be cured with the payment of
money, Lessor may itself make such payment or perform or comply with such
agreement, but shall not be obligated hereunder to do so, and the amount of such
payment and of the reasonable expenses of Lessor incurred in connection with
such payment or the performance of or compliance with such agreement, as the
case may be, together with interest thereon at the Late Charge Rate, to the
extent permitted by applicable law, shall be payable by Lessee to Lessor on
demand.

     21. ASSIGNMENT. (a) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH
SHALL NOT UNREASONABLY BE WITHHELD), LESSEE WILL NOT ASSIGN, TRANSFER OR
ENCUMBER ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR ITS LEASEHOLD INTEREST,
SUBLET THE CARS OR OTHERWISE PERMIT THE CARS TO BE OPERATED OR USED BY, OR TO
COME INTO OR REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE, ITS EMPLOYEES AND
AGENTS PROVIDED, HOWEVER, THAT SO LONG AS NO DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING, LESSEE SHALL HAVE THE RIGHT, WITHOUT LESSOR'S PRIOR CONSENT, TO PUT
THE CARS IN THE POSSESSION OF ANY REPUTABLE REPAIR FACILITY FOR THE PURPOSE OF
ANY REPAIRS, MODIFICATIONS, CHANGES OR ALTERATIONS PERMITTED UNDER THE RELEVANT
LEASE, SUCH WORK TO BE PERFORMED ON THE TERMS CONFERRING NO MORE THAN A
CONTRACTUAL RIGHT AGAINST LESSEE AND NO RIGHT AGAINST THE CAR; AND, PROVIDED,
FURTHER, THAT LESSEE MAY PLACE THE CARS INTO THE INTERCHANGE PROGRAM UNDER THE
AAR INTERCHANGE RULES. No assignment or sublease, whether authorized in this
Section or in violation of the terms hereof, shall relieve Lessee of its
obligations hereunder and Lessee shall remain primarily liable hereunder. Lessee
will not, without the prior written consent of Lessor, sublease or otherwise in
any manner deliver, transfer or relinquish possession of any Car. (b) Lessor may
assign any or all of its rights, obligations, title and interest hereunder, or
the right to enter into any Equipment Schedule; provided, however, that no such
assignment by Lessor may materially increase the burdens or risks placed on
Lessee under the relevant Lease, or may resell (through syndication, assignment,
participation or placements) an interest in any or all of the Cars, this Lease
or any Equipment Schedule. Each Equipment Schedule, incorporating by reference
the terms and conditions of this Lease, constitutes a separate instrument of
lease, and the "Lessor" named therein or its assignee shall have all rights as
"Lessor" thereunder separately exercisable by such named Lessor or assignee as
the case may be, exclusively and independently of Lessor or any assignee with
respect to other Equipment Schedules executed pursuant hereto. Lessee agrees to
confirm in writing receipt of any notice of assignment, syndication,
participation or placement, as reasonably may be requested by Lessor or any such
assignee or participant (collectively, the "Assignee"). Without waiving any
rights Lessee may have against Lessor, Lessee hereby waives and agrees not to
assert against any such Assignee any defense, setoff, recoupment, claim or
counterclaim which Lessee has or may at any time hereafter have against Lessor
or any Person other than such Assignee, for any reason

                                       15

<PAGE>

whatsoever. Lessee will provide reasonable assistance to Lessor in whatever
manner necessary but at Lessor's expense in order to permit Lessor to complete
any resale, syndication, assignment, participation or placement of the
transaction contemplated by this Lease. Lessee agrees that any such assignment
shall not materially change Lessee's duties or obligations under this Lease or
any Equipment Schedule, or materially increase Lessee's risks or burdens. Upon
such assignment and except as may otherwise by provided herein, all references
in this Lease to Lessor shall include such Assignee. (c) Subject always to the
foregoing, this Lease inures to the benefit of, and is binding upon, the
successors and assigns of the parties hereto.

     22. MISCELLANEOUS. (a) This Lease and the Equipment Schedules constitute
the entire agreement between the parties with respect to the subject matter
hereof and shall not be rescinded, amended or modified in any manner except by a
document in writing executed by both parties. (b) Any provision of this Lease
which is 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. (c) The
representations, warranties and covenants of Lessee herein shall be deemed to be
continuing on the closing hereunder. Each execution by Lessee of an Equipment
Schedule shall be deemed a reaffirmation and warranty that there shall have been
no material adverse change in the business or financial condition of Lessee from
the date of execution hereof. The obligations of Lessee under Sections 9, 11, 16
and 17, which accrue during the term of this Lease, shall survive the
termination of this Lease. The obligations of Lessor under Sections 11 and 17,
which accrue during the term of this Lease, shall survive the termination Lease.
(d) Lessor represents and covenants to Lessee that Lessor has full authority to
enter into this Lease and that, conditioned upon Lessee performing all of the
covenants and conditions hereof, as to claims of Lessor or persons claiming
under Lessor, Lessee shall peaceably and quietly hold, possess and use the Cars
during the term of this Lease subject to the terms and provisions hereof. Lessor
further agrees to enforce Lessee's right of quiet enjoyment as provided for
herein against Liens (as defined in Section 12) of third parties created by or
through Lessor. (e) Lessee irrevocably appoints Lessor as Lessee's
attorney-in-fact (which power shall be deemed irrevocable and coupled with an
interest) to execute, endorse and deliver any documents and checks or drafts
relating to or received in payment for any loss or damage under the policies of
insurance required by the provisions of Section 11 hereof, but only to the
extent that the same relates to the Cars. (f) LESSEE HEREBY WAIVES TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO WHICH LESSEE AND LESSOR MAY BE PARTIES ARISING
OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE. IT IS HEREBY AGREED AND
UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES
WHO ARE NOT PARTIES TO THIS LEASE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY MADE BY LESSEE AND LESSEE HEREBY ACKNOWLEDGES THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.
LESSEE FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS
LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF
ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL. (g) All notices (excluding billings and communications in the
ordinary course of business) hereunder shall be in writing, personally
delivered, delivered by overnight courier service, sent by facsimile
transmission (with confirmation of receipt), or sent by certified mail, return
receipt requested, addressed to the other party at its respective address stated
below the signature of such party or at such other address as such party shall
from time to time designate in writing to the other party; and shall be
effective upon receipt. (h) This Lease shall not be effective unless and until
accepted by execution by an officer of Lessor. (i) All warranties,
representations, indemnities and covenants made by any party hereto, herein or
in any certificate or other instrument delivered by any such party or on the
behalf of any such party under this Lease shall be considered to have been
relied upon by each other party hereto and shall survive the consummation of the
transactions contemplated regardless of any investigation made by any such party
or on behalf of any such party. (j) If any payment is to be made hereunder or
any action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the next succeeding Business Day. (k) THIS LEASE AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO THE CONFLICT OF LAWS

                                       16

<PAGE>

PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE CARS. (l) The parties agree that
any action or proceeding arising out of or relating to this Lease may be
commenced in any state or Federal court in the State of New York, and agree that
a summons and complaint commencing an action or proceeding in any such court
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address hereinbelow set forth, or
as it may provide in writing from time to time, or as otherwise provided under
the laws of the State of New York. (m) This Lease and all of the other Lease
Documents may be executed in any number of counterparts and by different parties
hereto or thereto on separate counterparts, each of which, when so executed and
delivered, shall be an original, but all such counterparts shall together
consist of but one and the same instrument; provided, however, that to the
extent that this Lease and/or the Equipment Schedule would constitute chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest herein or therein may be
created through the transfer or possession of this Lease in and of itself
without the transfer or possession of the original of such Equipment Schedule
and incorporating the Lease by reference; and no security interest in this Lease
and an Equipment Schedule may be created by the transfer or possession of any
counterpart of such Equipment Schedule other than the original thereof, which
shall be identified as the document marked "Original" and all other counterparts
shall be marked "Duplicate".

     23. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following terms when
used in this Lease or in any Equipment Schedule have the following meanings: (1)
"applicable law" or "law": any law, rule, regulation, ordinance, order, code,
common law, interpretation, judgment, directive, decree, treaty, injunction,
writ, determination, award, permit or similar norm or decision of any
governmental authority; (2) "UCC" or "Uniform Commercial Code": the Uniform
Commercial Code as in effect in the State of New York or in any other applicable
jurisdiction; and any reference to an article (including Article 2A) or section
thereof shall mean the corresponding article or section (however termed) of any
such other applicable version of the Uniform Commercial Code; (3) "governmental
authority": any Federal, state, county, municipal, regional or other
governmental authority, agency, board, body, instrumentality or court, in each
case, whether domestic or foreign. (b) The following terms when used herein or
in any Equipment Schedules shall be construed as follows: "herein," "hereof,"
"hereunder," etc.: in, of, under, etc. this Lease or such other Lease Document
in which such term appears (and not merely in, of, under, etc. the section or
provision where the reference occurs); "including": containing, embracing or
involving all of the enumerated items, but not limited to such items unless such
term is followed by the words "and limited to," or similar words; and "or": at
least one, but not necessarily only one, of the alternatives enumerated. Any
defined term used in the singular preceded by "any" indicates any number of the
members of the relevant class. Any Lease Document or other agreement or
instrument referred to herein means such agreement or instrument as supplemented
and amended from time to time. Any reference to Lessor or Lessee shall include
their permitted successors and assigns. Any reference to a law shall also mean
such law as amended, superseded or replaced from time to time. (c) Unless
otherwise expressly provided herein to the contrary, all actions that Lessee
takes or is required to take under any Lease Document shall be taken at Lessee's
sole cost and expense, and all such costs and expenses shall constitute claims
and be covered by Section 17(a) hereof. (d) To the extent Lessor is required to
give its consent or approval with respect to any matter, the reasonableness of
Lessor's withholding of such consent shall be determined based on the then
existing circumstances; provided, that Lessor's withholding of its consent shall
be deemed reasonable for all purposes if (i) the taking of the action that is
the subject of such request, might result (in Lessor's discretion), in (A) an
impairment of Lessor's rights, title or interests hereunder or under any
Equipment Schedule or other Lease Document, or to the Cars, or (B) expose Lessor
to any Claims, or (ii) to the extent Lessee fails to provide promptly to Lessor
any filings, certificates, opinions or indemnities specified by Lessor to Lessee
in writing. (e) As used herein, the following terms shall have the following
meaning:

     (1)  "Adverse Environmental Condition": shall mean (i) the existence or the
          continuation of the existence, of an Environmental Contamination
          (including, without limitation, a sudden or non-sudden accidental or
          non-accidental Environmental Contamination), of, or exposure to, any
          substance, chemical, material, pollutant, Hazardous Substance, odor or
          audible noise or other release or emission in, into or onto the
          environment (including without limitation, the air, ground, water or
          any surface) at, in, by, from or related to any Car, (ii) the
          environmental aspect of the transportation, storage, treatment or
          disposal of materials in connection with the operation of any Car, or
          (iii) the violation, or alleged violation, of any Environmental Law,
          permits or licenses of,

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<PAGE>

          by or from any governmental authority, agency or court relating to
          environmental matters connected with any Car.

     (2)  "Affiliate" shall mean, with respect to any given Person, any Person
          that directly or indirectly through one or more intermediaries,
          controls, or is controlled by, or is under common control with, such
          Person.

     (3)  "Business Day" shall mean any day other than a Saturday, a Sunday or
          any day on which commercial banks are authorized or required by law to
          be closed in the States of California, Illinois or New York.

     (4)  "Environmental Claim" shall mean any accusation, allegation, notice of
          violation, claim, demand, abatement or other order on direction
          (conditional or otherwise) by any governmental authority or any Person
          for personal injury (including sickness, disease or death), tangible
          or intangible property damage, damage to the environment or other
          adverse affects on the environment, or for fines, penalties or
          restrictions, resulting from or based upon any Adverse Environmental
          Condition.

     (5)  "Environmental Contamination" shall mean any actual or threatened
          release, spill, emission, leaking, pumping, injection, presence,
          deposit, abandonment, disposal, discharge, dispersal, leaching or
          migration into the indoor or outdoor environment, or into or out of
          any Car, including, without limitation, the movement of any Hazardous
          Substance or other substance through or in the air, soil, surface
          water, groundwater or property.

     (6)  "Environmental Law" shall mean any present or future federal, foreign,
          state or local law, ordinance, order, rule or regulation and all
          judicial, administrative and regulatory decrees, judgments and orders,
          pertaining to health, industrial hygiene, the use, disposal or
          transportation of Hazardous Substances, Environmental Contamination,
          or pertaining to the protection of the environment, including, but not
          limited to, the Comprehensive Environmental Response, Compensation,
          and Liability Act ("CERCLA") (42 U.S.C.Section.9601 et seq.), the
                                                              -- ---
          Hazardous Material Transportation Act (49 U.S.C.Section.1801 et seq.),
                                                                       -- ---
          the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
                                                                          --
          seq.), the Resource Conservation and Recovery Act (42
          ---
          U.S.C.Section.6901 et seq.), the Clean Air Act (42 U.S.C.Section.7401
                            -- ---
          et seq.), the Toxic Substances Control Act (15 U.S.C.Section.2601 et
          -- ---                                                            --
          seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
          ---
          U.S.C.Section.1361 et seq.), the Occupational Safety and Health Act
                             -- ---
          (19 U.S.C.Section.651 et seq.), and the Hazardous and Solid Waste
                                -- ---
          Amendments (42 U.S.C.Section.2601 et seq.), as these laws have been or
                                            -- ---
          may be amended or supplemented, and any successor thereto, and any
          analogous foreign, state or local statutes, and the rules, regulations
          and orders promulgated pursuant thereto.

     (7)  "Environmental Loss" shall mean any loss, cost, damage, liability,
          deficiency, fine, penalty or expense (including, without limitation,
          reasonable attorneys' fees, engineering and other professional or
          expert fees), investigation, removal, cleanup and remedial costs
          (voluntarily or involuntarily incurred) and damages to, loss of the
          use of or decrease in value of any Car arising out of or related to
          any Adverse Environmental Condition.

     (8)  "Hazardous Substances" shall mean and include hazardous substances as
          defined in CERCLA; oil of any kind, petroleum products and their
          by-products, including, but not limited to, sludge or residue;
          asbestos containing materials; polychlorinated biphenyls; any and all
          other hazardous or toxic substances; hazardous waste, as defined in
          CERCLA; medical waste; infectious waste; those substances listed in
          the United States Department of Transportation Table (49 C.F.R.
          Section.172.101); explosives; radioactive materials; and all other
          pollutants, contaminants and other substances regulated or controlled
          by the Environmental Laws and any other substance that requires
          special handling in its collection, storage, treatment or disposal
          under the Environmental Laws.

     (9)  "Person" shall mean any individual, partnership, corporation, trust,
          unincorporated organization, government or department or agency
          thereof and any other entity.

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<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Railcar Lease
Agreement to be duly executed, under seal, as of the day and year first above
set forth.

<TABLE>
<CAPTION>
GENERAL ELECTRIC RAILCAR SERVICES                             PACER INTERNATIONAL, INC.
CORPORATION                                  Lessee
Lessor
<S>                                                           <C>


By:                                         [SEAL]            By:
    ----------------------------------------                      ----------------------------------------
      [SEAL]
------
Name:                                                         Name:
     ----------------------------------------------                 -----------------------------------------
------
Title:                                                        Title:
      ---------------------------------------------                  ----------------------------------------
------

     161 North Clark Street                                                  2300 Clayton Road
     7th Floor                                                               Suite 1200
     Chicago, IL  60601                                                      Concord, CA 94520-2100
     Facsimile: 312-853-5035                                                 Facsimile: 925-887-1565
     Attention: General Counsel
</TABLE>

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