<PAGE>
10-Q
QUARTERLY REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 333-20397
RYDER TRS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-331-3542
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(303) 376-7003
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____
-----
As of May 11, 1998, the number of outstanding shares of (i) Class A Common
Stock, par value $.01 per share, of the registrant was 109,090, (ii) Class B
Common Stock, par value $.01 per share, of the registrant was 13,910 and (iii)
Class C Common Stock, par value $.01 per share, of the registrant was 1,725.
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
------
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements:
a) Consolidated Balance Sheets as of December 31, 1997
and March 31, 1998.................................... 1
b) Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1998.................. 2
c) Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1998.................. 3
d) Notes to Consolidated Financial Statements.............. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................. 6
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 8
Signatures......................................................... 9
i
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
(UNAUDITED)
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ 272
Restricted cash - letters of credit 1,650 1,650
Receivables, net 24,278 18,287
Deferred income taxes, prepaid expenses and other current assets 21,225 21,721
------------ -----------
Total current assets 47,153 41,930
Restricted cash - letters of credit and compensating balances 5,043 5,410
Revenue earning equipment and operating property and equipment, net 460,696 479,259
Net software development costs and intangible assets 66,581 70,017
Deferred income taxes 3,954 11,757
------------ -----------
Total assets $ 583,427 $ 608,373
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdrafts $ 6,324 $ 12,025
Accounts payable 32,528 16,933
Payable to truck manufacturers - 25,395
Payable to Ryder Truck Rental, Inc. 3,888 3,813
Accrued expenses 30,439 35,354
------------ -----------
Total current liabilities 73,179 93,520
Commercial paper notes and revolving credit facility 227,890 241,587
Senior subordinated notes 168,015 168,916
Accrued expenses 11,849 14,361
------------ -----------
Total liabilities 480,933 518,384
Redeemable Class C common stock:
940 and 775 shares issued and outstanding in 1997 and 1998, respectively 940 775
------------ -----------
Commitments and contingencies (Note 5)
Shareholders' equity:
Common stock: $.01 par value, 275,000 shares authorized, 109,090
Class A shares, 13,910 Class B shares and 200 Class C shares issued and
outstanding in 1997 and 1998 1 1
Additional paid-in capital 123,208 123,208
Accumulated deficit (21,655) (33,995)
------------ -----------
Total shareholders' equity 101,554 89,214
------------ -----------
Total liabilities and shareholders' equity $ 583,427 $ 608,373
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Truck rental and related revenue $103,932 $104,933
Operating expense 40,098 39,265
Selling, general and administrative expense 43,452 52,414
Depreciation expense (net of gains) and amortization 25,678 24,854
-------- --------
Operating loss (5,296) (11,600)
Interest expense 10,199 8,465
-------- --------
Loss before income taxes (15,495) (20,065)
Benefit from income taxes (5,966) (7,725)
-------- --------
Net loss $ (9,529) $(12,340)
======== ========
Basic and diluted net loss per common share $ (77.47) $ (99.51)
======== ========
Weighted average number of common shares 123,000 124,006
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------
1997 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,529) $ (12,340)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation (net of gains) and amortization expense 25,678 24,854
Amortization of deferred financing costs 541 493
Deferred income taxes (5,966) (7,803)
Changes in operating assets and liabilities (4,115) (2,748)
---------- ----------
Net cash provided by operating activities 6,609 2,456
---------- ----------
Cash flows from investing activities:
Proceeds from sales of revenue earning and operating equipment 15,794 7,926
Capital expenditures (3,358) (29,384)
Refund of purchase price 5,429 -
---------- ----------
Net cash provided by (used in) investing activities 17,865 (21,458)
---------- ----------
Cash flows from financing activities:
Net borrowings under commercial paper notes and revolving credit facility - 14,105
Change in bank overdrafts - 5,701
Change in restricted cash - (367)
Redemption of Class C common stock - (165)
Deferred financing costs (1,200) -
---------- ----------
Net cash provided by (used in) financing activities (1,200) 19,274
---------- ----------
Increase in cash and cash equivalents 23,274 272
Cash and cash equivalents at beginning of period 17,507 -
---------- ----------
Cash and cash equivalents at end of period $ 40,781 $ 272
========== ==========
Supplemental disclosure:
Non-cash: Increase in payable to truck manufacturers not yet impacting cash -
investing $ 33,608 $ 25,395
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
RYDER TRS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements as of and for the three months ended
March 31, 1997 and 1998 are unaudited and include the accounts of Ryder TRS,
Inc. ("TRS") and its consolidated subsidiaries (collectively, the "Company").
The consolidated balance sheet of the Company at December 31, 1997, has been
condensed from the Company's audited consolidated financial statements at that
date. All intercompany balances and transactions have been eliminated. In the
opinion of management, the interim consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations. The
consolidated financial statements and notes are presented as permitted by
interim financial reporting rules and do not include certain information
included in the Company's annual consolidated financial statements and notes.
The interim results of operations for the three months ended March 31, 1998 are
not necessarily indicative of results that may be expected for the full fiscal
year.
Certain reclassifications have been made to the 1997 financial statements to
conform to current year presentation. For a complete description of the
Company's accounting policies, refer to the consolidated financial statements
and notes included in the Company's Form 10-K for the year ended December 31,
1997.
NOTE 2. ACQUISITION OF THE RYDER CONSUMER TRUCK RENTAL BUSINESS
On October 17, 1996, pursuant to an Asset and Stock Purchase Agreement, TRS
acquired from Ryder Truck Rental, Inc. ("RTR"), a subsidiary of Ryder System,
Inc. (collectively, the "Seller"), substantially all the assets and assumed
certain of the liabilities of the Seller's Consumer Truck Rental division (the
"Acquisition"). In connection with the Acquisition, the Company entered into
various agreements with RTR regarding dealer relationships, vehicle maintenance,
facility leases, sales of used trucks, administrative services and management
information systems support.
NOTE 3. PAYABLE TO TRUCK MANUFACTURERS
The Company determines its liability to truck manufacturers using legal title
transfer of the underlying assets as a basis for recording the payable to truck
manufacturers reflected in the accompanying consolidated financial statements.
NOTE 4. COMMERCIAL PAPER NOTES AND REVOLVING CREDIT FACILITY
The Company's special purpose subsidiary, FCTR, Inc. ("Finco"), maintains a
commercial paper program that permits the issuance of up to $450.0 million in
commercial paper notes, subject to borrowing base availability provided by the
truck fleet of RCTR, Inc. ("Leasco"), another of the Company's special purpose
subsidiaries. A liquidity facility (the "Facility") provides committed
liquidity support for a period of 364 days renewable at the option of the
lenders. Any advances under the Facility that are outstanding on the
termination date of a liquidity lender's commitment will not mature for 18
months after such termination date. Accordingly, any amounts outstanding under
the program or advances outstanding under the Facility are classified as long-
term debt. Leasco and Finco each have their own separate creditors which, upon
the liquidation of either subsidiary, will be entitled to be satisfied out of
the assets of Leasco or Finco, respectively, prior to any value in either of the
subsidiaries becoming available to TRS. Finco's obligations are collateralized
by (i) its rights to receive payments under a loan agreement with Leasco, (ii)
any of Finco's cash and eligible investments, (iii) an assignment of Leasco's
rights under the lease agreement with the Company (including the rights to
receive payments thereunder), and (iv) the vehicles in Leasco's fleet.
TRS entered into an agreement pursuant to which TRS established a five-year,
$40.0 million secured revolving credit facility. The Company also entered into
a $50.0 million facility for the issuance of cash collateralized letters of
credit. The amount outstanding under the secured revolving credit facility at
March 31, 1998 was $750,000. No amount was outstanding at December 31, 1997.
4
<PAGE>
The outstanding commercial paper notes are net of $19.1 million and $24.0
million at December 31, 1997 and March 31, 1998, respectively, which is held for
the benefit of another party by a member of the consolidated group. The
carrying amount of the notes is shown net of deferred financing costs of $5.3
million and $4.8 million at December 31, 1997 and March 31, 1998, respectively.
All of the aforementioned agreements contain certain covenants and
restrictions, including, among other things, restrictions on the payment of
dividends and the incurrence of additional indebtedness. In addition, under
these agreements, the Company is required to comply with specified financial
ratios and tests. As of March 31, 1998, the Company was in compliance with such
covenants.
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company has retained a portion of its risk under automobile and general
liability insurance and other insurance programs for activities subsequent to
the acquisition referred to in Note 2. Coverage varies, but generally the
Company retains a significant portion of the per occurrence claims under $1
million. The Company has excess liability insurance per occurrence for claims
between $1 million and $100 million. The reserves for these claims are based on
actuarial or other estimates. There can be no assurance that the estimates will
not change as a result of limitations inherent in the estimation process.
The Company is a party to various claims, legal actions and complaints arising
in the ordinary course of business. While any proceeding or litigation has an
element of uncertainty, management believes that the disposition of these
matters will not have a material impact on the financial condition, liquidity or
results of operations of the Company.
NOTE 6. PENDING MERGER
On March 4, 1998, the Company and Budget Group, Inc. ("Budget") announced the
signing of a merger agreement under which the Company is to be acquired by
Budget and is to become a separate wholly-owned subsidiary of Budget (the
"Merger"). Budget also operates Budget Car and Truck Rental. Under the merger
agreement, Company shareholders will receive approximately $264 million
comprised of $125 million of cash, $119 million of Budget Class A common stock,
and up to $20 million of contingent consideration. The Federal Trade Commission
has granted early termination of the 30-day waiting period under the Hart-Scott-
Rodino Act in connection with the Merger. Subject to the receipt of all other
necessary governmental approvals, closing is expected to occur in the second
quarter of 1998.
In connection with the pending Merger, the Company will incur transaction fees
that may be payable to related and third parties. To the extent the transaction
fees exceed $10 million, an adjustment will be made to the purchase price. A
substantial portion of these fees will be incurred at the consummation of the
Merger.
Immediately prior to the consummation of the Merger, all outstanding stock
options become fully vested and exercisable by the optionholders. Under the
terms of the merger agreement, the Company will receive cash proceeds from the
exercise of options equal to the difference between the fully diluted cash
payable to a holder of Company stock in the Merger and the option exercise
price per share. The granting of certain options in the second quarter,
combined with the acceleration of their vesting in connection with the Merger,
will result in compensation expense of approximately $0.8 million.
5
<PAGE>
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations and business of Ryder TRS, Inc. and
its subsidiaries, including statements under Management's Discussion and
Analysis of Financial Condition and Results of Operations. These forward looking
statements involve certain risks and uncertainties. No assurance can be given
that any of such matters will be realized. Factors that may cause actual results
to differ materially for those contemplated by such forward looking statements
include, among others, the following: (i) the success of initiatives undertaken
by Ryder TRS, Inc. to increase its revenues and improve its profitability; (ii)
competitive pressure in the industry; and (iii) general economic conditions.
RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED
MARCH 31, 1998
First quarter revenues of $104.9 million were $1.0 million or 1.0% ahead of
1997. The change was primarily attributable to a revenue per transaction
improvement of 6%.
Operating expense decreased $0.8 million or 2.1% (37.4% of revenue compared to
38.6% in the prior year). Most categories of operating costs declined or
remained constant with the exception of costs associated with relocation
services revenue. Maintenance costs per mile were comparable to the prior year.
Management believes the declines resulted primarily from initiatives to control
costs implemented in late 1997.
Selling, general and administrative expense increased $9.0 million or 20.6
(50.0% of revenue compared to 41.8% in the prior year). The increases were
primarily due to higher payroll and professional fees, which were low in 1997's
first quarter as the Company was in its initial stage of becoming a stand-alone
entity. Additionally, 1998 includes costs related to the transition of the
Company to a stand-alone entity as well as costs associated with changing the
phone reservation process.
Depreciation expense (net of gains) and amortization decreased by $0.8 million
or 3.2% due to lower average fleet levels partially offset by increased levels
of operating equipment and capitalized software.
Interest expense of $8.5 million was $1.7 million or 17.0% lower than 1997
primarily due to the replacement of senior bank facilities with the commercial
paper program. The average quarterly effective interest rate in 1997 was 8.5%
compared to 7.3% in 1998.
SEASONALITY
Truck rentals display some seasonality, with generally higher levels of demand
occurring during the summer months and the third quarter typically being the
Company's strongest quarter. On average, approximately 50% of the Company's
annual revenues are earned from May through September, with August being the
strongest month.
The Company's cash flows also display seasonality due to the timing of truck
purchases and dispositions. The Company typically receives delivery of trucks
between March and June of each year, resulting in additional borrowing needs
during that period. Dispositions are spread more evenly throughout the year,
with greater dispositions occurring during the first and fourth quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service, working
capital needs and the funding of capital expenditures. The Company's principal
sources of cash to fund these liquidity needs have been net cash from operating
activities, proceeds from sales of revenue earning equipment, and borrowings
under the Company's commercial paper program.
6
<PAGE>
The components of net cash from operating activities are detailed in the
financial statements included herein and include the net loss adjusted for
certain non-cash components and changes in operating assets and liabilities. Net
cash flows from operating activities for the three months ended March 31, 1997
amounted to $6.6 million compared to $2.5 for the same period in 1998. The
change was primarily attributable to a combination of working capital changes in
accounts receivable and accounts payable and higher spending for selling,
general and administrative expenses. The Company generally manages the cash
balances and working capital position of the Company to minimize amounts
outstanding under the debt agreements.
The Company's cash capital expenditures, primarily for the purchase of revenue
earning equipment, were $3.4 million for the three months ended March 31, 1997,
compared to $29.4 million for the same period in 1998. Higher 1998 spending is
the result of the Company being further along in its annual fleet procurement
process than in the first quarter of 1997 and increased levels of fleet
acquisition. The Company estimates that its total capital expenditures for 1998
will range between $130.0 million and $180.0 million and proceeds from
dispositions will range between $30.0 million and $50.0 million.
During 1997, the Company's special purpose subsidiary, FCTR, Inc. ("Finco"),
entered into a commercial paper program that permits the issuance of up to
$450.0 million in commercial paper notes, subject to borrowing base availability
provided by the truck fleet of RCTR, Inc. ("Leasco"), another of the Company's
special purpose subsidiaries. TRS also entered into an agreement pursuant to
which TRS established a five-year, $40.0 million secured revolving credit
facility and entered into a $50.0 million facility for the issuance of
collateralized letters of credit. All of the aforementioned agreements contain
certain convenants and restrictions, including, among other things, restrictions
on the payment of dividends and the incurrence of additional indebtedness. In
addition, under these agreements, the Company is required to comply with
specified financial ratios and tests. As of March 31, 1998, the Company was in
compliance with such covenants.
Amounts available under the commercial paper program are subject to borrowing
base availability and may be generally used for the purchase of trucks. The
remaining availability under the commercial paper program on March 31, 1998 was
approximately $89.5 million. Amounts available under the $40.0 million
revolving credit facility are also subject to borrowing base availability and
may be generally used for working capital purposes. The remaining availability
under this facility on March 31, 1998 was $31.8 million.
The Company believes that cash generated from operations and asset
dispositions, together with the amounts available under the aforementioned
facilities, will be adequate to meet its debt service, capital expenditure and
working capital requirements for the foreseeable future, although no assurance
can be given in this regard.
YEAR 2000 COMPLIANCE
As part of the transition to a stand-alone entity, the Company has many new
technology initiatives under development which are designed to be year 2000
compliant. The Company does not anticipate any material adverse effect on its
financial condition, liquidity or results of operations as a result of the
Company's technology or year 2000 initiatives; however, it is difficult to
quantify year 2000 compliance issues for the Company's customers and suppliers.
PENDING MERGER
On March 4, 1998, the Company and Budget Group, Inc. ("Budget") announced the
signing of a merger agreement under which the Company is to be acquired by
Budget and is to become a separate wholly-owned subsidiary of Budget (the
"Merger"). Budget also operates Budget Car and Truck Rental. Under the merger
agreement, Company shareholders will receive approximately $264 million
comprised of $125 million of cash, $119 million of Budget Class A common stock,
and up to $20 million of contingent consideration. The Federal Trade Commission
has granted early termination of the 30-day waiting period under the Hart-Scott-
Rodino Act in connection with the Merger. Subject to the receipt of all other
necessary governmental approvals, closing is expected to occur in the second
quarter of 1998.
In connection with the pending Merger, the Company will incur transaction fees
that may be payable to related and third parties. To the extent the transaction
fees exceed $10 million, an adjustment will be made to the purchase price. A
substantial portion of these fees will be incurred at the consummation of the
Merger.
7
<PAGE>
Immediately prior to the consummation of the Merger, all outstanding stock
options become fully vested and exercisable by the optionholders. As described
in the merger agreement, the Company will receive cash proceeds from the
exercise of options equal to the difference between the fully diluted cash
payable to a holder of Company stock in the Merger and the option exercise
price per share. The granting of certain options in the second quarter,
combined with the acceleration of their vesting in connection with the Merger,
will result in compensation expense of approximately $0.8 million.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits: See Index immediately following the signature page.
b. Current Reports on Form 8-K: The Company filed a Form 8-K on March 17,
1998, to disclose the signing of the merger agreement with Budget and
to submit exhibits related thereto.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado, on the 15th day of May, 1998.
Ryder TRS, Inc.
By: /s/ RONALD A. RITTENMEYER
-----------------------------------------------
RONALD A. RITTENMEYER
PRESIDENT AND CHIEF OPERATING OFFICER AND DIRECTOR
By: /s/ MICHAEL A. ZAWALSKI
-----------------------------------------------
MICHAEL A. ZAWALSKI
CHIEF FINANCIAL OFFICER
9
<PAGE>
EXHIBIT INDEX
EXHIBIT
-------
NO.
---
2.1 (1) Agreement and Plan of Merger, dated as of March 4, 1998, by and among
Budget Group, Inc., BDG Corporation, Ryder TRS, Inc., and Questor
Partners Fund, L.P., Questor Side-by-Side Partners, L.P. and Madison
Dearborn Capital Partners, L.P.
2.2 (1) Amendment No. 1 to Agreement and Plan of Merger, dated as of March 16,
1998, by and among Budget Group, Inc., BDG Corporation, Ryder TRS,
Inc., Questor Partners Fund, L.P., Questor Side-by-Side Partners, L.P.
and Madison Dearborn Capital Partners, L.P.
3.1 (2) Restated and Amended Certificate of Incorporation of the Company.
3.2 (3) Restated and Amended By-Laws of the Company.
3.3 (2) Amended and Restated Certificate of Incorporation of RCTR, Inc.
3.4 (2) By-Laws of RCTR, Inc.
3.5 (4) Amended and Restated Certificate of Incorporation of FCTR, Inc.
3.6 (4) By-Laws of FCTR, Inc.
4.1 (2) Indenture dated as of November 25, 1996, between the Company and The
Bank of New York, relating to $175,000,000 principal amount of 10%
Senior Subordinated Notes due 2006, including forms of Senior
Subordinated Notes.
4.2 (2) Exchange and Registration Rights Agreement, dated November 25, 1996,
between the Company and Chase Securities Inc. (previously filed as
Exhibit 4.7).
10.1 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Gary L. Andrews.
10.2 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Thomas W. Arnst.
10.3 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Steve Davison.
10.4 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and James L. Gregory.
10.5 Executive Compensation Package Agreement, dated December 18, 1997,
between Ryder TRS, Inc. and Larry Thogmartin.
10.6 Executive Compensation Package Agreement, dated March 19, 1998,
between Ryder TRS, Inc. and Ronald A. Rittenmeyer.
10.7 Waiver Letter re: Employment Agreement, dated March 7, 1998, by David
Russell.
10.8 Amendment to Employment Agreement dated March 17, 1998 between Ryder
TRS, Inc. and David Russell.
10.9 Waiver Letter re: Employment Agreement, dated March 7, 1998, by
Deborah Riston.
<PAGE>
EXHIBIT
-------
NO.
-------
10.10 Amendment to Employment Agreement dated March 17, 1998 between Ryder
TRS, Inc. and Deborah Riston.
10.11 Waiver Letter re: Employment Agreement, dated March 7, 1998, by
Michael Zawalski.
10.12 Amendment to Employment Agreement dated March 17, 1998 between Ryder
TRS, Inc. and Michael Zawalski.
10.13 Waiver Letter re: Employment Agreement, dated March 7, 1998, by Tom
Arnst.
10.14 Amendment to Employment Agreement dated March 17, 1998 between Ryder
TRS, Inc. and Tom Arnst.
10.15 Waiver Letter re: Employment Agreement, dated March 7, 1998, by James
Gregory.
10.16 Amendment to Employment Agreement dated March 17, 1998 between Ryder
TRS, Inc. and James Gregory.
10.17 Waiver Letter re: Employment Agreement, dated March 7, 1998, by
Stephen Dixon.
10.18 Amendment to Employment Agreement dated March 17, 1998 between Ryder
TRS, Inc. and Stephen Dixon.
10.19 Subscription, Option and Shareholder's Agreement, dated May 1, 1998,
by and between James L. Gregory and Ryder TRS, Inc.
10.20 Subscription, Option and Shareholder's Agreement, dated May 1, 1998,
by and between Michael A. Zawalski and Ryder TRS, Inc.
10.21 Subscription, Option and Shareholder's Agreement, dated May 1, 1998,
by and between Ronald A. Rittenmeyer and Ryder TRS, Inc.
10.22 Information Technology Services Agreement, dated January 22, 1998,
among Perot Systems Corporation, Cambridge Technology Partners, Inc.
and Ryder TRS, Inc.
21 (3) Subsidiaries of Ryder TRS, Inc.
27 Financial Data Schedule.
99.1(1) Press Release dated March 4, 1998.
____________________
(1) Incorporated by reference to the identically numbered exhibit to Ryder TRS,
Inc., Current Report on Form 8-K filed on March 17, 1998.
(2) Incorporated by reference to the identically numbered exhibit (or to the
exhibit as indicated) to Ryder TRS, Inc., Registration Statement on Form
S-4, Registration No. 333-20397 (the "Company's Registration Statement").
---------------------------------
(3) Incorporated by reference to the identically numbered exhibit (or the
exhibit number as indicated) to Ryder TRS, Inc., Quarterly Report on Form
10-Q for the period ended June 30, 1997.
(4) Incorporated by reference to the identically numbered exhibit to Ryder TRS,
Inc., Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
<PAGE>
EXHIBIT 10.1
RYDER TRS, INC
1560 Broadway, Suite 1800
Denver, Colorado 80202
(303) 376-0040
December 18, 1997
To: Gary L. Andrews
From: Ron Rittenmeyer
[LOGO OF RYDER TRS APPEARS HERE]
Re: Executive Compensation Package
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Also, it is important that the company have one executive compensation design
for both current and future team members. For this reason, your grandfathered
perquisites previously in place for former RSI directors and officers will be
bought out with a one time lump sum payment equal to one year of these
perquisites to be paid to minimize the adjustment.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL. Your compensation package is as follows:
BASE SALARY: $128,000
BONUS OPPORTUNITY: 50% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the intention of the company to formalize an
annual executive stock award plan, this plan is required to receive the
Ryder TRS Board of Directors approval.
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Ryder TRS
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
<PAGE>
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
nonqualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for salary payments equal to one month per year of service
with a minimum of 3 months and a maximum of 9 months. During this time,
your medical and dental participation will continue through Cobra and will
be paid by the company unless you become eligible for benefits through
another employer. In addition, a prorated bonus will be paid to you based
upon the financial performance of the business at the time of your last day
worked.
ONE TIME PERQUISITE AND CAR ALLOWANCE BUY OUT: In January, 1998 you will receive
a one time payment of $8,000 in lieu of the elimination of your
grandfathered allowances. As discussed, this amount is not being added to
your base pay.
Gary, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. I look forward to continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.2
RYDER TRS, INC
1560 Broadway, Suite 1800
Denver, Colorado 80202
(303) 376-0040
December 18,1997
To: Tom Arnst
From: Ron Rittenmeyer /s/ RON
[LOGO OF RYDER TRS APPEARS HERE]
Re: Executive Compensation Package
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Also, it is important that the company have one executive compensation design
for both current and future team members. For this reason, all grandfathered
perquisites previously in place for former RSI directors and officers will be
shifted into their base salary and a one time lump sum payment equal to one year
of these perquisites be paid to minimize the adjustment.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL. Your compensation package is as follows:
BASE SALARY: $125,000 (this includes your $800 annual perquisite allowance and
your $7,200 annual car allowance)
BONUS OPPORTUNITY: 60% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
MANAGEMENT LEVEL: MS13
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the intention of the company to formalize an
annual executive stock award plan, but the plan must receive the Ryder TRS
Board of Directors approval prior to implementation.
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Ryder TRS
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
<PAGE>
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
nonqualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for salary payments equal to one month per year of service
with a minimum of 3 months and a maximum of 9 months. During this time,
your medical and dental participation will continue through Cobra and will
be paid by the company unless you become eligible for benefits through
another employer. In addition, a prorated bonus will be paid to you based
upon the financial performance of the business and your goals as related to
the bonus plan at the time of your last day worked.
ONE TIME PERQUISITE AND CAR ALLOWANCE BUY OUT: In January, 1998 you will receive
a one time payment of $8,000 in lieu of the elimination of your
grandfathered allowances. Please note that this payment is in addition to
the combined amount being added to your annual base pay effective January
1, 1998.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $40,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Tom, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.3
RYDER TRS, INC.
1560 Broadway, Suite 1800
Denver. Colorado 60202
(303) 376-0040
December 18,1997
To: Steve Davison
From: Mike Zawalski /s/ MIKE ZAWALSKI
[LOGO OF RYDER TRS APPEARS HERE]
Re: Executive Compensation package
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL. Your compensation package is as follows:
BASE SALARY: $127,900
BONUS OPPORTUNITY: 50% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the intention of the company to formalize an
annual executive stock award plan, but the plan must receive the Ryder TRS
Board of Directors approval prior to implementation.
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Ryder TRS
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
nonqualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
<PAGE>
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for salary payments equal to one month per year of service
with a minimum of 6 months and a maximum of 9 months. During this time,
your medical and dental participation will continue through Cobra and will
be paid by the company unless you become eligible for benefits through
another employer. In addition, a prorated bonus will be paid to you based
upon the financial performance of the business and your goals as related to
the bonus plan at the time of your last day worked.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $25,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Steve, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
CC. Ron Rittenmeyer
Debby Riston
<PAGE>
EXHIBIT 10.4
RYDER TRS, INC.
1560 Broadway, Suite 1800
Denver. Colorado 80202
(303) 376-0040
December 18,1997
To: Jim Gregory
From: Ron Rittenmeyer /s/ RON
[LOGO OF RYDER TRS APPEARS HERE]
Re: Executive Compensation Package
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL. Your compensation package is as follows:
BASE SALARY: $175,000
BONUS OPPORTUNITY: 80% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the intention of the company to formalize an
annual executive stock award plan, but the plan must receive the Ryder TRS
Board of Directors approval prior to implementation.
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Ryder TRS
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
nonqualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for 12 months of salary payments. During this time, your
medical and dental participation will continue through Cobra and will be
paid by the company unless you become eligible for benefits through another
employer. In addition, a prorated bonus will be paid to you based upon the
financial
<PAGE>
performance of the business and your goals as related to the bonus plan at
the time of your last day worked.
EXECUTIVE STAY-ON BONUS(OFFERED ONLY TO CERTAIN EXECUTIVES): Given your
performance and the critical role of your executive responsibilities, you
are eligible for a one time executive stay on incentive award of $75,000.
This award will be paid to you in May, 1999 if you continue to contribute
at your current capacity and level of performance and are employed at that
time. If you are terminated from the company for reasons other than cause
prior to May 1999, this bonus will be prorated for this time period based
on your last day worked. THIS AWARD IS STRICTLY CONFIDENTIAL AND MUST NOT
BE DISCUSSED WITH ANYONE FOR ANY REASON.
Jim, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team; I look forward to
continue working with you.
cc. Debby Riston
<PAGE>
EXHIBIT 10.5
RYDER TRS, INC.
1560 Broadway, Suite 1800
Denver. Colorado 80202
(303) 376-0040
December 18,1997
To: Larry Thogmartin
From: Mike Zawalski /s/ MIKE ZAWALSKI
[LOGO OF RYDER TRS APPEARS HERE]
Re: Executive Compensation Package
It is the intention of the board to offer a competitive executive compensation
package which will ensure that the company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Also, it is important that the company have one executive compensation design
for both current and future team members. For this reason, all grandfathered
perquisites previously in place for former RSI directors and officers will be
shifted into their base salary and a one time lump sum payment equal to one year
of these perquisites be paid to minimize the adjustment.
Your executive compensation package is outlined below and is effective January
1, 1998; it is tailored to you and therefore, SHOULD BE TREATED STRICTLY
CONFIDENTIAL. Your compensation package is as follows:
BASE SALARY: $128,000 (this includes your $800 annual perquisite allowance and
your $7,200 annual car allowance)
BONUS OPPORTUNITY: 60% of your base salary. The bonus program will be developed
yearly and award levels determined by the business requirements.
EXECUTIVE STOCK OPTIONS: You have been awarded stock options based upon your
level and performance. It is the intention of the company to formalize an
annual executive stock award plan, but the plan must receive the Ryder TRS
Board of Directors approval prior to implementation.
LIFE INSURANCE: 2 times your annual base pay
BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay
ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Ryder TRS
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
A NON-QUALIFIED SALARY DEFERRAL PLAN: The Board has approved the creation of a
nonqualified salary deferral plan which will allow executives to defer
their salary tax free beyond the current caps in the Ryder TRS 401k plan.
Details of this plan design will be published in January, 1998.
<PAGE>
EXECUTIVE SEVERANCE: If you are terminated for reasons other than for cause, you
are eligible for salary payments equal to one month per year of service
with a minimum of 3 months and a maximum of 9 months. During this time,
your medical and dental participation will continue through Cobra and will
be paid by the company unless you become eligible for benefits through
another employer. In addition, a prorated bonus will be paid to you based
upon the financial performance of the business and your goals as related to
the bonus plan at the time of your last day worked.
ONE TIME PERQUISITE AND CAR ALLOWANCE BUY OUT: In January, 1998 you will receive
a one time payment of $8,000 in lieu of the elimination of your
grandfathered allowances. Please note that this payment is in addition to
the combined amount being added to your annual base pay effective January
1, 1998.
Larry, thank you for your 1997 contributions to Ryder TRS. The creation of an
independent company comes with much hard work, dedication and unique business
talents. You are a valuable member of the leadership team, I look forward to
continue working with you.
CC. Ron Rittenmeyer
Debby Riston
<PAGE>
EXHIBIT 10.6
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 19, 1998
To: Ronald A. Rittenmeyer
From: Jay Alix /s/ JAY ALIX
RE: EXECUTIVE COMPENSATION PACKAGE
It is the intention of the Board of Directors (the "Board") of Ryder TRS, Inc.
(the "Company") to provide its executives with a competitive compensation
package which will ensure that the Company maintains the highest quality
executive team. This compensation package includes your base salary, bonuses,
stock options and executive benefits.
Your executive compensation package is outlined below and is effective March 1,
1998 (subject to the terms provided herein); it is tailored to you and
therefore, SHOULD BE TREATED STRICTLY CONFIDENTIAL. Your compensation package
is as follows:
A. POSITION: President and Chief Operating Officer of the Company with
responsibility for all business activities and actions of the Company and
reporting to the Chairman and Chief Executive Officer of the Company.
b. Base Salary: $400,000 per year, payable in accordance with the Company's
regular payroll practices.
C. BONUS OPPORTUNITY: 100% of your base salary. The bonus program will be
developed yearly and award levels determined by the business requirements.
D. EQUITY ARRANGEMENTS: In connection with your employment by the Company, you
will purchase, in accordance with the terms of the Subscription, Option
and Shareholders Agreement attached hereto as Exhibit A, 550 shares of
Class C Common Stock of the Company for $1,000 per share. In connection
with your purchase of these shares, you will be granted an option to
purchase 550 additional shares of Class C Common Stock of the Company for
$1,000 per share, subject to the terms and conditions of the Subscription,
Option and Shareholders Agreement attached hereto as Exhibit A.
E. LIFE INSURANCE: 2 times your annual base pay.
<PAGE>
F. BUSINESS ACCIDENT INSURANCE: 2 times your annual base pay.
G. ANNUAL PHYSICAL EXAMINATIONS: You will be reimbursed for an annual physical
examination. You are encouraged but not required to use the Company
medical network for your exam as this is covered by plan design. All
physical examination expenses not covered in the plan will be covered.
H. COMPANY BENEFIT PLANS AND PERQUISITES: You will be entitled to participate
in the current and future benefit plans sponsored for Company employees
consistent with your position as an executive of the Company. You will
receive the privileges and perquisites normally associated with your
position with the Company and in accordance with past practice, including
an executive office, parking, housing, air travel, local vehicle expense
and business expense reimbursements for the duration of your employment.
The Company understands and recognizes that you currently reside in Plano,
Texas, and that you are not expected or obligated to change your residence
in connection with your duties as provided herein. In accordance with its
past practice, the Company will reimburse you for all travel expenses
incurred by you in traveling from your residence to the Company or any
other location in connection with the performance of your duties for the
Company as provided herein. The Company further agrees to pay all
expenses associated with the maintenance of and returning, at the end of
your employment, your personal business furniture now located at the
Company's offices in Denver, Colorado to Plano, Texas or such other
location as you designate, including costs incurred for transportation,
insurance, storage, set up fees, packing and unpacking.
I. EXECUTIVE SEVERANCE: If (i) your employment is terminated by the Company
for reasons other than the conviction of, or a plea of no contest to, a
felony punishable by a prison sentence of more than one year, (ii) you
terminate your employment with the Company by resigning on or after
October 1, 1998 (or such earlier date as agreed to by you and the
Company), (iii) you terminate your employment by resigning following a
reduction in base salary, a change to the existing Company's target
maximum bonus percentage or formula and/or a reduction or change in the
perquisites and privileges set forth in Paragraph (h) above, (iv) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location or residence in Plano, Texas, or (v) you
terminate your employment by resigning following a reduction in your
title, duties, responsibilities or reporting relationships, then the
Company shall pay you an amount equal to $900,000, payable in a lump sum
cash payment
-2-
<PAGE>
within 5 days of employment termination, plus health care coverage
required by Sections 601-608 of the Employee Retirement Income Security
Act of 1974, as amended ("COBRA"), for a period of 24 months following
termination. It is understood and agreed that if you do not resign
following the occurrence of one or more of the events described in clauses
(ii) through (v) of the preceding sentence which would entitle you to the
benefits described therein, the failure to resign shall not result in a
forfeiture or waiver of such benefits or otherwise impair your entitlement
to such benefits as to any subsequent occurrence of any such event. In
lieu of COBRA coverage, you may elect to receive the applicable cost of
such coverage in a lump sum cash payment, to be paid within 5 days of
termination. Prior to the closing (the "Closing") of the transactions
contemplated by the Agreement and Plan of Merger dated as of March 4, 1998
by and among the Company, Questor Partners Fund, L.P., Questor Side-By-
Side Partners, L.P., Madison Dearborn Capital Partners, L.P., Budget
Group, Inc., and BDG Corporation (the "Merger"), the Company shall
contribute $900,000 to a bank account (the "Account") to fund its
obligations under this Paragraph. In establishing the Account, the Company
shall use its reasonable commercial efforts to require that the Account
provide that all disbursements shall require both your signature and the
signature of Jay Alix (or in the event of Mr. Alix's death or disability,
the signature of Robert E. Shields); provided, however, at such time as
Mr. Alix reasonably determines (or in the event of Mr. Alix's death or
disability, Mr. Shields reasonably determines) that no payments will be
made to you as provided for in this Paragraph, the funds then held in the
Account shall be returned to the Company without your signature. If the
Company is unable to establish the Account on the terms set forth in the
preceding sentence after using its reasonable commercial efforts, the
Account shall provide that all disbursements shall require only the
signature of either Mr. Shields or Mr. Alix.
In connection with the Merger, it is possible that the terms and provisions of
Paragraphs (d) and (i) above may give rise to "parachute payments" under Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"). In order
that the benefits provided to you under Paragraphs (d) and (i) not give rise to
a parachute payment, the benefits provided to you under such Paragraphs shall be
subject to and conditioned upon the approval of the holders of record of at
least 75% of the Company's outstanding voting common stock immediately prior to
the Merger in a manner that complies with Section 280G(b)(5)(B) of the Code.
Ron, thank you in advance for your contributions to the Company. The creation
of an independent company comes with much hard work,
-3-
<PAGE>
dedication and unique business talents. You are a valuable member of the
leadership team; I look forward to continue working with you.
Accepted And Agreed To By:
/s/ RONALD A. RITTENMEYER 4/3/98
_______________________________________
Ronald A. Rittenmeyer Date
-4-
<PAGE>
EXHIBIT 10.7
March 7, 1998
Ronald A. Rittenmeyer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Re: Employment Agreement
Dear Ron:
I have been advised that certain provisions of my employment agreement with the
Company dated December 18, 1997 may give rise to so-called "parachute payments"
under Section 280G of the Internal Revenue Code.
While my rights under my employment agreement are fully enforceable by me, I
hereby agree to waive all right and entitlement to the "Executive Severance" and
"Executive Stay-on Bonus" (collectively, the "Parachute Payments") to be
provided to me by the Company under the terms of my employment agreement.
My waiver of the Parachute Payments is subject to and conditioned on the
consummation of the transactions contemplated by the Agreement and Plan of
Merger dated as of March 4, 1998 by and among Ryder TRS, Inc., Questor Partners
Fund, L.P., Questor Side-By-Side Partners, L.P., Madison Dearborn Capital
Partners, L.P., BDG Corporation and Budget Group, Inc. (the "Merger Agreement").
If the Merger Agreement is terminated prior to the "Closing" (as defined in the
Merger Agreement) as provided in Section 10.1 of the Merger Agreement, my waiver
of the Parachute Payments shall be deemed rescinded, and the existing terms of
my employment agreement will continue to apply without regard to this waiver.
Except as otherwise provided herein, my waiver of the Parachute Payments shall
not affect any other benefits provided under my employment agreement.
Please acknowledge receipt and your agreement to the matters set forth in this
letter.
Very truly yours,
/s/ DAVID RUSSELL
David Russell
Accepted and Agreed to:
RYDER TRS, INC.
/s/ RONALD A. RITTENMEYER
__________________________
Ronald A. Rittenmeyer
<PAGE>
EXHIBIT 10.8
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 17, 1998
To: David Russell
From: Ronald A. Rittenmeyer /s/ RONALD A. RITTENMEYER
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
In connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of March 4, 1998 by and among Ryder
TRS, Inc. (the "Company"), Questor Partners Fund, L.P., Questor Side-By-Side
Partners, L.P., Madison Dearborn Capital Partners, L.P., BDG Corporation and
Budget Group, Inc. (the "Merger"), the Company would like to recognize your
contribution to its success by amending your existing employment agreement dated
December 18, 1997 (the "Agreement"), as thereafter modified by letter dated
March 7, 1998 in which you waived all right and entitlement under the Agreement
to the "Executive Severance" and "Executive Stay-on Bonus" payments provided
therein. In consideration of the foregoing, your Agreement is amended as
follows:
A. MERGER BONUS: Within 5 days following the "Closing Date" (as defined in the
Merger Agreement), the Company will make a cash payment to you in the
amount of $108,000. On the later of October 1, 1998 or 120 days after the
Closing Date, the Company will make an additional cash payment to you in
the amount of $108,000.
b. Executive Severance: If during the 2-year period following the Closing Date
(i) your employment is terminated by the Company for reasons other than
the conviction of, or a plea of no contest to, a felony punishable by a
prison sentence of more than one year, (ii) you terminate your employment
by resigning following a reduction in base salary and/or a change to the
existing Company's target maximum bonus percentage or formula, (iii) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location, or (iv) you terminate your employment by
resigning following a reduction in your title, duties, reporting
relationships or responsibilities, the Company shall:
* Pay you a lump sum cash amount within 5 days of your date of
termination equal to your then current annual base salary and prorated
targeted maximum bonus for the year.
<PAGE>
* If your termination of employment is prior to May 1, 1999, pay you a
lump sum cash payment within 5 days of your date of termination in the
amount of $100,000.
* Make a lump sum cash payment to you within 5 days of your date of
termination of any unpaid amounts required by Paragraph (a) above.
* Provide, without cost to you, health care coverage required by Sections
601-608 of the Employee Retirement Income Security Act of 1974, as amended
("COBRA"), for a period of 12 months following your termination of
employment. In lieu of COBRA coverage, you may elect to receive the
applicable cost of such coverage in a lump sum cash payment, to be paid
within 5 days of your termination of employment.
* If after May 1997 you relocated to the Denver, Colorado area at the
Company's request, the Company will reimburse you for relocation expenses
incurred following your termination of employment in an amount equal to
the lesser of: (i) your actual expenses incurred in relocating from
Denver, Colorado after your termination, or (ii) 125% of your expenses
previously incurred in relocating to Denver, Colorado at the Company's
request, provided any such expenses are not reimbursed by any subsequent
employer. The foregoing relocation program will have the same benefits
(including tax gross up on certain items) and coverage as the relocation
program under which you were moved to Denver, Colorado by the Company.
C. RETENTION BONUS: If you are employed by the Company on May 1, 1999, the
Company will pay you a lump sum cash payment in the amount of $100,000.
Anything herein to the contrary notwithstanding, the terms of this amendment to
your Agreement are subject to (i) the consummation of the transactions
contemplated by the Merger Agreement, and (ii) the approval of the holders of
record of at least 75% of the Company's outstanding voting common stock
immediately prior to the Merger in a manner that complies with Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended. If the Merger
Agreement is terminated prior to the Closing Date as provided in Section 10.1 of
the Merger Agreement or the shareholder approval requirements described in the
preceding sentence are not satisfied, the terms of this amendment shall be void
and be of no further force and effect, and the existing terms of your Agreement
shall continue to apply without regard to this amendment. Except as otherwise
provided herein, the terms of this amendment shall not affect any other benefits
provided under your Agreement.
-2-
<PAGE>
All payments to be provided to you hereunder are subject to applicable federal
and state employment and income tax withholding obligations.
The terms of this amendment to your Agreement is tailored to you and therefore,
MUST BE TREATED AS STRICTLY CONFIDENTIAL.
If the terms of this amendment to your Agreement are acceptable, please
acknowledge your acceptance by signing each signature page to this amendment as
indicated below and returning one of the signed pages to me.
Agreed To And Accepted By:
/s/ DAVID RUSSELL 3/17/98
____________________________________
David Russell DATE
-3-
<PAGE>
EXHIBIT 10.9
March 7, 1998
Ronald A. Rittenmeyer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Re: Employment Agreement
Dear Ron:
I have been advised that certain provisions of my employment agreement with the
Company dated December 18, 1997 may give rise to so-called "parachute payments"
under Section 280G of the Internal Revenue Code.
While my rights under my employment agreement are fully enforceable by me, I
hereby agree to waive all right and entitlement to the "Executive Severance" and
"Executive Stay-on Bonus" (collectively, the "Parachute Payments") to be
provided to me by the Company under the terms of my employment agreement.
My waiver of the Parachute Payments is subject to and conditioned on the
consummation of the transactions contemplated by the Agreement and Plan of
Merger dated as of March 4, 1998 by and among Ryder TRS, Inc., Questor Partners
Fund, L.P., Questor Side-By-Side Partners, L.P., Madison Dearborn Capital
Partners, L.P., BDG Corporation and Budget Group, Inc. (the "Merger Agreement").
If the Merger Agreement is terminated prior to the "Closing" (as defined in the
Merger Agreement) as provided in Section 10.1 of the Merger Agreement, my waiver
of the Parachute Payments shall be deemed rescinded, and the existing terms of
my employment agreement will continue to apply without regard to this waiver.
Except as otherwise provided herein, my waiver of the Parachute Payments shall
not affect any other benefits provided under my employment agreement.
Please acknowledge receipt and your agreement to the matters set forth in this
letter.
Very truly yours,
/s/ DEBORAH RISTON
Deborah Riston
Accepted and Agreed to:
RYDER TRS, INC.
/s/ RONALD A. RITTENMEYER
____________________________
Ronald A. Rittenmeyer
<PAGE>
EXHIBIT 10.10
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 17, 1998
To: Deborah Riston
From: Ronald A. Rittenmeyer /s/ RONALD A. RITTENMEYER
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
In connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of March 4, 1998 by and among Ryder
TRS, Inc. (the "Company"), Questor Partners Fund, L.P., Questor Side-By-Side
Partners, L.P., Madison Dearborn Capital Partners, L.P., BDG Corporation and
Budget Group, Inc. (the "Merger"), the Company would like to recognize your
contribution to its success by amending your existing employment agreement dated
December 18, 1997 (the "Agreement"), as thereafter modified by letter dated
March 7, 1998 in which you waived all right and entitlement under the Agreement
to the "Executive Severance" and "Executive Stay-on Bonus" payments provided
therein. In consideration of the foregoing, your Agreement is amended as
follows:
A. MERGER BONUS: Within 5 days following the "Closing Date" (as defined in the
Merger Agreement), the Company will make a cash payment to you in the
amount of $102,000. On the later of October 1, 1998 or 120 days after the
Closing Date, the Company will make an additional cash payment to you in
the amount of $102,000.
b. Executive Severance: If during the 2-year period following the Closing Date
(i) your employment is terminated by the Company for reasons other than
the conviction of, or a plea of no contest to, a felony punishable by a
prison sentence of more than one year, (ii) you terminate your employment
by resigning following a reduction in base salary and/or a change to the
existing Company's target maximum bonus percentage or formula, (iii) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location, or (iv) you terminate your employment by
resigning following a reduction in your title, duties, reporting
relationships or responsibilities, the Company shall:
* Pay you a lump sum cash amount within 5 days of your date of
termination equal to your then current annual base salary and prorated
targeted maximum bonus for the year.
<PAGE>
* If your termination of employment is prior to May 1, 1999, pay you a
lump sum cash payment within 5 days of your date of termination in the
amount of $75,000.
* Make a lump sum cash payment to you within 5 days of your date of
termination of any unpaid amounts required by Paragraph (a) above.
* Provide, without cost to you, health care coverage required by Sections
601-608 of the Employee Retirement Income Security Act of 1974, as amended
("COBRA"), for a period of 12 months following your termination of
employment. In lieu of COBRA coverage, you may elect to receive the
applicable cost of such coverage in a lump sum cash payment, to be paid
within 5 days of your termination of employment.
* If after May 1997 you relocated to the Denver, Colorado area at the
Company's request, the Company will reimburse you for relocation expenses
incurred following your termination of employment in an amount equal to
the lesser of: (i) your actual expenses incurred in relocating from
Denver, Colorado after your termination, or (ii) 125% of your expenses
previously incurred in relocating to Denver, Colorado at the Company's
request, provided any such expenses are not reimbursed by any subsequent
employer. The foregoing relocation program will have the same benefits
(including tax gross up on certain items) and coverage as the relocation
program under which you were moved to Denver, Colorado by the Company.
C. RETENTION BONUS: If you are employed by the Company on May 1, 1999, the
Company will pay you a lump sum cash payment in the amount of $75,000.
Anything herein to the contrary notwithstanding, the terms of this amendment to
your Agreement are subject to (i) the consummation of the transactions
contemplated by the Merger Agreement, and (ii) the approval of the holders of
record of at least 75% of the Company's outstanding voting common stock
immediately prior to the Merger in a manner that complies with Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended. If the Merger
Agreement is terminated prior to the Closing Date as provided in Section 10.1 of
the Merger Agreement or the shareholder approval requirements described in the
preceding sentence are not satisfied, the terms of this amendment shall be void
and be of no further force and effect, and the existing terms of your Agreement
shall continue to apply without regard to this amendment. Except as otherwise
provided herein, the terms of this amendment shall not affect any other benefits
provided under your Agreement.
-2-
<PAGE>
All payments to be provided to you hereunder are subject to applicable federal
and state employment and income tax withholding obligations.
The terms of this amendment to your Agreement is tailored to you and therefore,
MUST BE TREATED AS STRICTLY CONFIDENTIAL.
If the terms of this amendment to your Agreement are acceptable, please
acknowledge your acceptance by signing each signature page to this amendment as
indicated below and returning one of the signed pages to me.
Agreed To And Accepted By:
/s/ DEBORAH RISTON 3/17/98
____________________________________
Deborah Riston DATE
-3-
<PAGE>
EXHIBIT 10.11
March 7, 1998
Ronald A. Rittenmeyer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Re: Employment Agreement
Dear Ron:
I have been advised that certain provisions of my employment agreement with the
Company dated December 18, 1997 may give rise to so-called "parachute payments"
under Section 280G of the Internal Revenue Code.
While my rights under my employment agreement are fully enforceable by me, I
hereby agree to waive all right and entitlement to the "Executive Severance" and
"Executive Stay-on Bonus" (collectively, the "Parachute Payments") to be
provided to me by the Company under the terms of my employment agreement.
My waiver of the Parachute Payments is subject to and conditioned on the
consummation of the transactions contemplated by the Agreement and Plan of
Merger dated as of March 4, 1998 by and among Ryder TRS, Inc., Questor Partners
Fund, L.P., Questor Side-By-Side Partners, L.P., Madison Dearborn Capital
Partners, L.P., BDG Corporation and Budget Group, Inc. (the "Merger Agreement").
If the Merger Agreement is terminated prior to the "Closing" (as defined in the
Merger Agreement) as provided in Section 10.1 of the Merger Agreement, my waiver
of the Parachute Payments shall be deemed rescinded, and the existing terms of
my employment agreement will continue to apply without regard to this waiver.
Except as otherwise provided herein, my waiver of the Parachute Payments shall
not affect any other benefits provided under my employment agreement.
Please acknowledge receipt and your agreement to the matters set forth in this
letter.
Very truly yours,
/s/ MICHAEL ZAWALSKI
Michael Zawalski
Accepted and Agreed to:
RYDER TRS, INC.
/s/ RONALD A. RITTENMEYER
____________________________
Ronald A. Rittenmeyer
<PAGE>
EXHIBIT 10.12
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 17, 1998
To: Michael Zawalski
From: Ronald A. Rittenmeyer /s/ RONALD A. RITTENMEYER
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
In connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of March 4, 1998 by and among Ryder
TRS, Inc. (the "Company"), Questor Partners Fund, L.P., Questor Side-By-Side
Partners, L.P., Madison Dearborn Capital Partners, L.P., BDG Corporation and
Budget Group, Inc. (the "Merger"), the Company would like to recognize your
contribution to its success by amending your existing employment agreement dated
December 18, 1997 (the "Agreement"), as thereafter modified by letter dated
March 7, 1998 in which you waived all right and entitlement under the Agreement
to the "Executive Severance" and "Executive Stay-on Bonus" payments provided
therein. In consideration of the foregoing, your Agreement is amended as
follows:
A. MERGER BONUS: Within 5 days following the "Closing Date" (as defined in the
Merger Agreement), the Company will make a cash payment to you in the
amount of $70,000. On the later of October 1, 1998 or 120 days after the
Closing Date, the Company will make an additional cash payment to you in
the amount of $70,000.
b. Executive Severance: If during the 2-year period following the Closing Date
(i) your employment is terminated by the Company for reasons other than
the conviction of, or a plea of no contest to, a felony punishable by a
prison sentence of more than one year, (ii) you terminate your employment
by resigning following a reduction in base salary and/or a change to the
existing Company's target maximum bonus percentage or formula, (iii) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location, or (iv) you terminate your employment by
resigning following a reduction in your title, duties, reporting
relationships or responsibilities, the Company shall:
* Pay you a lump sum cash amount within 5 days of your date of
termination equal to your then current annual base salary and prorated
targeted maximum bonus for the year.
<PAGE>
* If your termination of employment is prior to May 1, 1999, pay you a
lump sum cash payment within 5 days of your date of termination in the
amount of $100,000.
* Make a lump sum cash payment to you within 5 days of your date of
termination of any unpaid amounts required by Paragraph (a) above.
* Provide, without cost to you, health care coverage required by Sections
601-608 of the Employee Retirement Income Security Act of 1974, as amended
("COBRA"), for a period of 12 months following your termination of
employment. In lieu of COBRA coverage, you may elect to receive the
applicable cost of such coverage in a lump sum cash payment, to be paid
within 5 days of your termination of employment.
* If after May 1997 you relocated to the Denver, Colorado area at the
Company's request, the Company will reimburse you for relocation expenses
incurred following your termination of employment in an amount equal to
the lesser of: (i) your actual expenses incurred in relocating from
Denver, Colorado after your termination, or (ii) 125% of your expenses
previously incurred in relocating to Denver, Colorado at the Company's
request, provided any such expenses are not reimbursed by any subsequent
employer. The foregoing relocation program will have the same benefits
(including tax gross up on certain items) and coverage as the relocation
program under which you were moved to Denver, Colorado by the Company.
C. RETENTION BONUS: If you are employed by the Company on May 1, 1999, the
Company will pay you a lump sum cash payment in the amount of $100,000.
Anything herein to the contrary notwithstanding, the terms of this amendment to
your Agreement are subject to (i) the consummation of the transactions
contemplated by the Merger Agreement, and (ii) the approval of the holders of
record of at least 75% of the Company's outstanding voting common stock
immediately prior to the Merger in a manner that complies with Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended. If the Merger
Agreement is terminated prior to the Closing Date as provided in Section 10.1 of
the Merger Agreement or the shareholder approval requirements described in the
preceding sentence are not satisfied, the terms of this amendment shall be void
and be of no further force and effect, and the existing terms of your Agreement
shall continue to apply without regard to this amendment. Except as otherwise
provided herein, the terms of this amendment shall not affect any other benefits
provided under your Agreement.
-2-
<PAGE>
All payments to be provided to you hereunder are subject to applicable federal
and state employment and income tax withholding obligations.
The terms of this amendment to your Agreement is tailored to you and therefore,
MUST BE TREATED AS STRICTLY CONFIDENTIAL.
If the terms of this amendment to your Agreement are acceptable, please
acknowledge your acceptance by signing each signature page to this amendment as
indicated below and returning one of the signed pages to me.
Agreed To And Accepted By:
/s/ MICHAEL ZAWALSKI 3/17/98
____________________________________
Michael Zawalski DATE
-3-
<PAGE>
EXHIBIT 10.13
March 7, 1998
Ronald A. Rittenmeyer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Re: Employment Agreement
Dear Ron:
I have been advised that certain provisions of my employment agreement with the
Company dated December 18, 1997 may give rise to so-called "parachute payments"
under Section 280G of the Internal Revenue Code.
While my rights under my employment agreement are fully enforceable by me, I
hereby agree to waive all right and entitlement to the "Executive Severance" and
"Executive Stay-on Bonus" (collectively, the "Parachute Payments") to be
provided to me by the Company under the terms of my employment agreement.
My waiver of the Parachute Payments is subject to and conditioned on the
consummation of the transactions contemplated by the Agreement and Plan of
Merger dated as of March 4, 1998 by and among Ryder TRS, Inc., Questor Partners
Fund, L.P., Questor Side-By-Side Partners, L.P., Madison Dearborn Capital
Partners, L.P., BDG Corporation and Budget Group, Inc. (the "Merger Agreement").
If the Merger Agreement is terminated prior to the "Closing" (as defined in the
Merger Agreement) as provided in Section 10.1 of the Merger Agreement, my waiver
of the Parachute Payments shall be deemed rescinded, and the existing terms of
my employment agreement will continue to apply without regard to this waiver.
Except as otherwise provided herein, my waiver of the Parachute Payments shall
not affect any other benefits provided under my employment agreement.
Please acknowledge receipt and your agreement to the matters set forth in this
letter.
Very truly yours,
/s/ TOM ARNST
Tom Arnst
Accepted and Agreed to:
RYDER TRS, INC.
/s/ RONALD A. RITTENMEYER
____________________________
Ronald A. Rittenmeyer
<PAGE>
EXHIBIT 10.14
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 17, 1998
To: Tom Arnst
From: Ronald A. Rittenmeyer /s/ RONALD A. RITTENMEYER
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
In connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of March 4, 1998 by and among Ryder
TRS, Inc. (the "Company"), Questor Partners Fund, L.P., Questor Side-By-Side
Partners, L.P., Madison Dearborn Capital Partners, L.P., BDG Corporation and
Budget Group, Inc. (the "Merger"), the Company would like to recognize your
contribution to its success by amending your existing employment agreement dated
December 18, 1997 (the "Agreement"), as thereafter modified by letter dated
March 7, 1998 in which you waived all right and entitlement under the Agreement
to the "Executive Severance" and "Executive Stay-on Bonus" payments provided
therein. In consideration of the foregoing, your Agreement is amended as
follows:
A. MERGER BONUS: Within 5 days following the "Closing Date" (as defined in the
Merger Agreement), the Company will make a cash payment to you in the
amount of $60,000. On the later of October 1, 1998 or 120 days after the
Closing Date, the Company will make an additional cash payment to you in
the amount of $60,000.
b. Executive Severance: If during the 2-year period following the Closing Date
(i) your employment is terminated by the Company for reasons other than
the conviction of, or a plea of no contest to, a felony punishable by a
prison sentence of more than one year, (ii) you terminate your employment
by resigning following a reduction in base salary and/or a change to the
existing Company's target maximum bonus percentage or formula, (iii) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location, or (iv) you terminate your employment by
resigning following a reduction in your title, duties, reporting
relationships or responsibilities, the Company shall:
* Pay you a lump sum cash amount within 5 days of your date of
termination equal to your then current annual base salary and prorated
targeted maximum bonus for the year.
<PAGE>
* If your termination of employment is prior to May 1, 1999, pay you a
lump sum cash payment within 5 days of your date of termination in the
amount of $40,000.
* Make a lump sum cash payment to you within 5 days of your date of
termination of any unpaid amounts required by Paragraph (a) above.
* Provide, without cost to you, health care coverage required by Sections
601-608 of the Employee Retirement Income Security Act of 1974, as amended
("COBRA"), for a period of 12 months following your termination of
employment. In lieu of COBRA coverage, you may elect to receive the
applicable cost of such coverage in a lump sum cash payment, to be paid
within 5 days of your termination of employment.
* If after May 1997 you relocated to the Denver, Colorado area at the
Company's request, the Company will reimburse you for relocation expenses
incurred following your termination of employment in an amount equal to
the lesser of: (i) your actual expenses incurred in relocating from
Denver, Colorado after your termination, or (ii) 125% of your expenses
previously incurred in relocating to Denver, Colorado at the Company's
request, provided any such expenses are not reimbursed by any subsequent
employer. The foregoing relocation program will have the same benefits
(including tax gross up on certain items) and coverage as the relocation
program under which you were moved to Denver, Colorado by the Company.
C. RETENTION BONUS: If you are employed by the Company on May 1, 1999, the
Company will pay you a lump sum cash payment in the amount of $40,000.
Anything herein to the contrary notwithstanding, the terms of this amendment to
your Agreement are subject to (i) the consummation of the transactions
contemplated by the Merger Agreement, and (ii) the approval of the holders of
record of at least 75% of the Company's outstanding voting common stock
immediately prior to the Merger in a manner that complies with Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended. If the Merger
Agreement is terminated prior to the Closing Date as provided in Section 10.1 of
the Merger Agreement or the shareholder approval requirements described in the
preceding sentence are not satisfied, the terms of this amendment shall be void
and be of no further force and effect, and the existing terms of your Agreement
shall continue to apply without regard to this amendment. Except as otherwise
provided herein, the terms of this amendment shall not affect any other benefits
provided under your Agreement.
-2-
<PAGE>
All payments to be provided to you hereunder are subject to applicable federal
and state employment and income tax withholding obligations.
The terms of this amendment to your Agreement is tailored to you and therefore,
MUST BE TREATED AS STRICTLY CONFIDENTIAL.
If the terms of this amendment to your Agreement are acceptable, please
acknowledge your acceptance by signing each signature page to this amendment as
indicated below and returning one of the signed pages to me.
Agreed To And Accepted By:
/s/ TOM ARNST 3/17/98
____________________________________
Tom Arnst DATE
-3-
<PAGE>
EXHIBIT 10.15
March 7, 1998
Ronald A. Rittenmeyer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Re: Employment Agreement
Dear Ron:
I have been advised that certain provisions of my employment agreement with the
Company dated December 18, 1997 may give rise to so-called "parachute payments"
under Section 280G of the Internal Revenue Code.
While my rights under my employment agreement are fully enforceable by me, I
hereby agree to waive all right and entitlement to the "Executive Severance" and
"Executive Stay-on Bonus" (collectively, the "Parachute Payments") to be
provided to me by the Company under the terms of my employment agreement.
My waiver of the Parachute Payments is subject to and conditioned on the
consummation of the transactions contemplated by the Agreement and Plan of
Merger dated as of March 4, 1998 by and among Ryder TRS, Inc., Questor Partners
Fund, L.P., Questor Side-By-Side Partners, L.P., Madison Dearborn Capital
Partners, L.P., BDG Corporation and Budget Group, Inc. (the "Merger Agreement").
If the Merger Agreement is terminated prior to the "Closing" (as defined in the
Merger Agreement) as provided in Section 10.1 of the Merger Agreement, my waiver
of the Parachute Payments shall be deemed rescinded, and the existing terms of
my employment agreement will continue to apply without regard to this waiver.
Except as otherwise provided herein, my waiver of the Parachute Payments shall
not affect any other benefits provided under my employment agreement.
Please acknowledge receipt and your agreement to the matters set forth in this
letter.
Very truly yours,
/s/ JAMES GREGORY
James Gregory
Accepted and Agreed to:
RYDER TRS, INC.
/s/ RONALD A. RITTENMEYER
____________________________
Ronald A. Rittenmeyer
<PAGE>
EXHIBIT 10.16
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 17, 1998
To: James Gregory
From: Ronald A. Rittenmeyer /s/ RONALD A. RITTENMEYER
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
In connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of March 4, 1998 by and among Ryder
TRS, Inc. (the "Company"), Questor Partners Fund, L.P., Questor Side-By-Side
Partners, L.P., Madison Dearborn Capital Partners, L.P., BDG Corporation and
Budget Group, Inc. (the "Merger"), the Company would like to recognize your
contribution to its success by amending your existing employment agreement dated
December 18, 1997 (the "Agreement"), as thereafter modified by letter dated
March 7, 1998 in which you waived all right and entitlement under the Agreement
to the "Executive Severance" and "Executive Stay-on Bonus" payments provided
therein. In consideration of the foregoing, your Agreement is amended as
follows:
A. MERGER BONUS: Within 5 days following the "Closing Date" (as defined in the
Merger Agreement), the Company will make a cash payment to you in the
amount of $55,000. On the later of October 1, 1998 or 120 days after the
Closing Date, the Company will make an additional cash payment to you in
the amount of $55,000.
b. Executive Severance: If during the 2-year period following the Closing Date
(i) your employment is terminated by the Company for reasons other than
the conviction of, or a plea of no contest to, a felony punishable by a
prison sentence of more than one year, (ii) you terminate your employment
by resigning following a reduction in base salary and/or a change to the
existing Company's target maximum bonus percentage or formula, (iii) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location, or (iv) you terminate your employment by
resigning following a reduction in your title, duties, reporting
relationships or responsibilities, the Company shall:
* Pay you a lump sum cash amount within 5 days of your date of
termination equal to your then current annual base salary and prorated
targeted maximum bonus for the year.
<PAGE>
* If your termination of employment is prior to May 1, 1999, pay you a
lump sum cash payment within 5 days of your date of termination in the
amount of $75,000.
* Make a lump sum cash payment to you within 5 days of your date of
termination of any unpaid amounts required by Paragraph (a) above.
* Provide, without cost to you, health care coverage required by Sections
601-608 of the Employee Retirement Income Security Act of 1974, as amended
("COBRA"), for a period of 12 months following your termination of
employment. In lieu of COBRA coverage, you may elect to receive the
applicable cost of such coverage in a lump sum cash payment, to be paid
within 5 days of your termination of employment.
* If after May 1997 you relocated to the Denver, Colorado area at the
Company's request, the Company will reimburse you for relocation expenses
incurred following your termination of employment in an amount equal to
the lesser of: (i) your actual expenses incurred in relocating from
Denver, Colorado after your termination, or (ii) 125% of your expenses
previously incurred in relocating to Denver, Colorado at the Company's
request, provided any such expenses are not reimbursed by any subsequent
employer. The foregoing relocation program will have the same benefits
(including tax gross up on certain items) and coverage as the relocation
program under which you were moved to Denver, Colorado by the Company.
C. RETENTION BONUS: If you are employed by the Company on May 1, 1999, the
Company will pay you a lump sum cash payment in the amount of $75,000.
Anything herein to the contrary notwithstanding, the terms of this amendment to
your Agreement are subject to (i) the consummation of the transactions
contemplated by the Merger Agreement, and (ii) the approval of the holders of
record of at least 75% of the Company's outstanding voting common stock
immediately prior to the Merger in a manner that complies with Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended. If the Merger
Agreement is terminated prior to the Closing Date as provided in Section 10.1 of
the Merger Agreement or the shareholder approval requirements described in the
preceding sentence are not satisfied, the terms of this amendment shall be void
and be of no further force and effect, and the existing terms of your Agreement
shall continue to apply without regard to this amendment. Except as otherwise
provided herein, the terms of this amendment shall not affect any other benefits
provided under your Agreement.
-2-
<PAGE>
All payments to be provided to you hereunder are subject to applicable federal
and state employment and income tax withholding obligations.
The terms of this amendment to your Agreement is tailored to you and therefore,
MUST BE TREATED AS STRICTLY CONFIDENTIAL.
If the terms of this amendment to your Agreement are acceptable, please
acknowledge your acceptance by signing each signature page to this amendment as
indicated below and returning one of the signed pages to me.
Agreed To And Accepted By:
/s/ JAMES GREGORY 3/17/98
____________________________________
James Gregory DATE
-3-
<PAGE>
EXHIBIT 10.17
March 7, 1998
Ronald A. Rittenmeyer
Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Re: Employment Agreement
Dear Ron:
I have been advised that certain provisions of my employment agreement with the
Company dated December 18, 1997 may give rise to so-called "parachute payments"
under Section 280G of the Internal Revenue Code.
While my rights under my employment agreement are fully enforceable by me, I
hereby agree to waive all right and entitlement to the "Executive Severance" and
"Executive Stay-on Bonus" (collectively, the "Parachute Payments") to be
provided to me by the Company under the terms of my employment agreement.
My waiver of the Parachute Payments is subject to and conditioned on the
consummation of the transactions contemplated by the Agreement and Plan of
Merger dated as of March 4, 1998 by and among Ryder TRS, Inc., Questor Partners
Fund, L.P., Questor Side-By-Side Partners, L.P., Madison Dearborn Capital
Partners, L.P., BDG Corporation and Budget Group, Inc. (the "Merger Agreement").
If the Merger Agreement is terminated prior to the "Closing" (as defined in the
Merger Agreement) as provided in Section 10.1 of the Merger Agreement, my waiver
of the Parachute Payments shall be deemed rescinded, and the existing terms of
my employment agreement will continue to apply without regard to this waiver.
Except as otherwise provided herein, my waiver of the Parachute Payments shall
not affect any other benefits provided under my employment agreement.
Please acknowledge receipt and your agreement to the matters set forth in this
letter.
Very truly yours,
/s/ STEPHEN DIXON
Stephen Dixon
Accepted and Agreed to:
RYDER TRS, INC.
/s/ RONALD A. RITTENMEYER
____________________________
Ronald A. Rittenmeyer
<PAGE>
EXHIBIT 10.18
RYDER TRS, INC.
1560 BROADWAY, SUITE 1800
DENVER, COLORADO 80202
March 17, 1998
To: Stephen Dixon
From: Ronald A. Rittenmeyer /s/ RONALD A. RITTENMEYER
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
In connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") dated as of March 4, 1998 by and among Ryder
TRS, Inc. (the "Company"), Questor Partners Fund, L.P., Questor Side-By-Side
Partners, L.P., Madison Dearborn Capital Partners, L.P., BDG Corporation and
Budget Group, Inc. (the "Merger"), the Company would like to recognize your
contribution to its success by amending your existing employment agreement dated
December 18, 1997 (the "Agreement"), as thereafter modified by letter dated
March 7, 1998 in which you waived all right and entitlement under the Agreement
to the "Executive Severance" and "Executive Stay-on Bonus" payments provided
therein. In consideration of the foregoing, your Agreement is amended as
follows:
A. MERGER BONUS: Within 5 days following the "Closing Date" (as defined in the
Merger Agreement), the Company will make a cash payment to you in the
amount of $30,000. On the later of October 1, 1998 or 120 days after the
Closing Date, the Company will make an additional cash payment to you in
the amount of $30,000.
b. Executive Severance: If during the 2-year period following the Closing Date
(i) your employment is terminated by the Company for reasons other than
the conviction of, or a plea of no contest to, a felony punishable by a
prison sentence of more than one year, (ii) you terminate your employment
by resigning following a reduction in base salary and/or a change to the
existing Company's target maximum bonus percentage or formula, (iii) you
terminate your employment by resigning following a requirement by the
Company to relocate to a location more than 50 miles away from your
current employment location, or (iv) you terminate your employment by
resigning following a reduction in your title, duties, reporting
relationships or responsibilities, the Company shall:
* Pay you a lump sum cash amount within 5 days of your date of
termination equal to 9 months of your then current base salary and
prorated targeted maximum bonus for the year.
<PAGE>
* If your termination of employment is prior to May 1, 1999, pay you a
lump sum cash payment within 5 days of your date of termination in the
amount of $40,000.
* Make a lump sum cash payment to you within 5 days of your date of
termination of any unpaid amounts required by Paragraph (a) above.
* Provide, without cost to you, health care coverage required by Sections
601-608 of the Employee Retirement Income Security Act of 1974, as amended
("COBRA"), for a period of 9 months following your termination of
employment. In lieu of COBRA coverage, you may elect to receive the
applicable cost of such coverage in a lump sum cash payment, to be paid
within 5 days of your termination of employment.
* If after May 1997 you relocated to the Denver, Colorado area at the
Company's request, the Company will reimburse you for relocation expenses
incurred following your termination of employment in an amount equal to
the lesser of: (i) your actual expenses incurred in relocating from
Denver, Colorado after your termination, or (ii) 125% of your expenses
previously incurred in relocating to Denver, Colorado at the Company's
request, provided any such expenses are not reimbursed by any subsequent
employer. The foregoing relocation program will have the same benefits
(including tax gross up on certain items) and coverage as the relocation
program under which you were moved to Denver, Colorado by the Company.
C. RETENTION BONUS: If you are employed by the Company on May 1, 1999, the
Company will pay you a lump sum cash payment in the amount of $40,000.
Anything herein to the contrary notwithstanding, the terms of this amendment to
your Agreement are subject to (i) the consummation of the transactions
contemplated by the Merger Agreement, and (ii) the approval of the holders of
record of at least 75% of the Company's outstanding voting common stock
immediately prior to the Merger in a manner that complies with Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended. If the Merger
Agreement is terminated prior to the Closing Date as provided in Section 10.1 of
the Merger Agreement or the shareholder approval requirements described in the
preceding sentence are not satisfied, the terms of this amendment shall be void
and be of no further force and effect, and the existing terms of your Agreement
shall continue to apply without regard to this amendment. Except as otherwise
provided herein, the terms of this amendment shall not affect any other benefits
provided under your Agreement.
-2-
<PAGE>
All payments to be provided to you hereunder are subject to applicable federal
and state employment and income tax withholding obligations.
The terms of this amendment to your Agreement is tailored to you and therefore,
MUST BE TREATED AS STRICTLY CONFIDENTIAL.
If the terms of this amendment to your Agreement are acceptable, please
acknowledge your acceptance by signing each signature page to this amendment as
indicated below and returning one of the signed pages to me.
Agreed To And Accepted By:
/s/ STEPHEN DIXON 3/17/98
____________________________________
Stephen Dixon DATE
-3-
<PAGE>
EXHIBIT 10.19
SUBSCRIPTION, OPTION AND SHAREHOLDER'S AGREEMENT
------------------------------------------------
THIS SUBSCRIPTION, OPTION AND SHAREHOLDER'S AGREEMENT ("Agreement") is made
and entered into as of May 1, 1998, by and between James L. Gregory (the
"Shareholder") and Ryder TRS, Inc., a Delaware corporation (the "Corporation").
RECITALS
--------
A. The Corporation and the Shareholder desire that the Shareholder
purchases an equity interest in the Corporation.
B. The Corporation also desires to grant to the Shareholder an option to
acquire additional equity interests in the Corporation.
C. The Corporation and the Shareholder believe that it would be in the
best interest of the Corporation to place certain restrictions upon the right of
transfer of the Shareholder's interests in the Corporation.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Shareholder and the
Corporation agree as follows:
ARTICLE I
SUBSCRIPTION OF SHARES
----------------------
Section 1.1 Purchase, Issuance and Sale of Stock. The Shareholder
------------------------------------
hereby subscribes for and agrees to purchase, and the Corporation hereby agrees
to issue and sell to the Shareholder, One Hundred (100) shares of the
Corporation's Class C Common Stock, par value $.01 per share (the "Class C
Common Stock"), for a purchase price of One Thousand Dollars ($1,000.00) per
share (the "Purchase Price"). The purchase and sale of the Class C Common Stock
contemplated to be issued to the Shareholder pursuant to this Agreement (the
"Stock") will be consummated at a closing (the "Subscription Closing") to be
held at the principal offices of the Corporation in Denver, Colorado on May 1,
1998, at which time the Corporation shall deliver to the Shareholder a
certificate representing the Stock purchased by the Shareholder against the
Shareholder's delivery of the Purchase Price in immediately available funds.
Section 1.2 Representations and Warranties of the Corporation. The
-------------------------------------------------
Corporation hereby represents and warrants to the Shareholder as follows:
<PAGE>
(a) Authority. The Corporation has the requisite corporate power and
---------
authority to execute and perform this Agreement. This Agreement has been duly
executed and delivered by the Corporation and (assuming the due execution and
delivery hereof by the Shareholder) constitutes a valid and binding obligation
of the Corporation, enforceable against it in accordance with its terms, except
to the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
(b) Capitalization. The authorized capital stock of the Corporation
--------------
consists of (i) 225,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), (ii) 25,000 shares of non-voting Class B Common
Stock, par value $.01 per share (the "Class B Common Stock"), and (iii) 25,000
shares of non-voting Class C Common Stock.
(c) Outstanding Shares. Upon the Shareholder's payment of the
------------------
Purchase Price, the Stock will be duly authorized, validly issued, fully paid
and nonassessable. Immediately following the Subscription Closing, there will be
issued and outstanding (i) 109,090 shares of Class A Common Stock, (ii) 13,910
shares of Class B Common Stock, and (iii) 1,725 shares of Class C Common Stock.
Questor (as hereinafter defined) acquired its Class A Common Stock for a per
share purchase price of $1,000.
Section 1.3 Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to the Corporation as follows:
(a) State Securities Laws. The Shareholder received this Agreement
---------------------
and first learned of the offer and sale of the Stock contemplated hereby in the
State of Colorado, his state of residence. The Shareholder executed and will
execute all documents contemplated hereby in such state, and intends that the
laws of such state govern the offering of Stock to the Shareholder.
(b) Authority. The Shareholder has the power and authority to
---------
execute this Agreement and perform the Shareholder's obligations hereunder. This
Agreement has been duly executed and delivered by the Shareholder and (assuming
the due execution and delivery hereof by the Corporation) constitutes a valid
and binding obligation of the Shareholder enforceable against the Shareholder in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
(c) Acquisition for Investment. The Shareholder is acquiring the
--------------------------
Stock for investment solely for the Shareholder's account and not for
distribution, transfer or resale to others.
(d) Restrictions on Transfer. The Shareholder understands that the
------------------------
Shareholder must bear the economic risk of the purchase of the Stock for an
indefinite period of time because (i) the Corporation's sale of the Stock to the
Shareholder will not be registered
2
<PAGE>
under the Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws in reliance on the Shareholder's representations; (ii) except as
otherwise set forth herein, the Stock may not be sold, transferred, pledged, or
otherwise disposed of without the consent of the Corporation (which consent will
not be unreasonably withheld or delayed) and an opinion of counsel for or
satisfactory to the Corporation that registration under the Act or any
applicable state securities laws is not required; (iii) the Corporation neither
has an obligation to register a sale of the Stock nor has it agreed to do so in
the future; (iv) the exemption provided in Rule 144 under the Act is not
presently available for the resale of any Stock, and there is no assurance that
such exemption will be available at any time in the future with respect to any
proposed transfer of Stock; and (v) the Corporation is under no obligation to
perfect any exemption for resale of Stock. The Shareholder also acknowledges the
Shareholder's understanding that transfers of Stock will be subject to the
limitations set forth elsewhere in this Agreement.
(e) Certain Risk Factors. The Shareholder understands the
--------------------
speculative nature of and risks involved in the proposed investment in the
Corporation, and all matters relating to the structure and the operations of the
Corporation have been discussed and explained to Shareholder's satisfaction,
including but not limited to the structure and ramifications of the Senior
Subordinated Notes due 2006 of the Corporation in the principal amount of $175
million (the "Senior Notes") pursuant to and as more fully described in the
Corporation's Offering Memorandum (the "Offering Memorandum"), dated November
20, 1996, as well as the Corporation's Registration Statement on Form S-4 (File
No. 333-20397) filed with the Securities and Exchange Commission (the
"Registration Statement"), copies of which have been previously provided to the
Shareholder, as well as all matters with respect to the "Senior Bank Facilities"
described therein. The Shareholder also acknowledges receipt of the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. The Shareholder
specifically acknowledges his or her understanding that:
(i) the presence of substantial amounts of debt creates
significant risks, including that (A) although equity investments in highly
leveraged companies such as the Corporation offer the opportunity for
significant capital appreciation, such investments involve the highest degree of
risks and can result in the loss of the Shareholder's entire investment, (B)
other general business risks, including the effects of a recession, may have a
more pronounced effect, (C) senior lending institutions and the holders of the
Senior Notes may have rights to participate in certain decisions relating to the
management of the Corporation, and (D) for the Corporation's debt to be repaid
and for the Shareholder's equity investment in the Stock to have any value, the
Corporation must achieve significant continued growth in financial performance
in excess of its historical financial results;
(ii) the Purchase Price for the Stock may not be indicative of
the fair market value of such Stock;
(iii) because the Stock is non-voting, the Shareholder will have
no control over or influence in the management of the Corporation (other than by
virtue of the
3
<PAGE>
Shareholder's position with the Corporation), and that the purchase of the Stock
does not entitle the Shareholder to continued employment by the Corporation;
(iv) the terms of the Senior Notes, the Corporation's Senior
Bank Facilities, other contemplated financings and other documents relating to
an investment in the Corporation are quite complex, that all such documents are
available for inspection, that a review thereof is recommended, and that the
Shareholder should consider obtaining counsel or other competent advisors before
purchasing the Stock;
(v) Questor Management Company ("Questor"), an affiliate of
the Corporation's principal shareholder, Questor Partners Fund, L.P.
("Questor"), will receive a monthly management fee of approximately $70,833
pursuant to a Management and Consulting Agreement;
(vi) the Corporation will have the unrestricted right to issue
additional capital stock for any purpose deemed advisable by its Board of
Directors, which may result in future dilution of a particular Shareholder's
ownership interest in the Corporation provided, however, that if any time the
Corporation in any manner subdivides or combines the outstanding shares of any
class of Common Stock, the outstanding shares of Class C Common Stock will be
proportionately subdivided or combined in a similar manner; and
(vii) the Corporation will be subject to the additional "Risk
Factors" described in the Offering Memorandum and/or Registration Statement.
(f) Representations Relied Upon by the Shareholder. The Shareholder
----------------------------------------------
acknowledges receipt of the Offering Memorandum, which describes, among other
things, the transactions consummated under that certain Asset Purchase
Agreement, dated September 19, 1996, between Ryder Truck Rental, Inc., a Florida
corporation ("Ryder") and the Corporation pursuant to which the Corporation
acquired substantially all of the assets of the Consumer Truck Rental business
unit of Ryder, the issuance of the Senior Notes, the existing Senior Bank
Facilities and the possible refinancing of a portion of such indebtedness, as
well as certain risk factors relating to such matters. The Shareholder expressly
acknowledges that he or she is acquiring the Stock without having been furnished
any representations or warranties of any kind whatsoever with respect to the
Corporation's business and financial condition other than the representations
set forth herein. The Shareholder specifically understands that the financial
projections for the Corporation that have been made available for the
Shareholder's review are based on certain key assumptions, that such assumptions
are subject to uncertainties relating to the effect that economic or other
circumstances may have on future events, and that there can be no assurance that
the assumptions or data upon which they are based are achievable.
(g) Restrictive Legends. The Shareholder understands that the
-------------------
certificate(s) evidencing the Shareholder's Stock will bear a restrictive legend
prohibiting the transfer thereof except in compliance with (i) applicable state
and federal securities laws and may not be transferred of record except in
compliance therewith, and (ii) the terms of this Agreement.
4
<PAGE>
(h) Access to Information. The Shareholder has been offered the
---------------------
opportunity to ask questions of, and receive answers from, the Corporation and
to obtain any additional information, to the extent that the Corporation
possesses such information or could have acquired it without unreasonable effort
or expense, necessary to verify the accuracy of the information contained in the
documents delivered to the Shareholder and has in general had access to all
information the Shareholder has deemed material to an investment decision with
respect to the purchase of the Stock.
(i) No Liquidity. The Shareholder has adequate means of providing
------------
for the Shareholder's current financial needs and possible personal
contingencies and has no need for liquidity in the Shareholder's investment in
the Corporation.
(j) Risk of Loss. The Shareholder is able to bear the economic risks
------------
inherent in an investment in the Corporation and can afford a complete loss of
the Shareholder's entire investment in the Corporation.
(k) Other Illiquid Investments. The Shareholder's overall commitment
--------------------------
to investments which are not readily marketable is not disproportionate to the
Shareholder's net worth, and the Shareholder's investment in the Corporation
will not cause such overall commitment to be disproportionate.
(l) Familiarity With Business and Sophistication. The Shareholder
--------------------------------------------
(i) is familiar with the Corporation's business, and (ii) has such knowledge and
experience in financial and business matters that the Shareholder is capable of
evaluating the merits and risks of an investment in the Corporation and of
making an informed investment decision.
(m) Reliance on Representations. The Shareholder has discussed with,
---------------------------
and relied upon the advice of the Shareholder's counsel with regard to, the
meaning and legal consequences of the Shareholder's representations and
warranties herein and the considerations involved in making an investment in the
Corporation, and the Shareholder understands that the Corporation is relying on
the information set forth herein.
Section 1.4 Section 83(b) Election. The Shareholder understands that
----------------------
under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the fair market value of the Stock to be purchased by the
Shareholder on the date any forfeiture restrictions applicable to the shares
lapse over the Purchase Price paid for such Stock may be reportable as ordinary
income at that time. For this purpose, the term "forfeiture restrictions" may
include certain rights of the Corporation to repurchase the Stock pursuant to
this Agreement. The Shareholder understands, however, that the Shareholder may
elect to be taxed at the time the Stock is acquired hereunder, rather than when
and as such Stock ceases to be subject to such forfeiture restrictions, by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service within thirty (30) days after the date of this Agreement. Even if the
fair market value of the Stock at the date of this Agreement equals the Purchase
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The
5
<PAGE>
Shareholder understands that failure to make this filing within the thirty (30)
day period will result in the recognition of ordinary income by the Shareholder
as the forfeiture restrictions lapse. THE SHAREHOLDER ACKNOWLEDGES THAT IT IS
THE SHAREHOLDER'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A
TIMELY ELECTION UNDER SECTION 83(B), EVEN IF THE SHAREHOLDER REQUESTS THE
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF.
ARTICLE II
PURCHASE OF SHAREHOLDER'S STOCK UPON DEATH,
RETIREMENT, TERMINATION FOR GOOD REASON OR
TERMINATION OF EMPLOYMENT BY THE CORPORATION WITHOUT CAUSE
----------------------------------------------------------
Section 2.1 Sale and Purchase. Upon (i) the death or Retirement of the
-----------------
Shareholder, (ii) the Corporation's termination of the Shareholder's employment
with the Corporation by reason of the Shareholder's disability or for any other
reason except Cause, or (iii) the voluntary termination of the Shareholder's
employment for Good Reason (each a "FMV Triggering Event"), the Corporation
shall purchase from the Shareholder, or from the Shareholder's Estate, and the
Shareholder or the Shareholder's Estate shall sell, all of the Shareholder's
Stock (which, for all purposes of this Agreement, shall include all shares of
Class C Common Stock acquired by the Shareholder in the future, including as a
result of option exercises) in accordance with the terms and conditions provided
in this ARTICLE TWO.
Section 2.2 Purchase Price. The purchase price to be paid for any Stock
--------------
acquired under this ARTICLE TWO shall be the fair market value of the Stock as
of the date of termination of employment as described in Section 2.1 hereof. The
fair market value of the Stock shall be determined in good faith by agreement of
the Board of Directors of the Corporation (the "Board") and the Shareholder or
the Shareholder's Estate. If the Board and the Shareholder or the Shareholder's
Estate cannot in good faith agree to the determination of fair market value
within thirty (30) days of the Corporation's receipt or delivery of written
notice of any FMV Triggering Event, the determination of such fair market value
shall be submitted within ten (10) days of the end of such 30-day period to
Raymond James & Associates, Inc. (the "Primary Investment Firm"), whose fees
shall be shared equally by the Corporation, on the one hand, and the Shareholder
or the Shareholder's Estate, on the other. If either the Corporation, the
Shareholder or the Shareholder's Estate shall object to the determination of
fair market value made by the Primary Investment Firm, within ten (10) business
days of receipt thereof, the Corporation and the Shareholder or the
Shareholder's Estate shall mutually agree to a second investment banking or
valuation firm (the "Secondary Investment Firm"), who shall determine such fair
market value and whose fees shall be paid by the person objecting to the
determination made by the Primary Investment Firm. The average of the fair
market values as determined by the Primary Investment Firm and Secondary
Investment Firm shall be conclusive and binding for all purposes hereof.
Notwithstanding the foregoing, in no event will the purchase price under
6
<PAGE>
this ARTICLE TWO for the initial Stock purchased under Section 1.1 of this
Agreement be less than the initial purchase price paid by Shareholder of One
Thousand Dollars ($1,000) per share.
Section 2.3 Assignment. The Corporation may assign all or any portion
----------
of its right to purchase Stock under this ARTICLE TWO to one or more persons
(each an "Assignee" and collectively the "Assignees").
Section 2.4 Closing. The Corporation and/or its Assignee(s) shall
-------
purchase the Shareholder's Stock under this ARTICLE TWO at a closing to occur
within forty-five (45) days of the Corporation's receipt or delivery of written
notice of any FMV Triggering Event; provided, however, that if the determination
of fair market value has been submitted to the Primary Investment Firm or the
Secondary Investment Firm, the closing date shall be deferred until the fifth
(5th) business day after the final determination thereof. The closing shall
occur at the principal office of the Corporation, and the closing procedures and
purchase price shall be consistent with the provisions of this ARTICLE TWO.
Section 2.5 Tender Requirements at Closing. At the closing, the
------------------------------
Shareholder or the Shareholder's Estate shall present to the Corporation and/or
its Assignee Shareholder, as the case may be, share certificates for all shares
of Stock to be acquired, such share certificates to be in proper form for
transfer. Such Stock shall be transferred free of all liens and encumbrances or
adverse claims of any kind or character. The Corporation and/or its Assignee(s),
upon receipt of a proper tender from the Shareholder or the Shareholder's
Estate, shall tender payment of the purchase price in cash or by official bank
check (or such other form of consideration as may be mutually agreed upon by the
parties).
Section 2.6 Definitions. For purposes of ARTICLE TWO, ARTICLE THREE OR
-----------
ARTICLE EIGHT, of this Agreement, the terms hereinafter set forth shall have the
following definitions unless otherwise specifically stated.
(a) Cause. The term "Cause" shall mean (i) a willful breach by the
-----
Shareholder of any of the material terms or provisions of this Agreement or any
of the material terms of the Shareholder's employment with the Corporation, (ii)
the conviction of the Shareholder of a felony, or (iii) commission by the
Shareholder of fraud, embezzlement, misappropriation, theft, breach of fiduciary
duty or dishonesty against the Corporation, its properties or personnel.
(b) Estate. The term "Estate" shall mean and include the deceased
------
Shareholder's executor, administrator or similar personal representative (if one
has qualified and is then acting), and his or her surviving spouse, heirs,
beneficiaries, devisees and legatees to the extent, if any, that their action is
required in order to effect a full and complete transfer of the deceased
Shareholder's Stock pursuant to the terms of this Agreement. The general agent
of the persons and entities comprising the Shareholder's Estate shall be the
Shareholder's duly appointed and qualified personal representative, executor or
administrator, or his or her surviving
7
<PAGE>
spouse where no such representative is appointed, and all notices and
communications hereunder shall be effected to and through such general agent.
(c) Retirement. The term "Retirement" means the withdrawal from the
----------
employment with the Corporation at an age of 55 years or more with the intent
not to be employed by the Corporation or to be engaged in any other substantial
business activity.
(d) Good Reason. The term "Good Reason" shall mean (i) the
-----------
assignment to the Shareholder of any duties which result in a significant
diminution of the Shareholder's existing authority, duty or responsibility,
excluding for this purpose an isolated, insubstantial or inadvertent action not
taken in bad faith and which is remedied by the Corporation after receipt of
written notice given by the Shareholder, or (ii) a requirement that the
Shareholder be based at a location other than the Shareholder's current location
or any location more than 50 miles from such location.
ARTICLE III
PURCHASE OF SHAREHOLDER'S STOCK UPON TERMINATION
FOR CAUSE, TERMINATION BY SHAREHOLDER OR BANKRUPTCY
---------------------------------------------------
Section 3.1 Sale and Purchase. Upon (i) the Corporation's termination
-----------------
of the Shareholder for Cause, (ii) the Shareholder's voluntary termination of
his or her employment relationship with the Corporation, other than for Good
Reason, or (iii) the adjudication of the Shareholder as bankrupt, the taking of
any voluntary action by the Shareholder or any involuntary action against the
Shareholder seeking an adjudication of the Shareholder as bankrupt or the
seeking of any relief by or against the Shareholder under any provision of the
Bankruptcy Code (each a "Book Value Triggering Event"), the Corporation shall
purchase from the Shareholder, and the Shareholder shall sell, all of the
Shareholder's Stock in accordance with the terms and conditions provided in this
ARTICLE THREE. The Corporation may assign all or a portion of its right to
purchase Stock under this ARTICLE THREE to one or more Assignees.
Section 3.2 Purchase Price. The purchase price to be paid for each
--------------
share of Stock acquired under this ARTICLE THREE shall be the "Book Value Per
Share of Stock" as of the end of the last complete calendar quarter immediately
preceding the event giving rise to the obligation referred to in Section 3.1.
The "Book Value Per Share of Stock" shall be determined by dividing (a) the
Corporation's common "Shareholder's equity," determined in accordance with
generally accepted accounting principles consistently applied, by (b) aggregate
number of outstanding shares of the Corporation's common stock.
Section 3.3 Closing. The Corporation or its Assignee(s) shall purchase
-------
the Shareholder's Stock under this ARTICLE THREE at a closing to occur within
forty-five (45) days of the Corporation's receipt or delivery of written notice
of any Book Value Triggering Event. The closing shall occur at the principal
office of the Corporation, and the closing procedures and purchase price shall
be consistent with the provisions of this ARTICLE THREE.
8
<PAGE>
Section 3.4 Tender Requirements at Closing. At the closing, the
------------------------------
Shareholder shall present to the Corporation share certificates for all shares
of Stock to be acquired, such share certificates to be in proper form for
transfer. Such Stock shall be transferred free of all liens and encumbrances or
adverse claims of any kind or character. The Corporation or its Assignee(s),
upon receipt of a proper tender from the Shareholder, shall tender payment of
the purchase price in cash.
ARTICLE IV
RESTRICTIONS IMPOSED UPON THE
TRANSFER OF STOCK BY THE SHAREHOLDER
------------------------------------
Section 4.1 General Prohibition on Transfers. Except as is specifically
--------------------------------
permitted by the provisions of this ARTICLE FOUR, the sale, assignment, pledge,
gift, transfer or other disposition of the Shareholder's Stock, either directly
or indirectly, to any person or entity other than the Corporation, is
prohibited.
Section 4.2 Permitted Transfers. The following transfers of Stock shall
-------------------
be permitted transfers which do not require the giving of a Notice of Right of
First Refusal under Section 4.3 of this ARTICLE FOUR.
(a) Transfers with Consent. Notwithstanding the provisions of
----------------------
Section 4.1, a transfer or disposition of any kind or character otherwise
prohibited by this ARTICLE FOUR may be permitted if approved by the Corporation.
(b) Transfers to Family Members. Notwithstanding the provisions of
---------------------------
Section 4.1, the Shareholder shall be permitted to transfer (whether by
purchase, assignment, gift, bequest, devise, levy, execution or other means of
transfer) all or any portion of his Stock to (i) his spouse or any lineal
descendant, (ii) any custodian, guardian or other representative for a spouse or
lineal descendant, and/or (iii) the trustee of any trust created for the benefit
of the Shareholder, his or her spouse and/or lineal descendants (collectively
the "Permitted Family Transferees") provided that each and every such Permitted
Family Transferee executes a written acknowledgment that (i) all Stock held by
the Permitted Family Transferee will, notwithstanding the transfer to such
Permitted Family Transferee, be deemed for all purposes of this Agreement to be
owned by the transferring Shareholder, and (ii) he, she or it agrees to be bound
by all of the terms of this Agreement.
(c) Transfers Under Other Articles. Notwithstanding the provisions
------------------------------
of Section 4.1, a transfer pursuant to the provisions of ARTICLE TWO, THREE or
SIX of this Agreement shall be permitted without complying with the Right of
First Refusal provisions of this ARTICLE FOUR.
Section 4.3 Transfers to Third Parties.
--------------------------
9
<PAGE>
(a) Notice of Right of First Refusal. Notwithstanding the provisions
--------------------------------
of Section 4.1, and absent the right to make a transfer of Stock pursuant to
Section 4.2, commencing on the third anniversary of the Subscription Closing,
the Shareholder may also transfer all or a portion of his Stock, subject in all
respects to the prior written approval of the Corporation (which approval shall
not be unreasonably withheld) and the following "right of first refusal"
provisions of this Section 4.3. Commencing on the third anniversary of the
Subscription Closing, if the Shareholder receives a bona fide offer from a party
unrelated to the Shareholder to sell, assign, transfer or otherwise dispose of
Stock owned by the Shareholder, or any interest therein, and the Shareholder
desires to accept such offer, the Shareholder shall cause such offer to be
reduced in writing and the Shareholder shall, not less than thirty (30) days
prior to the date of the proposed sale, assignment, transfer or other
disposition, deliver a request for the Corporation's approval of the proposed
transaction and a Notice of Right of First Refusal to the Corporation containing
the following information:
(i) the number of shares of Stock proposed to be so
transferred (the "Offered Stock");
(ii) the terms and conditions of the proposed transfer,
including the identity of the proposed transferee(s) and the per share price to
be charged (if any) for the shares of Stock to be transferred and the cash
consideration to be received therefor (the "Offered Terms"); and
(iii) an affirmative offer made by the Shareholder to transfer
the Offered Stock to the Corporation at a price (the "Offer Price") equal to the
total cash price in the proposed transfer for the Offered Stock as indicated in
the Notice of Right of First Refusal (i.e., the number of shares multiplied by
----
the per share price, if any, to be charged for the shares of Stock to be
transferred), it being agreed that, without the prior written approval of the
Corporation, all transfers permitted by this Section 4.3 must be solely for
consideration consisting of cash or cash equivalents.
The date that the Notice of Right of First Refusal is received by the
Corporation shall constitute the First Refusal Notice Date.
(b) Primary Right of First Refusal by the Corporation. The
-------------------------------------------------
Corporation shall have the right to approve or disapprove the proposed transfer
of Stock described in the Notice of Right of First Refusal, which approval shall
not be unreasonably withheld or delayed. In addition, the Corporation shall have
the sole and exclusive option to acquire all or any portion of the shares of
Stock offered for transfer in accordance with the provisions of the Notice of
Right of First Refusal for a period of thirty days from the First Refusal Notice
Date. The Corporation may exercise such option by giving written notice of
exercise to the Selling Shareholder prior to the termination of its exclusive
option period. Such notice of exercise shall refer to the Notice of Right of
First Refusal and shall set forth the number of shares to be acquired by the
Corporation and/or any Assignee (it being the parties' agreement and intent that
10
<PAGE>
the Corporation may assign all or a portion of its right to purchase Stock under
this ARTICLE FOUR to one or more Assignees).
(c) Requirement to Purchase All Offered Stock. Notwithstanding the
-----------------------------------------
provisions of the Section 4.3(b), the option to purchase shares of Stock
described in the Notice of Right of First Refusal may be exercised and the
Closing (as hereinafter defined) consummated only if the Corporation and one or
more Assignees, if applicable, collectively agree to purchase all of the shares
of the Offered Stock.
(d) Closing and Tender Requirements. The consummation of any
-------------------------------
transfer required pursuant to an exercise of option rights created by this
ARTICLE FOUR shall constitute the "Closing", and the time and date of such
Closing shall constitute the "Closing Date." The Closing shall be held at the
principal office of the Corporation, at 10:00 a.m. on the thirty-fifth day
subsequent to the date of giving of the Notice of Right of First Refusal to the
Corporation. At the Closing, the Shareholder shall present to the Corporation
and/or the Assignee(s), as the case may be, all share certificates for Stock
required to be sold in proper form for transfer. Such Stock shall be transferred
free of all liens and encumbrances or adverse claims of any kind or character.
At the Closing, the Corporation and/or the Assignee(s), as the case may be, upon
receipt of proper tender of the Stock, shall tender full payment of the Offer
Price in conformity with the Offered Terms as set forth in the Notice of Right
of First Refusal, or upon such other terms and conditions as favorable or more
favorable to the Offered Terms.
(e) Permitted Transfer Following Right of First Refusal. If all of
---------------------------------------------------
the Stock identified in the Notice of Right of First Refusal is not purchased by
the Corporation and/or the Assignee(s) prior to the thirty-sixth day subsequent
to the First Refusal Notice Date, then all of such Stock (including any Stock
for which a proper tender was made) may be transferred by the Shareholder at any
time during the ensuing thirty days in strict conformity with the Offered Terms
set forth in the Notice of Right of First Refusal; provided, however, the
purchaser(s) of such Stock must execute a written acknowledgment that he or she
or they have become a Shareholder as if he or she or they had been original
signatory parties to this Agreement and that he or she or they agree to be bound
by the terms of this Agreement applicable to Shareholder.
Section 4.4 Transfers Include Foreclosure. For purposes of this ARTICLE
-----------------------------
FOUR, a transfer of Stock by the Shareholder shall be deemed to include, but
shall not be limited to, any transfer of legal or beneficial ownership by reason
of foreclosure under any pledge, hypothecation or similar credit transactions
that was previously permitted by the Corporation; provided, however, that the
Corporation shall have the right to prohibit any such pledge or similar
transaction in its sole discretion.
Section 4.5 Compliance Required. Absent the right to make a transfer of
-------------------
Stock pursuant to Section 4.2 or 4.3 hereof, any transfer described in this
ARTICLE FOUR of the Shareholder's Stock without complying with the giving of a
Notice of Right of First Refusal shall be void, and the Corporation shall issue
a Notice of Right of First Refusal upon discovery of
11
<PAGE>
such transfer, a copy of which shall be sent to the person making such transfer
and his or her transferee. The duty of the Corporation to cause the issuance of
such Notice of Right of First Refusal shall not be considered to be elective,
but shall be mandatory. Upon the giving of the Notice of Right of First Refusal,
the time periods for the exercise of the options specified in Section 4.3 shall
commence running. If a Notice of Right of First Refusal had already been given
to the Corporation, but the Corporation is required to issue a new Notice of
Right of First Refusal under this Section 4.5, the prior Notice of Right of
First Refusal shall have no effect and the time periods under the Notice of
Right of First Refusal issued by the Corporation shall apply.
ARTICLE V
PUBLIC OFFERING CONVERSION, PREEMPTIVE RIGHTS AND SETOFF
--------------------------------------------------------
Section 5.1 Public Offering. Upon and as a condition to the
---------------
consummation of the Corporation's "IPO" (as hereinafter defined), the
Corporation shall cause its Certificate of Incorporation to be amended to
provide that the Class C Common Stock is automatically converted into voting
common stock of the same class that will be held by Questor. The Shareholder
agrees to vote in favor of such amendment.
Section 5.2 Preemptive Rights. If, subsequent to the date hereof and
-----------------
prior to the Corporation's IPO, the Corporation desires to issue and sell
capital stock to Questor or to any other affiliate of the Corporation, other
than pursuant to this Agreement or upon the consent of the holders of at least a
majority of the Stock, the Corporation shall afford the Shareholder "preemptive
rights" in order to permit the Shareholder to maintain his or her percentage
ownership in the Corporation (it being agreed that preemptive rights with
respect to the issuance of voting securities may be satisfied through the
Corporation's offer to issue non-voting securities that otherwise have the same
economic terms). The Shareholder's right to exercise the "preemptive rights"
contemplated by this Section 5.2 shall be subject to the Shareholder's provision
of the undertakings contemplated by Section 8.7 hereof.
Section 5.3 Setoff. Notwithstanding anything contained in this
------
Agreement, in the event that the Corporation shall purchase the Stock from the
Shareholder pursuant to this Agreement, then, in any such event, there shall be
a setoff applied against the full amount of any and all indebtedness of the
selling Shareholder or the Shareholder's Estate owed to the Corporation, whether
or not evidenced by a promissory note or other written instrument, and any and
all interest accrued on such indebtedness.
12
<PAGE>
ARTICLE VI
TAKE-A-LONG-PROVISIONS AND RELATED VOTING AGREEMENT
---------------------------------------------------
The Shareholder hereby agrees, upon the request of Questor, to vote all of
the Shareholder's Stock in favor of any Specified Corporate Transactions (as
defined in Section 8.6(c)) and, at Questor's request, to include the
Shareholder's shares of Stock in any such proposed transaction or any proposed
sale of more than 50% of the capital stock then held by Questor (each a "Sale
Transaction"); provided that the per share consideration to be received by the
Shareholder in the Sale Transaction is not less than the per share consideration
to be received by Questor.
ARTICLE VII
LEGEND
------
All certificates representing Stock of the Corporation issued to the
Shareholder shall bear the following legend. On the face of each such
certificate there shall appear the following statement:
"SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS. SEE REVERSE SIDE."
On the reverse side of each such certificate, the following statement shall
appear:
"RESTRICTIONS ON THE RIGHT TO VOTE, OWN OR TRANSFER THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN
IMPOSED PURSUANT TO AN AGREEMENT DATED AS OF MAY 1, 1998, BY
AND BETWEEN THE CORPORATION AND THE SHAREHOLDER. THE
CORPORATION SHALL FURNISH THE HOLDER HEREOF A COPY OF SUCH
AGREEMENT WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR ITS
REGISTERED OFFICE."
The Corporation may also cause to be imposed upon such certificates such other
legends as counsel to the Corporation shall determine to be required under the
provisions of any federal securities act or any state law. The Corporation shall
incorporate the provisions of this Agreement in its Bylaws as required by state
law.
13
<PAGE>
ARTICLE VIII
OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS OF THE CORPORATION
----------------------------------------------------------------
Section 8.1 Grant of Options. Subject to the terms and conditions set
----------------
forth in this ARTICLE EIGHT, the Corporation hereby grants to the Shareholder
(in such capacity, the "Optionee") an option to purchase (the "Option") One
Hundred (100) shares of Stock.
Section 8.2 Exercise Price and Exercise Schedule. Subject to adjustment
------------------------------------
pursuant to Section 8.6 hereof, the exercise price per share of Stock paid by
the Optionee shall be One Thousand Dollars ($1,000.00). Except as otherwise
provided in this ARTICLE EIGHT, each Option shall be exercisable in whole or in
part (but in any event solely in whole shares) and cumulatively according to the
following schedule, provided in each case that the Optionee did not default in
--------
the performance of his purchase obligation at the Subscription Closing:
20% after May 1, 1999
40% after May 1, 2000
60% after May 1, 2001
80% after May 1, 2002
100% after May 1, 2003
In no event shall any Option be exercisable after May 1, 2008
Section 8.3 Transferability. Each Option granted under this ARTICLE
---------------
EIGHT is not transferable otherwise than by will or the laws of descent and
distribution and during the lifetime of the Optionee is exercisable only by the
applicable Optionee.
Section 8.4 Procedures for Exercise of Option. Each Option shall be
---------------------------------
deemed exercised as to any Optionee when (i) the Corporation has received
written notice of such exercise from the Optionee, (ii) full payment of the
aggregate option exercise price of the shares of Stock as to which the Option is
exercised has been made to the Corporation, and (iii) arrangements that are
satisfactory to the Corporation in its sole discretion have been made for the
Optionee's payment to the Corporation of the amount, if any, that is necessary
for the Corporation to withhold in accordance with applicable Federal or state
tax withholding requirements. The option exercise price of any Stock purchased
shall be paid in cash, by certified or official bank check or by money order;
provided, however, that to the extent that an Option is being exercised in
connection with a sale of Stock pursuant to ARTICLE TWO or ARTICLE THREE hereof
at a price that exceeds the Option exercise price, no payment of the exercise
price shall be required and, instead, appropriate arrangements shall be made for
the Corporation's payment (without duplication) to the Optionee of the positive
difference (net of required withholding) between (x) the purchase price payable
under ARTICLE TWO or ARTICLE THREE with respect to the Stock subject to the
Option, and (y) the aggregate exercise
14
<PAGE>
price with respect to such Option. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date of
such payment, except as expressly provided in Section 8.6 hereof.
Section 8.5 Termination of Option Period. The unexercised portion of
----------------------------
each Option granted under this ARTICLE EIGHT as to any Optionee shall
automatically and without notice terminate and become null and void at the time
of the earliest to occur of the following:
(i) thirty (30) days after the date on which the Optionee's
employment relationship with the Corporation is terminated for any reason other
than by reason of Cause (it being agreed that the "vesting" schedule set forth
in Section 8.2 shall continue through such 30 days); or
(ii) immediately upon the termination of the Optionee's
employment relationship with the Corporation for Cause; or
(iii) on the ten-year anniversary date of the date of the
Subscription Closing.
Section 8.6 Adjustment of Shares.
--------------------
(a) If at any time while an Option is outstanding, the Corporation in
any manner subdivides or combines the outstanding shares of any class of Common
Stock, then and in such event appropriate adjustment shall be made in the number
of shares of Class C Common Stock and the exercise price per share then subject
to such Option, so that the same percentage of the Corporation's issued and
outstanding shares of Class C Common Stock shall remain subject to purchase at
the same aggregate exercise price.
(b) Except as otherwise expressly provided in Section 8.6(a), the
issuance by the Corporation of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Corporation convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to the number of
or exercise price of shares of Stock then subject to any Option.
(c) Without limiting the generality of the foregoing, the existence
of any Option shall not affect in any manner the right or power of the
Corporation and/or the Shareholder to make, authorize or consummate (i) any or
all adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business; (ii) any merger or
consolidation of the Corporation; (iii) any issue by the Corporation of debt or
equity securities, including but not limited to preferred or preference stock
that would rank above the shares of Stock subject to this Option; (iv) the
dissolution or liquidation of the Corporation; (v) any sale, transfer or
assignment of all or any part of the assets or business of the Corporation;
15
<PAGE>
or (vi) any other corporate act or proceeding, whether of a similar character or
otherwise. The Corporation in its sole discretion may, by giving written notice
("Cancellation Notice") cancel, upon the date of the consummation of (i) any
transaction (which shall include a series of transactions occurring within 180
days or occurring pursuant to a plan), other than an IPO, that has the result
that shareholders of the Corporation immediately before such transaction cease
to own at least 51 percent of the voting stock of the Corporation or of any
entity that results from the participation of the Corporation in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction (ii) any merger, consolidation, reorganization,
liquidation or dissolution in which the Corporation does not survive, or (iii)
the sale, lease, exchange or other disposition of all or substantially all the
property and assets of the Corporation, any Option that remains unexercised on
such date (each a "Specified Corporate Transaction"). The Cancellation Notice
shall be given a reasonable period of time prior to the proposed date of
cancellation and may be given either before or after any required shareholder
approval of such Specified Corporation Transaction. Notwithstanding Section 8.2
hereof, all Options shall become immediately and fully exercisable immediately
prior to any Specified Corporate Transaction in order to permit the exercise
prior to the cancellation thereof. The Corporation shall also have the right to
accelerate the vesting of all or part of any or all Options for any other reason
in its sole discretion.
Section 8.7 Issuance of Shares. As a condition of any sale or issuance
------------------
of Stock upon exercise of any Option, the Corporation may require such
agreements or undertakings, if any, as the Corporation may deem necessary or
advisable to assure compliance with any law or regulation, including, but not
limited to, the following:
(a) a representation and warranty by the Optionee, at the time an
Option is exercised, that he is acquiring the Stock to be issued to him for
investment and not with a view to, or for sale in connection with, the
distribution of any such Stock; and
(b) a representation, warranty and/or agreement to be bound by any
legends that are, in the opinion of the Corporation, necessary or appropriate to
comply with the provisions of any securities law deemed to be applicable to the
issuance of the Stock and are endorsed upon the share certificates.
Section 8.8 Section 83(b) Election. The Shareholder acknowledges his or
----------------------
her understanding that, if as a result of exercising all or any part of an
Option, the Optionee receives Stock that is subject to a "substantial risk of
forfeiture" and is not "transferable" as those terms are defined for purposes of
section 83(a) of the Code, then the Optionee may elect under section 83(b) of
the Code to include in his or her gross income, for his or her taxable year in
which the Stock is transferred to him, the excess of the "Fair Market Value" of
such Stock at the time of transfer (determined without regard to any restriction
other than one that by its terms will never lapse), over the amount paid for the
Stock. If the Optionee makes the section 83(b) election described above, the
Optionee shall (i) make such election in a manner that is satisfactory to the
Corporation, (ii) provide the Corporation with a copy of such election, (iii)
agree to promptly notify the Corporation if any Internal Revenue Service or
state tax agent,
16
<PAGE>
on audit or otherwise, questions the validity or correctness of such election or
of the amount of income reportable on account of such election, and (iv) agree
to such withholding as the Corporation may reasonably require in its sole and
absolute discretion.
Section 8.9 No Right to Continued Employment. Neither this Agreement
--------------------------------
nor any Option shall not confer upon the Optionee any right to continued
employment by the Corporation or any subsidiary or affiliate of the Corporation.
ARTICLE IX
THE GIVING OF NOTICES REQUIRED BY THIS AGREEMENT
------------------------------------------------
Section 9.1 Addresses. Any notices, requests, demands and other
---------
communications required or permitted to be given hereunder must be in writing
and, except as otherwise specified in writing, will be deemed to have been duly
given when personally delivered, telexed or facsimile transmitted, or three days
after deposit in the United States mail, by certified mail, postage prepaid,
return receipt requested, as follows. The addresses of the Corporation and the
Shareholder, which shall be considered to be their last known addresses unless
subsequently changed in accordance with the provisions of this Agreement, are as
follows:
IF TO THE CORPORATION: Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Attention: President
With Copies To:
--------------
Questor Management Company
4000 Town Center, Suite 500
Southfield, Michigan 48075
Attention: President
and
---
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Bruce E. Macdonough
IF TO THE SHAREHOLDER:
James L. Gregory
16467 East Dorado Avenue
Aurora, CO 80015
17
<PAGE>
Any party may change its address for the purposes of this Agreement by giving
notice of such change of address to the other parties in the manner herein
provided for giving notice.
Section 9.2 Form of Notice. Any notice or communication hereunder must
--------------
be in writing, and may be personally delivered or given by registered or
certified mail, return receipt requested, and if given by registered or
certified mail, shall be deemed to have been given and received forty-eight
hours after deposit in the United States mail of a registered or certified
letter, return receipt requested, containing such notice, properly addressed,
with postage prepaid; and if given otherwise than by registered or certified
mail, it shall be deemed to have been given when received by the party to whom
it is addressed at the time received.
Section 9.3 Failure to Notify of Changed Address. It shall be the
------------------------------------
responsibility of each of the parties to this Agreement to notify all other
parties of their respective addresses and any changes thereof, and any
objections to the performance of any act required hereunder based upon a failure
to receive a notice mailed in conformity with the provisions of this Agreement
shall be meritless.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Termination. This Agreement shall terminate upon the
-----------
earlier to occur of (i) the dissolution of the Corporation, (ii) except with
respect to the Option provisions under ARTICLE EIGHT and Section (S)10.15
hereof, the consummation of the Corporation's initial underwritten public
offering ("IPO") of common stock registered under the Securities Act of 1933, as
amended, and (iii) upon the date the Shareholder ceases to own any Stock.
Section 10.2 Modification. This Agreement may only be amended,
------------
terminated or modified by the written consent of the Corporation and the
Shareholder.
Section 10.3 Successors. This Agreement shall be binding upon the
----------
parties hereto, their heirs, administrators, successors, executors and assigns,
and the parties hereto do covenant and agree that they themselves and their
respective heirs, executors, successors, administrators and assigns will execute
any and all instruments, releases, assignments and consents that may be
reasonably required of them to more fully execute the provisions of this
Agreement.
Section 10.4 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall serve as an original for all purposes, but all
copies of which shall constitute but one and the same Agreement.
Section 10.5 Headings. All headings set forth in this Agreement are
--------
intended for convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or of any of the provisions thereof.
18
<PAGE>
Section 10.6 Governing Law. This Agreement shall be governed by and
-------------
shall be construed and enforced in accordance with the laws of the State of
Colorado.
Section 10.7 Insurance. The Shareholder agrees to cooperate with the
---------
Corporation and to assist it to the extent required in order to allow the
Corporation to obtain insurance on the life of the Shareholder should the
Corporation decide to purchase such insurance.
Section 10.8 Waiver. The waiver by any party hereto of a breach of any
------
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
Section 10.9 Entire Agreement. This Agreement constitutes the entire
----------------
Agreement of the parties hereto with respect to the transactions contemplated
hereby, and it is hereby agreed that any prior oral or written agreements
concerning the sale or disposition of Stock shall be null and void.
Section 10.10 Severability. If any provision of this Agreement shall be
------------
held to be illegal or unenforceable, such illegality or unenforceability shall
extend to that provision solely, and the remainder of this Agreement shall be
enforced as if such illegal or unenforceable provision were not incorporated
herein.
Section 10.11 Specific Performance. The right to own and vote Stock is
--------------------
hereby declared by the parties hereto to be a unique right, the loss of which is
not susceptible to monetary quantification. Consequently, the parties hereto
agree that an action for specific performance of the purchase and sale
obligations created by this Agreement is a proper remedy for the breach of its
provisions. If any party to this Agreement institutes legal proceedings in
connection with this Agreement, the prevailing party shall be entitled to
recover their reasonable attorneys' fees and court costs.
Section 10.12 Business Days. Whenever the terms of this Agreement call
-------------
for the performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
Section 10.13 Stock References. References to "Stock" herein shall mean
----------------
(i) any Stock purchased or otherwise acquired by the Shareholder, whether
pursuant to ARTICLE ONE, ARTICLE EIGHT or otherwise, (ii) any equity securities
issued or issuable directly or indirectly with respect to the Stock referred to
in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Corporation held by the Shareholder. As to any particular shares
constituting Stock, such shares will cease to be Stock when they have been (x)
disposed of in accordance with a registration statement effective under the Act,
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or any similar provision then in force) under the Act.
19
<PAGE>
Section 10.14 Failure to Deliver Stock. If the Shareholder (or any
------------------------
personal representative or other representative of the Shareholder) who has
become obligated to sell Stock of the Corporation hereunder shall fail to
deliver such Stock on the terms and in accordance with this Agreement, the
Corporation, in addition to all other remedies it may have, may send to the such
obligated party by registered mail, return receipt requested, the purchase price
for such Stock on the terms provided for in this Agreement. Thereupon, the
Corporation, upon written notice to the Shareholder, shall cancel on its books
the certificates representing the Stock to be sold; and thereupon, all of the
obligated Shareholder's rights in and to such Stock shall terminate.
Section 10.15 Lock-Up. In consideration of the premises and mutual
-------
covenants set forth in this Agreement, the Shareholder severally agrees to
execute and deliver a customary "lock-up" agreement, restricting the transfer of
the Shareholder's Stock for not more than 180 days, in connection with the IPO
and each other underwritten public offering of the Corporation's securities.
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
RYDER TRS, INC.
By: /s/ Ronald A. Rittenmeyer
-------------------------
Ronald A. Rittenmeyer, President and
Chief Operating Officer
/s/ James L. Gregory
--------------------
James L. Gregory
20
<PAGE>
EXHIBIT 10.20
SUBSCRIPTION, OPTION AND SHAREHOLDER'S AGREEMENT
------------------------------------------------
THIS SUBSCRIPTION, OPTION AND SHAREHOLDER'S AGREEMENT ("Agreement") is made
and entered into as of May 1, 1998, by and between Michael A. Zawalski (the
"Shareholder") and Ryder TRS, Inc., a Delaware corporation (the "Corporation").
RECITALS
--------
A. The Corporation and the Shareholder desire that the Shareholder
purchases an equity interest in the Corporation.
B. The Corporation also desires to grant to the Shareholder an option to
acquire additional equity interests in the Corporation.
C. The Corporation and the Shareholder believe that it would be in the
best interest of the Corporation to place certain restrictions upon the right of
transfer of the Shareholder's interests in the Corporation.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Shareholder and the
Corporation agree as follows:
ARTICLE I
SUBSCRIPTION OF SHARES
----------------------
Section 1.1 Purchase, Issuance and Sale of Stock. The Shareholder hereby
------------------------------------
subscribes for and agrees to purchase, and the Corporation hereby agrees to
issue and sell to the Shareholder, One Hundred (100) shares of the Corporation's
Class C Common Stock, par value $.01 per share (the "Class C Common Stock"), for
a purchase price of One Thousand Dollars ($1,000.00) per share (the "Purchase
Price"). The purchase and sale of the Class C Common Stock contemplated to be
issued to the Shareholder pursuant to this Agreement (the "Stock") will be
consummated at a closing (the "Subscription Closing") to be held at the
principal offices of the Corporation in Denver, Colorado on May 1, 1998, at
which time the Corporation shall deliver to the Shareholder a certificate
representing the Stock purchased by the Shareholder against the Shareholder's
delivery of the Purchase Price in immediately available funds.
Section 1.2 Representations and Warranties of the Corporation. The
-------------------------------------------------
Corporation hereby represents and warrants to the Shareholder as follows:
<PAGE>
(a) Authority. The Corporation has the requisite corporate power
---------
and authority to execute and perform this Agreement. This Agreement has been
duly executed and delivered by the Corporation and (assuming the due execution
and delivery hereof by the Shareholder) constitutes a valid and binding
obligation of the Corporation, enforceable against it in accordance with its
terms, except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
(b) Capitalization. The authorized capital stock of the
--------------
Corporation consists of (i) 225,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (ii) 25,000 shares of non-voting
Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), and
(iii) 25,000 shares of non-voting Class C Common Stock.
(c) Outstanding Shares. Upon the Shareholder's payment of the
------------------
Purchase Price, the Stock will be duly authorized, validly issued, fully paid
and nonassessable. Immediately following the Subscription Closing, there will be
issued and outstanding (i) 109,090 shares of Class A Common Stock, (ii) 13,910
shares of Class B Common Stock, and (iii) 1,725 shares of Class C Common Stock.
Questor (as hereinafter defined) acquired its Class A Common Stock for a per
share purchase price of $1,000.
Section 1.3 Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to the Corporation as follows:
(a) State Securities Laws. The Shareholder received this
---------------------
Agreement and first learned of the offer and sale of the Stock contemplated
hereby in the State of Colorado, his state of residence. The Shareholder
executed and will execute all documents contemplated hereby in such state, and
intends that the laws of such state govern the offering of Stock to the
Shareholder.
(b) Authority. The Shareholder has the power and authority to
---------
execute this Agreement and perform the Shareholder's obligations hereunder. This
Agreement has been duly executed and delivered by the Shareholder and (assuming
the due execution and delivery hereof by the Corporation) constitutes a valid
and binding obligation of the Shareholder enforceable against the Shareholder in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
(c) Acquisition for Investment. The Shareholder is acquiring the
--------------------------
Stock for investment solely for the Shareholder's account and not for
distribution, transfer or resale to others.
(d) Restrictions on Transfer. The Shareholder understands that
------------------------
the Shareholder must bear the economic risk of the purchase of the Stock for an
indefinite period of time because (i) the Corporation's sale of the Stock to the
Shareholder will not be registered
2
<PAGE>
under the Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws in reliance on the Shareholder's representations; (ii) except as
otherwise set forth herein, the Stock may not be sold, transferred, pledged, or
otherwise disposed of without the consent of the Corporation (which consent will
not be unreasonably withheld or delayed) and an opinion of counsel for or
satisfactory to the Corporation that registration under the Act or any
applicable state securities laws is not required; (iii) the Corporation neither
has an obligation to register a sale of the Stock nor has it agreed to do so in
the future; (iv) the exemption provided in Rule 144 under the Act is not
presently available for the resale of any Stock, and there is no assurance that
such exemption will be available at any time in the future with respect to any
proposed transfer of Stock; and (v) the Corporation is under no obligation to
perfect any exemption for resale of Stock. The Shareholder also acknowledges
the Shareholder's understanding that transfers of Stock will be subject to the
limitations set forth elsewhere in this Agreement.
(e) Certain Risk Factors. The Shareholder understands the
--------------------
speculative nature of and risks involved in the proposed investment in the
Corporation, and all matters relating to the structure and the operations of the
Corporation have been discussed and explained to Shareholder's satisfaction,
including but not limited to the structure and ramifications of the Senior
Subordinated Notes due 2006 of the Corporation in the principal amount of $175
million (the "Senior Notes") pursuant to and as more fully described in the
Corporation's Offering Memorandum (the "Offering Memorandum"), dated November
20, 1996, as well as the Corporation's Registration Statement on Form S-4 (File
No. 333-20397) filed with the Securities and Exchange Commission (the
"Registration Statement"), copies of which have been previously provided to the
Shareholder, as well as all matters with respect to the "Senior Bank Facilities"
described therein. The Shareholder also acknowledges receipt of the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. The Shareholder
specifically acknowledges his or her understanding that:
(i) the presence of substantial amounts of debt creates
significant risks, including that (A) although equity investments in highly
leveraged companies such as the Corporation offer the opportunity for
significant capital appreciation, such investments involve the highest degree of
risks and can result in the loss of the Shareholder's entire investment, (B)
other general business risks, including the effects of a recession, may have a
more pronounced effect, (C) senior lending institutions and the holders of the
Senior Notes may have rights to participate in certain decisions relating to the
management of the Corporation, and (D) for the Corporation's debt to be repaid
and for the Shareholder's equity investment in the Stock to have any value, the
Corporation must achieve significant continued growth in financial performance
in excess of its historical financial results;
(ii) the Purchase Price for the Stock may not be
indicative of the fair market value of such Stock;
(iii) because the Stock is non-voting, the Shareholder will
have no control over or influence in the management of the Corporation (other
than by virtue of the
3
<PAGE>
Shareholder's position with the Corporation), and that the purchase of the Stock
does not entitle the Shareholder to continued employment by the Corporation;
(iv) the terms of the Senior Notes, the Corporation's
Senior Bank Facilities, other contemplated financings and other documents
relating to an investment in the Corporation are quite complex, that all such
documents are available for inspection, that a review thereof is recommended,
and that the Shareholder should consider obtaining counsel or other competent
advisors before purchasing the Stock;
(v) Questor Management Company ("Questor"), an affiliate
of the Corporation's principal shareholder, Questor Partners Fund, L.P.
("Questor"), will receive a monthly management fee of approximately $70,833
pursuant to a Management and Consulting Agreement;
(vi) the Corporation will have the unrestricted right to
issue additional capital stock for any purpose deemed advisable by its Board of
Directors, which may result in future dilution of a particular Shareholder's
ownership interest in the Corporation provided, however, that if any time the
Corporation in any manner subdivides or combines the outstanding shares of any
class of Common Stock, the outstanding shares of Class C Common Stock will be
proportionately subdivided or combined in a similar manner; and
(vii) the Corporation will be subject to the additional
"Risk Factors" described in the Offering Memorandum and/or Registration
Statement.
(f) Representations Relied Upon by the Shareholder. The
----------------------------------------------
Shareholder acknowledges receipt of the Offering Memorandum, which describes,
among other things, the transactions consummated under that certain Asset
Purchase Agreement, dated September 19, 1996, between Ryder Truck Rental, Inc.,
a Florida corporation ("Ryder") and the Corporation pursuant to which the
Corporation acquired substantially all of the assets of the Consumer Truck
Rental business unit of Ryder, the issuance of the Senior Notes, the existing
Senior Bank Facilities and the possible refinancing of a portion of such
indebtedness, as well as certain risk factors relating to such matters. The
Shareholder expressly acknowledges that he or she is acquiring the Stock without
having been furnished any representations or warranties of any kind whatsoever
with respect to the Corporation's business and financial condition other than
the representations set forth herein. The Shareholder specifically understands
that the financial projections for the Corporation that have been made available
for the Shareholder's review are based on certain key assumptions, that such
assumptions are subject to uncertainties relating to the effect that economic or
other circumstances may have on future events, and that there can be no
assurance that the assumptions or data upon which they are based are achievable.
(g) Restrictive Legends. The Shareholder understands that the
-------------------
certificate(s) evidencing the Shareholder's Stock will bear a restrictive legend
prohibiting the transfer thereof except in compliance with (i) applicable state
and federal securities laws and may not be transferred of record except in
compliance therewith, and (ii) the terms of this Agreement.
4
<PAGE>
(h) Access to Information. The Shareholder has been offered the
---------------------
opportunity to ask questions of, and receive answers from, the Corporation and
to obtain any additional information, to the extent that the Corporation
possesses such information or could have acquired it without unreasonable effort
or expense, necessary to verify the accuracy of the information contained in the
documents delivered to the Shareholder and has in general had access to all
information the Shareholder has deemed material to an investment decision with
respect to the purchase of the Stock.
(i) No Liquidity. The Shareholder has adequate means of
------------
providing for the Shareholder's current financial needs and possible personal
contingencies and has no need for liquidity in the Shareholder's investment in
the Corporation.
(j) Risk of Loss. The Shareholder is able to bear the economic
------------
risks inherent in an investment in the Corporation and can afford a complete
loss of the Shareholder's entire investment in the Corporation.
(k) Other Illiquid Investments. The Shareholder's overall
--------------------------
commitment to investments which are not readily marketable is not
disproportionate to the Shareholder's net worth, and the Shareholder's
investment in the Corporation will not cause such overall commitment to be
disproportionate.
(l) Familiarity With Business and Sophistication. The
--------------------------------------------
Shareholder (i) is familiar with the Corporation's business, and (ii) has such
knowledge and experience in financial and business matters that the Shareholder
is capable of evaluating the merits and risks of an investment in the
Corporation and of making an informed investment decision.
(m) Reliance on Representations. The Shareholder has discussed
---------------------------
with, and relied upon the advice of the Shareholder's counsel with regard to,
the meaning and legal consequences of the Shareholder's representations and
warranties herein and the considerations involved in making an investment in the
Corporation, and the Shareholder understands that the Corporation is relying on
the information set forth herein.
Section 1.4 Section 83(b) Election. The Shareholder understands that
----------------------
under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the fair market value of the Stock to be purchased by the
Shareholder on the date any forfeiture restrictions applicable to the shares
lapse over the Purchase Price paid for such Stock may be reportable as ordinary
income at that time. For this purpose, the term "forfeiture restrictions" may
include certain rights of the Corporation to repurchase the Stock pursuant to
this Agreement. The Shareholder understands, however, that the Shareholder may
elect to be taxed at the time the Stock is acquired hereunder, rather than when
and as such Stock ceases to be subject to such forfeiture restrictions, by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service within thirty (30) days after the date of this Agreement. Even if the
fair market value of the Stock at the date of this Agreement equals the Purchase
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The
5
<PAGE>
Shareholder understands that failure to make this filing within the thirty (30)
day period will result in the recognition of ordinary income by the Shareholder
as the forfeiture restrictions lapse. THE SHAREHOLDER ACKNOWLEDGES THAT IT IS
THE SHAREHOLDER'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A
TIMELY ELECTION UNDER SECTION 83(B), EVEN IF THE SHAREHOLDER REQUESTS THE
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF.
ARTICLE II
PURCHASE OF SHAREHOLDER'S STOCK UPON DEATH,
RETIREMENT, TERMINATION FOR GOOD REASON OR
TERMINATION OF EMPLOYMENT BY THE CORPORATION WITHOUT CAUSE
----------------------------------------------------------
Section 2.1 Sale and Purchase. Upon (i) the death or Retirement of the
-----------------
Shareholder, (ii) the Corporation's termination of the Shareholder's employment
with the Corporation by reason of the Shareholder's disability or for any other
reason except Cause, or (iii) the voluntary termination of the Shareholder's
employment for Good Reason (each a "FMV Triggering Event"), the Corporation
shall purchase from the Shareholder, or from the Shareholder's Estate, and the
Shareholder or the Shareholder's Estate shall sell, all of the Shareholder's
Stock (which, for all purposes of this Agreement, shall include all shares of
Class C Common Stock acquired by the Shareholder in the future, including as a
result of option exercises) in accordance with the terms and conditions provided
in this ARTICLE TWO.
Section 2.2 Purchase Price. The purchase price to be paid for any Stock
--------------
acquired under this ARTICLE TWO shall be the fair market value of the Stock as
of the date of termination of employment as described in Section 2.1 hereof.
The fair market value of the Stock shall be determined in good faith by
agreement of the Board of Directors of the Corporation (the "Board") and the
Shareholder or the Shareholder's Estate. If the Board and the Shareholder or
the Shareholder's Estate cannot in good faith agree to the determination of fair
market value within thirty (30) days of the Corporation's receipt or delivery of
written notice of any FMV Triggering Event, the determination of such fair
market value shall be submitted within ten (10) days of the end of such 30-day
period to Raymond James & Associates, Inc. (the "Primary Investment Firm"),
whose fees shall be shared equally by the Corporation, on the one hand, and the
Shareholder or the Shareholder's Estate, on the other. If either the
Corporation, the Shareholder or the Shareholder's Estate shall object to the
determination of fair market value made by the Primary Investment Firm, within
ten (10) business days of receipt thereof, the Corporation and the Shareholder
or the Shareholder's Estate shall mutually agree to a second investment banking
or valuation firm (the "Secondary Investment Firm"), who shall determine such
fair market value and whose fees shall be paid by the person objecting to the
determination made by the Primary Investment Firm. The average of the fair
market values as determined by the Primary Investment Firm and Secondary
Investment Firm shall be conclusive and binding for all purposes hereof.
Notwithstanding the foregoing, in no event will the purchase price under
6
<PAGE>
this ARTICLE TWO for the initial Stock purchased under Section 1.1 of this
Agreement be less than the initial purchase price paid by Shareholder of One
Thousand Dollars ($1,000) per share.
Section 2.3 Assignment. The Corporation may assign all or any portion of
----------
its right to purchase Stock under this ARTICLE TWO to one or more persons (each
an "Assignee" and collectively the "Assignees").
Section 2.4 Closing. The Corporation and/or its Assignee(s) shall
-------
purchase the Shareholder's Stock under this ARTICLE TWO at a closing to occur
within forty-five (45) days of the Corporation's receipt or delivery of written
notice of any FMV Triggering Event; provided, however, that if the determination
of fair market value has been submitted to the Primary Investment Firm or the
Secondary Investment Firm, the closing date shall be deferred until the fifth
(5th) business day after the final determination thereof. The closing shall
occur at the principal office of the Corporation, and the closing procedures and
purchase price shall be consistent with the provisions of this ARTICLE TWO.
Section 2.5 Tender Requirements at Closing. At the closing, the
------------------------------
Shareholder or the Shareholder's Estate shall present to the Corporation and/or
its Assignee Shareholder, as the case may be, share certificates for all shares
of Stock to be acquired, such share certificates to be in proper form for
transfer. Such Stock shall be transferred free of all liens and encumbrances or
adverse claims of any kind or character. The Corporation and/or its
Assignee(s), upon receipt of a proper tender from the Shareholder or the
Shareholder's Estate, shall tender payment of the purchase price in cash or by
official bank check (or such other form of consideration as may be mutually
agreed upon by the parties).
Section 2.6 Definitions. For purposes of ARTICLE TWO, ARTICLE THREE OR
-----------
ARTICLE EIGHT, of this Agreement, the terms hereinafter set forth shall have the
following definitions unless otherwise specifically stated.
(a) Cause. The term "Cause" shall mean (i) a willful breach by
-----
the Shareholder of any of the material terms or provisions of this Agreement or
any of the material terms of the Shareholder's employment with the Corporation,
(ii) the conviction of the Shareholder of a felony, or (iii) commission by the
Shareholder of fraud, embezzlement, misappropriation, theft, breach of fiduciary
duty or dishonesty against the Corporation, its properties or personnel.
(b) Estate. The term "Estate" shall mean and include the
------
deceased Shareholder's executor, administrator or similar personal
representative (if one has qualified and is then acting), and his or her
surviving spouse, heirs, beneficiaries, devisees and legatees to the extent, if
any, that their action is required in order to effect a full and complete
transfer of the deceased Shareholder's Stock pursuant to the terms of this
Agreement. The general agent of the persons and entities comprising the
Shareholder's Estate shall be the Shareholder's duly appointed and qualified
personal representative, executor or administrator, or his or her surviving
7
<PAGE>
spouse where no such representative is appointed, and all notices and
communications hereunder shall be effected to and through such general agent.
(c) Retirement. The term "Retirement" means the withdrawal from
----------
the employment with the Corporation at an age of 55 years or more with the
intent not to be employed by the Corporation or to be engaged in any other
substantial business activity.
(d) Good Reason. The term "Good Reason" shall mean (i) the
-----------
assignment to the Shareholder of any duties which result in a significant
diminution of the Shareholder's existing authority, duty or responsibility,
excluding for this purpose an isolated, insubstantial or inadvertent action not
taken in bad faith and which is remedied by the Corporation after receipt of
written notice given by the Shareholder, or (ii) a requirement that the
Shareholder be based at a location other than the Shareholder's current location
or any location more than 50 miles from such location.
ARTICLE III
PURCHASE OF SHAREHOLDER'S STOCK UPON TERMINATION
FOR CAUSE, TERMINATION BY SHAREHOLDER OR BANKRUPTCY
---------------------------------------------------
Section 3.1 Sale and Purchase. Upon (i) the Corporation's termination of
-----------------
the Shareholder for Cause, (ii) the Shareholder's voluntary termination of his
or her employment relationship with the Corporation, other than for Good Reason,
or (iii) the adjudication of the Shareholder as bankrupt, the taking of any
voluntary action by the Shareholder or any involuntary action against the
Shareholder seeking an adjudication of the Shareholder as bankrupt or the
seeking of any relief by or against the Shareholder under any provision of the
Bankruptcy Code (each a "Book Value Triggering Event"), the Corporation shall
purchase from the Shareholder, and the Shareholder shall sell, all of the
Shareholder's Stock in accordance with the terms and conditions provided in this
ARTICLE THREE. The Corporation may assign all or a portion of its right to
purchase Stock under this ARTICLE THREE to one or more Assignees.
Section 3.2 Purchase Price. The purchase price to be paid for each share
--------------
of Stock acquired under this ARTICLE THREE shall be the "Book Value Per Share of
Stock" as of the end of the last complete calendar quarter immediately preceding
the event giving rise to the obligation referred to in Section 3.1. The "Book
Value Per Share of Stock" shall be determined by dividing (a) the Corporation's
common "Shareholder's equity," determined in accordance with generally accepted
accounting principles consistently applied, by (b) aggregate number of
outstanding shares of the Corporation's common stock.
Section 3.3 Closing. The Corporation or its Assignee(s) shall purchase
-------
the Shareholder's Stock under this ARTICLE THREE at a closing to occur within
forty-five (45) days of the Corporation's receipt or delivery of written notice
of any Book Value Triggering Event. The closing shall occur at the principal
office of the Corporation, and the closing procedures and purchase price shall
be consistent with the provisions of this ARTICLE THREE.
8
<PAGE>
Section 3.4 Tender Requirements at Closing. At the closing, the
------------------------------
Shareholder shall present to the Corporation share certificates for all shares
of Stock to be acquired, such share certificates to be in proper form for
transfer. Such Stock shall be transferred free of all liens and encumbrances or
adverse claims of any kind or character. The Corporation or its Assignee(s),
upon receipt of a proper tender from the Shareholder, shall tender payment of
the purchase price in cash.
ARTICLE IV
RESTRICTIONS IMPOSED UPON THE
TRANSFER OF STOCK BY THE SHAREHOLDER
------------------------------------
Section 4.1 General Prohibition on Transfers. Except as is specifically
--------------------------------
permitted by the provisions of this ARTICLE FOUR, the sale, assignment, pledge,
gift, transfer or other disposition of the Shareholder's Stock, either directly
or indirectly, to any person or entity other than the Corporation, is
prohibited.
Section 4.2 Permitted Transfers. The following transfers of Stock shall
-------------------
be permitted transfers which do not require the giving of a Notice of Right of
First Refusal under Section 4.3 of this ARTICLE FOUR.
(a) Transfers with Consent. Notwithstanding the provisions of
----------------------
Section 4.1, a transfer or disposition of any kind or character otherwise
prohibited by this ARTICLE FOUR may be permitted if approved by the Corporation.
(b) Transfers to Family Members. Notwithstanding the provisions
---------------------------
of Section 4.1, the Shareholder shall be permitted to transfer (whether by
purchase, assignment, gift, bequest, devise, levy, execution or other means of
transfer) all or any portion of his Stock to (i) his spouse or any lineal
descendant, (ii) any custodian, guardian or other representative for a spouse or
lineal descendant, and/or (iii) the trustee of any trust created for the benefit
of the Shareholder, his or her spouse and/or lineal descendants (collectively
the "Permitted Family Transferees") provided that each and every such Permitted
Family Transferee executes a written acknowledgment that (i) all Stock held by
the Permitted Family Transferee will, notwithstanding the transfer to such
Permitted Family Transferee, be deemed for all purposes of this Agreement to be
owned by the transferring Shareholder, and (ii) he, she or it agrees to be bound
by all of the terms of this Agreement.
(c) Transfers Under Other Articles. Notwithstanding the
------------------------------
provisions of Section 4.1, a transfer pursuant to the provisions of ARTICLE TWO,
THREE or SIX of this Agreement shall be permitted without complying with the
Right of First Refusal provisions of this ARTICLE FOUR.
Section 4.3 Transfers to Third Parties.
--------------------------
9
<PAGE>
(a) Notice of Right of First Refusal. Notwithstanding the
--------------------------------
provisions of Section 4.1, and absent the right to make a transfer of Stock
pursuant to Section 4.2, commencing on the third anniversary of the Subscription
Closing, the Shareholder may also transfer all or a portion of his Stock,
subject in all respects to the prior written approval of the Corporation (which
approval shall not be unreasonably withheld) and the following "right of first
refusal" provisions of this Section 4.3. Commencing on the third anniversary of
the Subscription Closing, if the Shareholder receives a bona fide offer from a
party unrelated to the Shareholder to sell, assign, transfer or otherwise
dispose of Stock owned by the Shareholder, or any interest therein, and the
Shareholder desires to accept such offer, the Shareholder shall cause such offer
to be reduced in writing and the Shareholder shall, not less than thirty (30)
days prior to the date of the proposed sale, assignment, transfer or other
disposition, deliver a request for the Corporation's approval of the proposed
transaction and a Notice of Right of First Refusal to the Corporation containing
the following information:
(i) the number of shares of Stock proposed to be so
transferred (the "Offered Stock");
(ii) the terms and conditions of the proposed transfer,
including the identity of the proposed transferee(s) and the per share price to
be charged (if any) for the shares of Stock to be transferred and the cash
consideration to be received therefor (the "Offered Terms"); and
(iii) an affirmative offer made by the Shareholder to
transfer the Offered Stock to the Corporation at a price (the "Offer Price")
equal to the total cash price in the proposed transfer for the Offered Stock as
indicated in the Notice of Right of First Refusal (i.e., the number of shares
---
multiplied by the per share price, if any, to be charged for the shares of Stock
to be transferred), it being agreed that, without the prior written approval of
the Corporation, all transfers permitted by this Section 4.3 must be solely for
consideration consisting of cash or cash equivalents.
The date that the Notice of Right of First Refusal is received by the
Corporation shall constitute the First Refusal Notice Date.
(b) Primary Right of First Refusal by the Corporation. The
-------------------------------------------------
Corporation shall have the right to approve or disapprove the proposed transfer
of Stock described in the Notice of Right of First Refusal, which approval shall
not be unreasonably withheld or delayed. In addition, the Corporation shall
have the sole and exclusive option to acquire all or any portion of the shares
of Stock offered for transfer in accordance with the provisions of the Notice of
Right of First Refusal for a period of thirty days from the First Refusal Notice
Date. The Corporation may exercise such option by giving written notice of
exercise to the Selling Shareholder prior to the termination of its exclusive
option period. Such notice of exercise shall refer to the Notice of Right of
First Refusal and shall set forth the number of shares to be acquired by the
Corporation and/or any Assignee (it being the parties' agreement and intent that
10
<PAGE>
the Corporation may assign all or a portion of its right to purchase Stock under
this ARTICLE FOUR to one or more Assignees).
(c) Requirement to Purchase All Offered Stock. Notwithstanding
-----------------------------------------
the provisions of the Section 4.3(b), the option to purchase shares of Stock
described in the Notice of Right of First Refusal may be exercised and the
Closing (as hereinafter defined) consummated only if the Corporation and one or
more Assignees, if applicable, collectively agree to purchase all of the shares
of the Offered Stock.
(d) Closing and Tender Requirements. The consummation of any
-------------------------------
transfer required pursuant to an exercise of option rights created by this
ARTICLE FOUR shall constitute the "Closing", and the time and date of such
Closing shall constitute the "Closing Date." The Closing shall be held at the
principal office of the Corporation, at 10:00 a.m. on the thirty-fifth day
subsequent to the date of giving of the Notice of Right of First Refusal to the
Corporation. At the Closing, the Shareholder shall present to the Corporation
and/or the Assignee(s), as the case may be, all share certificates for Stock
required to be sold in proper form for transfer. Such Stock shall be transferred
free of all liens and encumbrances or adverse claims of any kind or character.
At the Closing, the Corporation and/or the Assignee(s), as the case may be, upon
receipt of proper tender of the Stock, shall tender full payment of the Offer
Price in conformity with the Offered Terms as set forth in the Notice of Right
of First Refusal, or upon such other terms and conditions as favorable or more
favorable to the Offered Terms.
(e) Permitted Transfer Following Right of First Refusal. If all
---------------------------------------------------
of the Stock identified in the Notice of Right of First Refusal is not purchased
by the Corporation and/or the Assignee(s) prior to the thirty-sixth day
subsequent to the First Refusal Notice Date, then all of such Stock (including
any Stock for which a proper tender was made) may be transferred by the
Shareholder at any time during the ensuing thirty days in strict conformity with
the Offered Terms set forth in the Notice of Right of First Refusal; provided,
however, the purchaser(s) of such Stock must execute a written acknowledgment
that he or she or they have become a Shareholder as if he or she or they had
been original signatory parties to this Agreement and that he or she or they
agree to be bound by the terms of this Agreement applicable to Shareholder.
Section 4.4 Transfers Include Foreclosure. For purposes of this ARTICLE
-----------------------------
FOUR, a transfer of Stock by the Shareholder shall be deemed to include, but
shall not be limited to, any transfer of legal or beneficial ownership by reason
of foreclosure under any pledge, hypothecation or similar credit transactions
that was previously permitted by the Corporation; provided, however, that the
Corporation shall have the right to prohibit any such pledge or similar
transaction in its sole discretion.
Section 4.5 Compliance Required. Absent the right to make a transfer of
-------------------
Stock pursuant to Section 4.2 or 4.3 hereof, any transfer described in this
ARTICLE FOUR of the Shareholder's Stock without complying with the giving of a
Notice of Right of First Refusal shall be void, and the Corporation shall issue
a Notice of Right of First Refusal upon discovery of
11
<PAGE>
such transfer, a copy of which shall be sent to the person making such transfer
and his or her transferee. The duty of the Corporation to cause the issuance of
such Notice of Right of First Refusal shall not be considered to be elective,
but shall be mandatory. Upon the giving of the Notice of Right of First Refusal,
the time periods for the exercise of the options specified in Section 4.3 shall
commence running. If a Notice of Right of First Refusal had already been given
to the Corporation, but the Corporation is required to issue a new Notice of
Right of First Refusal under this Section 4.5, the prior Notice of Right of
First Refusal shall have no effect and the time periods under the Notice of
Right of First Refusal issued by the Corporation shall apply.
ARTICLE V
PUBLIC OFFERING CONVERSION, PREEMPTIVE RIGHTS AND SETOFF
--------------------------------------------------------
Section 5.1 Public Offering. Upon and as a condition to the consummation
---------------
of the Corporation's "IPO" (as hereinafter defined), the Corporation shall cause
its Certificate of Incorporation to be amended to provide that the Class C
Common Stock is automatically converted into voting common stock of the same
class that will be held by Questor. The Shareholder agrees to vote in favor of
such amendment.
Section 5.2 Preemptive Rights. If, subsequent to the date hereof and
-----------------
prior to the Corporation's IPO, the Corporation desires to issue and sell
capital stock to Questor or to any other affiliate of the Corporation, other
than pursuant to this Agreement or upon the consent of the holders of at least a
majority of the Stock, the Corporation shall afford the Shareholder "preemptive
rights" in order to permit the Shareholder to maintain his or her percentage
ownership in the Corporation (it being agreed that preemptive rights with
respect to the issuance of voting securities may be satisfied through the
Corporation's offer to issue non-voting securities that otherwise have the same
economic terms). The Shareholder's right to exercise the "preemptive rights"
contemplated by this Section 5.2 shall be subject to the Shareholder's provision
of the undertakings contemplated by Section 8.7 hereof.
Section 5.3 Setoff. Notwithstanding anything contained in this Agreement,
------
in the event that the Corporation shall purchase the Stock from the Shareholder
pursuant to this Agreement, then, in any such event, there shall be a setoff
applied against the full amount of any and all indebtedness of the selling
Shareholder or the Shareholder's Estate owed to the Corporation, whether or not
evidenced by a promissory note or other written instrument, and any and all
interest accrued on such indebtedness.
12
<PAGE>
ARTICLE VI
TAKE-A-LONG-PROVISIONS AND RELATED VOTING AGREEMENT
---------------------------------------------------
The Shareholder hereby agrees, upon the request of Questor, to vote all of
the Shareholder's Stock in favor of any Specified Corporate Transactions (as
defined in Section 8.6(c)) and, at Questor's request, to include the
Shareholder's shares of Stock in any such proposed transaction or any proposed
sale of more than 50% of the capital stock then held by Questor (each a "Sale
Transaction"); provided that the per share consideration to be received by the
Shareholder in the Sale Transaction is not less than the per share consideration
to be received by Questor.
ARTICLE VII
LEGEND
------
All certificates representing Stock of the Corporation issued to the
Shareholder shall bear the following legend. On the face of each such
certificate there shall appear the following statement:
"SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS. SEE REVERSE SIDE."
On the reverse side of each such certificate, the following statement shall
appear:
"RESTRICTIONS ON THE RIGHT TO VOTE, OWN OR TRANSFER THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN
IMPOSED PURSUANT TO AN AGREEMENT DATED AS OF MAY 1, 1998, BY
AND BETWEEN THE CORPORATION AND THE SHAREHOLDER. THE
CORPORATION SHALL FURNISH THE HOLDER HEREOF A COPY OF SUCH
AGREEMENT WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR ITS
REGISTERED OFFICE."
The Corporation may also cause to be imposed upon such certificates such other
legends as counsel to the Corporation shall determine to be required under the
provisions of any federal securities act or any state law. The Corporation
shall incorporate the provisions of this Agreement in its Bylaws as required by
state law.
13
<PAGE>
ARTICLE VIII
OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS OF THE CORPORATION
----------------------------------------------------------------
Section 8.1 Grant of Options. Subject to the terms and conditions set
----------------
forth in this ARTICLE EIGHT, the Corporation hereby grants to the Shareholder
(in such capacity, the "Optionee") an option to purchase (the "Option") One
Hundred (100) shares of Stock.
Section 8.2 Exercise Price and Exercise Schedule. Subject to adjustment
------------------------------------
pursuant to Section 8.6 hereof, the exercise price per share of Stock paid by
the Optionee shall be One Thousand Dollars ($1,000.00). Except as otherwise
provided in this ARTICLE EIGHT, each Option shall be exercisable in whole or in
part (but in any event solely in whole shares) and cumulatively according to the
following schedule, provided in each case that the Optionee did not default in
--------
the performance of his purchase obligation at the Subscription Closing:
20% after May 1, 1999
40% after May 1, 2000
60% after May 1, 2001
80% after May 1, 2002
100% after May 1, 2003
In no event shall any Option be exercisable after May 1, 2008
Section 8.3 Transferability. Each Option granted under this ARTICLE EIGHT
---------------
is not transferable otherwise than by will or the laws of descent and
distribution and during the lifetime of the Optionee is exercisable only by the
applicable Optionee.
Section 8.4 Procedures for Exercise of Option. Each Option shall be
---------------------------------
deemed exercised as to any Optionee when (i) the Corporation has received
written notice of such exercise from the Optionee, (ii) full payment of the
aggregate option exercise price of the shares of Stock as to which the Option is
exercised has been made to the Corporation, and (iii) arrangements that are
satisfactory to the Corporation in its sole discretion have been made for the
Optionee's payment to the Corporation of the amount, if any, that is necessary
for the Corporation to withhold in accordance with applicable Federal or state
tax withholding requirements. The option exercise price of any Stock purchased
shall be paid in cash, by certified or official bank check or by money order;
provided, however, that to the extent that an Option is being exercised in
connection with a sale of Stock pursuant to ARTICLE TWO or ARTICLE THREE hereof
at a price that exceeds the Option exercise price, no payment of the exercise
price shall be required and, instead, appropriate arrangements shall be made for
the Corporation's payment (without duplication) to the Optionee of the positive
difference (net of required withholding) between (x) the purchase price payable
under ARTICLE TWO or ARTICLE THREE with respect to the Stock subject to the
Option, and (y) the aggregate exercise
14
<PAGE>
price with respect to such Option. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date of
such payment, except as expressly provided in Section 8.6 hereof.
Section 8.5 Termination of Option Period. The unexercised portion of each
----------------------------
Option granted under this ARTICLE EIGHT as to any Optionee shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) thirty (30) days after the date on which the
Optionee's employment relationship with the Corporation is terminated for any
reason other than by reason of Cause (it being agreed that the "vesting"
schedule set forth in Section 8.2 shall continue through such 30 days); or
(ii) immediately upon the termination of the
Optionee's employment relationship with the Corporation for Cause; or
(iii) on the ten-year anniversary date of the date of
the Subscription Closing.
Section 8.6 Adjustment of Shares.
--------------------
(a) If at any time while an Option is outstanding, the
Corporation in any manner subdivides or combines the outstanding shares of any
class of Common Stock, then and in such event appropriate adjustment shall be
made in the number of shares of Class C Common Stock and the exercise price per
share then subject to such Option, so that the same percentage of the
Corporation's issued and outstanding shares of Class C Common Stock shall remain
subject to purchase at the same aggregate exercise price.
(b) Except as otherwise expressly provided in Section 8.6(a),
the issuance by the Corporation of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Corporation convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to the number of
or exercise price of shares of Stock then subject to any Option.
(c) Without limiting the generality of the foregoing, the
existence of any Option shall not affect in any manner the right or power of the
Corporation and/or the Shareholder to make, authorize or consummate (i) any or
all adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business; (ii) any merger or
consolidation of the Corporation; (iii) any issue by the Corporation of debt or
equity securities, including but not limited to preferred or preference stock
that would rank above the shares of Stock subject to this Option; (iv) the
dissolution or liquidation of the Corporation; (v) any sale, transfer or
assignment of all or any part of the assets or business of the Corporation;
15
<PAGE>
or (vi) any other corporate act or proceeding, whether of a similar character or
otherwise. The Corporation in its sole discretion may, by giving written notice
("Cancellation Notice") cancel, upon the date of the consummation of (i) any
transaction (which shall include a series of transactions occurring within 180
days or occurring pursuant to a plan), other than an IPO, that has the result
that shareholders of the Corporation immediately before such transaction cease
to own at least 51 percent of the voting stock of the Corporation or of any
entity that results from the participation of the Corporation in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction (ii) any merger, consolidation, reorganization,
liquidation or dissolution in which the Corporation does not survive, or (iii)
the sale, lease, exchange or other disposition of all or substantially all the
property and assets of the Corporation, any Option that remains unexercised on
such date (each a "Specified Corporate Transaction"). The Cancellation Notice
shall be given a reasonable period of time prior to the proposed date of
cancellation and may be given either before or after any required shareholder
approval of such Specified Corporation Transaction. Notwithstanding Section 8.2
hereof, all Options shall become immediately and fully exercisable immediately
prior to any Specified Corporate Transaction in order to permit the exercise
prior to the cancellation thereof. The Corporation shall also have the right to
accelerate the vesting of all or part of any or all Options for any other reason
in its sole discretion.
Section 8.7 Issuance of Shares. As a condition of any sale or issuance of
------------------
Stock upon exercise of any Option, the Corporation may require such agreements
or undertakings, if any, as the Corporation may deem necessary or advisable to
assure compliance with any law or regulation, including, but not limited to, the
following:
(a) a representation and warranty by the Optionee, at the time
an Option is exercised, that he is acquiring the Stock to be issued to him for
investment and not with a view to, or for sale in connection with, the
distribution of any such Stock; and
(b) a representation, warranty and/or agreement to be bound by
any legends that are, in the opinion of the Corporation, necessary or
appropriate to comply with the provisions of any securities law deemed to be
applicable to the issuance of the Stock and are endorsed upon the share
certificates.
Section 8.8 Section 83(b) Election. The Shareholder acknowledges his or
----------------------
her understanding that, if as a result of exercising all or any part of an
Option, the Optionee receives Stock that is subject to a "substantial risk of
forfeiture" and is not "transferable" as those terms are defined for purposes of
section 83(a) of the Code, then the Optionee may elect under section 83(b) of
the Code to include in his or her gross income, for his or her taxable year in
which the Stock is transferred to him, the excess of the "Fair Market Value" of
such Stock at the time of transfer (determined without regard to any restriction
other than one that by its terms will never lapse), over the amount paid for the
Stock. If the Optionee makes the section 83(b) election described above, the
Optionee shall (i) make such election in a manner that is satisfactory to the
Corporation, (ii) provide the Corporation with a copy of such election, (iii)
agree to promptly notify the Corporation if any Internal Revenue Service or
state tax agent,
16
<PAGE>
on audit or otherwise, questions the validity or correctness of such election or
of the amount of income reportable on account of such election, and (iv) agree
to such withholding as the Corporation may reasonably require in its sole and
absolute discretion.
Section 8.9 No Right to Continued Employment. Neither this Agreement nor
--------------------------------
any Option shall not confer upon the Optionee any right to continued employment
by the Corporation or any subsidiary or affiliate of the Corporation.
ARTICLE IX
THE GIVING OF NOTICES REQUIRED BY THIS AGREEMENT
------------------------------------------------
Section 9.1 Addresses. Any notices, requests, demands and other
---------
communications required or permitted to be given hereunder must be in writing
and, except as otherwise specified in writing, will be deemed to have been duly
given when personally delivered, telexed or facsimile transmitted, or three days
after deposit in the United States mail, by certified mail, postage prepaid,
return receipt requested, as follows. The addresses of the Corporation and the
Shareholder, which shall be considered to be their last known addresses unless
subsequently changed in accordance with the provisions of this Agreement, are as
follows:
IF TO THE CORPORATION: Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Attention: President
With Copies To:
---------------
Questor Management Company
4000 Town Center, Suite 500
Southfield, Michigan 48075
Attention: President
and
---
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Bruce E. Macdonough
IF TO THE SHAREHOLDER:
Michael A. Zawalski
14 Prairie Clover
Littleton, CO 80127
17
<PAGE>
Any party may change its address for the purposes of this Agreement by giving
notice of such change of address to the other parties in the manner herein
provided for giving notice.
Section 9.2 Form of Notice. Any notice or communication hereunder must be
--------------
in writing, and may be personally delivered or given by registered or certified
mail, return receipt requested, and if given by registered or certified mail,
shall be deemed to have been given and received forty-eight hours after deposit
in the United States mail of a registered or certified letter, return receipt
requested, containing such notice, properly addressed, with postage prepaid; and
if given otherwise than by registered or certified mail, it shall be deemed to
have been given when received by the party to whom it is addressed at the time
received.
Section 9.3 Failure to Notify of Changed Address. It shall be the
------------------------------------
responsibility of each of the parties to this Agreement to notify all other
parties of their respective addresses and any changes thereof, and any
objections to the performance of any act required hereunder based upon a failure
to receive a notice mailed in conformity with the provisions of this Agreement
shall be meritless.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Termination. This Agreement shall terminate upon the earlier
-----------
to occur of (i) the dissolution of the Corporation, (ii) except with respect to
the Option provisions under ARTICLE EIGHT and Section (S)10.15 hereof, the
consummation of the Corporation's initial underwritten public offering ("IPO")
of common stock registered under the Securities Act of 1933, as amended, and
(iii) upon the date the Shareholder ceases to own any Stock.
Section 10.2 Modification. This Agreement may only be amended, terminated
------------
or modified by the written consent of the Corporation and the Shareholder.
Section 10.3 Successors. This Agreement shall be binding upon the parties
----------
hereto, their heirs, administrators, successors, executors and assigns, and the
parties hereto do covenant and agree that they themselves and their respective
heirs, executors, successors, administrators and assigns will execute any and
all instruments, releases, assignments and consents that may be reasonably
required of them to more fully execute the provisions of this Agreement.
Section 10.4 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall serve as an original for all purposes, but all
copies of which shall constitute but one and the same Agreement.
Section 10.5 Headings. All headings set forth in this Agreement are
--------
intended for convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or of any of the provisions thereof.
18
<PAGE>
Section 10.6 Governing Law. This Agreement shall be governed by and shall
-------------
be construed and enforced in accordance with the laws of the State of Colorado.
Section 10.7 Insurance. The Shareholder agrees to cooperate with the
---------
Corporation and to assist it to the extent required in order to allow the
Corporation to obtain insurance on the life of the Shareholder should the
Corporation decide to purchase such insurance.
Section 10.8 Waiver. The waiver by any party hereto of a breach of any
------
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
Section 10.9 Entire Agreement. This Agreement constitutes the entire
----------------
Agreement of the parties hereto with respect to the transactions contemplated
hereby, and it is hereby agreed that any prior oral or written agreements
concerning the sale or disposition of Stock shall be null and void.
Section 10.10 Severability. If any provision of this Agreement shall be
------------
held to be illegal or unenforceable, such illegality or unenforceability shall
extend to that provision solely, and the remainder of this Agreement shall be
enforced as if such illegal or unenforceable provision were not incorporated
herein.
Section 10.11 Specific Performance. The right to own and vote Stock is
--------------------
hereby declared by the parties hereto to be a unique right, the loss of which is
not susceptible to monetary quantification. Consequently, the parties hereto
agree that an action for specific performance of the purchase and sale
obligations created by this Agreement is a proper remedy for the breach of its
provisions. If any party to this Agreement institutes legal proceedings in
connection with this Agreement, the prevailing party shall be entitled to
recover their reasonable attorneys' fees and court costs.
Section 10.12 Business Days. Whenever the terms of this Agreement call
-------------
for the performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
Section 10.13 Stock References. References to "Stock" herein shall mean
----------------
(i) any Stock purchased or otherwise acquired by the Shareholder, whether
pursuant to ARTICLE ONE, ARTICLE EIGHT or otherwise, (ii) any equity securities
issued or issuable directly or indirectly with respect to the Stock referred to
in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Corporation held by the Shareholder. As to any particular shares
constituting Stock, such shares will cease to be Stock when they have been (x)
disposed of in accordance with a registration statement effective under the Act,
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or any similar provision then in force) under the Act.
19
<PAGE>
Section 10.14 Failure to Deliver Stock. If the Shareholder (or any
------------------------
personal representative or other representative of the Shareholder) who has
become obligated to sell Stock of the Corporation hereunder shall fail to
deliver such Stock on the terms and in accordance with this Agreement, the
Corporation, in addition to all other remedies it may have, may send to the such
obligated party by registered mail, return receipt requested, the purchase price
for such Stock on the terms provided for in this Agreement. Thereupon, the
Corporation, upon written notice to the Shareholder, shall cancel on its books
the certificates representing the Stock to be sold; and thereupon, all of the
obligated Shareholder's rights in and to such Stock shall terminate.
Section 10.15 Lock-Up. In consideration of the premises and mutual
-------
covenants set forth in this Agreement, the Shareholder severally agrees to
execute and deliver a customary "lock-up" agreement, restricting the transfer of
the Shareholder's Stock for not more than 180 days, in connection with the IPO
and each other underwritten public offering of the Corporation's securities.
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
RYDER TRS, INC.
By: /s/ Ronald A. Rittenmeyer
-------------------------
Ronald A. Rittenmeyer, President and
Chief Operating Officer
/s/ Michael A. Zawalski
-----------------------
Michael A. Zawalski
20
<PAGE>
EXHIBIT 10.21
SUBSCRIPTION, OPTION AND SHAREHOLDER'S AGREEMENT
------------------------------------------------
THIS SUBSCRIPTION, OPTION AND SHAREHOLDER'S AGREEMENT ("Agreement") is made
and entered into as of May 1, 1998, by and between Ronald A. Rittenmeyer (the
"Shareholder") and Ryder TRS, Inc., a Delaware corporation (the "Corporation").
RECITALS
--------
A. The Corporation and the Shareholder desire that the Shareholder
purchases an equity interest in the Corporation.
B. The Corporation also desires to grant to the Shareholder an option to
acquire additional equity interests in the Corporation.
C. The Corporation and the Shareholder believe that it would be in the
best interest of the Corporation to place certain restrictions upon the right of
transfer of the Shareholder's interests in the Corporation.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Shareholder and the
Corporation agree as follows:
ARTICLE I
SUBSCRIPTION OF SHARES
----------------------
Section 1.1 Purchase, Issuance and Sale of Stock. The Shareholder hereby
------------------------------------
subscribes for and agrees to purchase, and the Corporation hereby agrees to
issue and sell to the Shareholder, Five Hundred and Fifty (550) shares of the
Corporation's Class C Common Stock, par value $.01 per share (the "Class C
Common Stock"), for a purchase price of One Thousand Dollars ($1,000.00) per
share (the "Purchase Price"). The purchase and sale of the Class C Common Stock
contemplated to be issued to the Shareholder pursuant to this Agreement (the
"Stock") will be consummated at a closing (the "Subscription Closing") to be
held at the principal offices of the Corporation in Denver, Colorado on May 1,
1998, at which time the Corporation shall deliver to the Shareholder a
certificate representing the Stock purchased by the Shareholder against the
Shareholder's delivery of the Purchase Price in immediately available funds.
Section 1.2 Representations and Warranties of the Corporation. The
-------------------------------------------------
Corporation hereby represents and warrants to the Shareholder as follows:
<PAGE>
(a) Authority. The Corporation has the requisite corporate power
---------
and authority to execute and perform this Agreement. This Agreement has been
duly executed and delivered by the Corporation and (assuming the due execution
and delivery hereof by the Shareholder) constitutes a valid and binding
obligation of the Corporation, enforceable against it in accordance with its
terms, except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
(b) Capitalization. The authorized capital stock of the
--------------
Corporation consists of (i) 225,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (ii) 25,000 shares of non-voting
Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), and
(iii) 25,000 shares of non-voting Class C Common Stock.
(c) Outstanding Shares. Upon the Shareholder's payment of the
------------------
Purchase Price, the Stock will be duly authorized, validly issued, fully paid
and nonassessable. Immediately following the Subscription Closing, there will
be issued and outstanding (i) 109,090 shares of Class A Common Stock, (ii)
13,910 shares of Class B Common Stock, and (iii) 1,725 shares of Class C Common
Stock. Questor (as hereinafter defined) acquired its Class A Common Stock for a
per share purchase price of $1,000.
Section 1.3 Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to the Corporation as follows:
(a) State Securities Laws. The Shareholder received this
---------------------
Agreement and first learned of the offer and sale of the Stock contemplated
hereby in the State of Colorado. The Shareholder executed and will execute all
documents contemplated hereby in such state, and intends that the laws of such
state govern the offering of Stock to the Shareholder.
(b) Authority. The Shareholder has the power and authority to
---------
execute this Agreement and perform the Shareholder's obligations hereunder. This
Agreement has been duly executed and delivered by the Shareholder and (assuming
the due execution and delivery hereof by the Corporation) constitutes a valid
and binding obligation of the Shareholder enforceable against the Shareholder in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
(c) Acquisition for Investment. The Shareholder is acquiring the
--------------------------
Stock for investment solely for the Shareholder's account and not for
distribution, transfer or resale to others.
(d) Restrictions on Transfer. The Shareholder understands that
------------------------
the Shareholder must bear the economic risk of the purchase of the Stock for an
indefinite period of time because (i) the Corporation's sale of the Stock to the
Shareholder will not be registered under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws in
2
<PAGE>
reliance on the Shareholder's representations; (ii) except as otherwise set
forth herein, the Stock may not be sold, transferred, pledged, or otherwise
disposed of without the consent of the Corporation (which consent will not be
unreasonably withheld or delayed) and an opinion of counsel for or satisfactory
to the Corporation that registration under the Act or any applicable state
securities laws is not required; (iii) the Corporation neither has an obligation
to register a sale of the Stock nor has it agreed to do so in the future; (iv)
the exemption provided in Rule 144 under the Act is not presently available for
the resale of any Stock, and there is no assurance that such exemption will be
available at any time in the future with respect to any proposed transfer of
Stock; and (v) the Corporation is under no obligation to perfect any exemption
for resale of Stock. The Shareholder also acknowledges the Shareholder's
understanding that transfers of Stock will be subject to the limitations set
forth elsewhere in this Agreement.
(e) Certain Risk Factors. The Shareholder understands the
--------------------
speculative nature of and risks involved in the proposed investment in the
Corporation, and all matters relating to the structure and the operations of the
Corporation have been discussed and explained to Shareholder's satisfaction,
including but not limited to the structure and ramifications of the Senior
Subordinated Notes due 2006 of the Corporation in the principal amount of $175
million (the "Senior Notes") pursuant to and as more fully described in the
Corporation's Offering Memorandum (the "Offering Memorandum"), dated November
20, 1996, as well as the Corporation's Registration Statement on Form S-4 (File
No. 333-20397) filed with the Securities and Exchange Commission (the
"Registration Statement"), copies of which have been previously provided to the
Shareholder, as well as all matters with respect to the "Senior Bank Facilities"
described therein. The Shareholder also acknowledges receipt of the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. The Shareholder
specifically acknowledges his or her understanding that:
(i) the presence of substantial amounts of debt creates
significant risks, including that (A) although equity investments in highly
leveraged companies such as the Corporation offer the opportunity for
significant capital appreciation, such investments involve the highest degree of
risks and can result in the loss of the Shareholder's entire investment, (B)
other general business risks, including the effects of a recession, may have a
more pronounced effect, (C) senior lending institutions and the holders of the
Senior Notes may have rights to participate in certain decisions relating to the
management of the Corporation, and (D) for the Corporation's debt to be repaid
and for the Shareholder's equity investment in the Stock to have any value, the
Corporation must achieve significant continued growth in financial performance
in excess of its historical financial results;
(ii) the Purchase Price for the Stock may not be indicative
of the fair market value of such Stock;
(iii) because the Stock is non-voting, the Shareholder will
have no control over or influence in the management of the Corporation (other
than by virtue of the Shareholder's position with the Corporation), and that the
purchase of the Stock does not entitle the Shareholder to continued employment
by the Corporation;
3
<PAGE>
(iv) the terms of the Senior Notes, the Corporation's
Senior Bank Facilities, other contemplated financings and other documents
relating to an investment in the Corporation are quite complex, that all such
documents are available for inspection, that a review thereof is recommended,
and that the Shareholder should consider obtaining counsel or other competent
advisors before purchasing the Stock;
(v) Questor Management Company ("Questor"), an affiliate
of the Corporation's principal shareholder, Questor Partners Fund, L.P.
("Questor"), will receive a monthly management fee of approximately $70,833
pursuant to a Management and Consulting Agreement;
(vi) the Corporation will have the unrestricted right to
issue additional capital stock for any purpose deemed advisable by its Board of
Directors, which may result in future dilution of a particular Shareholder's
ownership interest in the Corporation provided, however, that if any time the
Corporation in any manner subdivides or combines the outstanding shares of any
class of Common Stock, the outstanding shares of Class C Common Stock will be
proportionately subdivided or combined in a similar manner; and
(vii) the Corporation will be subject to the additional
"Risk Factors" described in the Offering Memorandum and/or Registration
Statement.
(f) Representations Relied Upon by the Shareholder. The
----------------------------------------------
Shareholder acknowledges receipt of the Offering Memorandum, which describes,
among other things, the transactions consummated under that certain Asset
Purchase Agreement, dated September 19, 1996, between Ryder Truck Rental, Inc.,
a Florida corporation ("Ryder") and the Corporation pursuant to which the
Corporation acquired substantially all of the assets of the Consumer Truck
Rental business unit of Ryder, the issuance of the Senior Notes, the existing
Senior Bank Facilities and the possible refinancing of a portion of such
indebtedness, as well as certain risk factors relating to such matters. The
Shareholder expressly acknowledges that he or she is acquiring the Stock without
having been furnished any representations or warranties of any kind whatsoever
with respect to the Corporation's business and financial condition other than
the representations set forth herein. The Shareholder specifically understands
that the financial projections for the Corporation that have been made available
for the Shareholder's review are based on certain key assumptions, that such
assumptions are subject to uncertainties relating to the effect that economic or
other circumstances may have on future events, and that there can be no
assurance that the assumptions or data upon which they are based are achievable.
(g) Restrictive Legends. The Shareholder understands that the
-------------------
certificate(s) evidencing the Shareholder's Stock will bear a restrictive legend
prohibiting the transfer thereof except in compliance with (i) applicable state
and federal securities laws and may not be transferred of record except in
compliance therewith, and (ii) the terms of this Agreement.
(h) Access to Information. The Shareholder has been offered the
---------------------
opportunity to ask questions of, and receive answers from, the Corporation and
to obtain any additional
4
<PAGE>
information, to the extent that the Corporation possesses such information or
could have acquired it without unreasonable effort or expense, necessary to
verify the accuracy of the information contained in the documents delivered to
the Shareholder and has in general had access to all information the Shareholder
has deemed material to an investment decision with respect to the purchase of
the Stock.
(i) No Liquidity. The Shareholder has adequate means of
------------
providing for the Shareholder's current financial needs and possible personal
contingencies and has no need for liquidity in the Shareholder's investment in
the Corporation.
(j) Risk of Loss. The Shareholder is able to bear the economic
------------
risks inherent in an investment in the Corporation and can afford a complete
loss of the Shareholder's entire investment in the Corporation.
(k) Other Illiquid Investments. The Shareholder's overall
--------------------------
commitment to investments which are not readily marketable is not
disproportionate to the Shareholder's net worth, and the Shareholder's
investment in the Corporation will not cause such overall commitment to be
disproportionate.
(l) Familiarity With Business and Sophistication. The
--------------------------------------------
Shareholder (i) is familiar with the Corporation's business, and (ii) has such
knowledge and experience in financial and business matters that the Shareholder
is capable of evaluating the merits and risks of an investment in the
Corporation and of making an informed investment decision.
(m) Reliance on Representations. The Shareholder has discussed
---------------------------
with, and relied upon the advice of the Shareholder's counsel with regard to,
the meaning and legal consequences of the Shareholder's representations and
warranties herein and the considerations involved in making an investment in the
Corporation, and the Shareholder understands that the Corporation is relying on
the information set forth herein.
Section 1.4 Section 83(b) Election. The Shareholder understands that
----------------------
under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the fair market value of the Stock to be purchased by the
Shareholder on the date any forfeiture restrictions applicable to the shares
lapse over the Purchase Price paid for such Stock may be reportable as ordinary
income at that time. For this purpose, the term "forfeiture restrictions" may
include certain rights of the Corporation to repurchase the Stock pursuant to
this Agreement. The Shareholder understands, however, that the Shareholder may
elect to be taxed at the time the Stock is acquired hereunder, rather than when
and as such Stock ceases to be subject to such forfeiture restrictions, by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service within thirty (30) days after the date of this Agreement. Even if the
fair market value of the Stock at the date of this Agreement equals the Purchase
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The Shareholder understands that
failure to make this filing within the thirty (30) day period will result in the
recognition of ordinary income by the Shareholder as the forfeiture restrictions
5
<PAGE>
lapse. THE SHAREHOLDER ACKNOWLEDGES THAT IT IS THE SHAREHOLDER'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(B), EVEN IF THE SHAREHOLDER REQUESTS THE CORPORATION OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF.
ARTICLE II
PURCHASE OF SHAREHOLDER'S STOCK UPON DEATH,
RETIREMENT, TERMINATION FOR GOOD REASON OR
TERMINATION OF EMPLOYMENT BY THE CORPORATION WITHOUT CAUSE
----------------------------------------------------------
Section 2.1 Sale and Purchase. Upon (i) the death or Retirement of the
-----------------
Shareholder, (ii) the Corporation's termination of the Shareholder's employment
with the Corporation by reason of the Shareholder's disability or for any other
reason except Cause, or (iii) the voluntary termination of the Shareholder's
employment for Good Reason (each a "FMV Triggering Event"), the Corporation
shall purchase from the Shareholder, or from the Shareholder's Estate, and the
Shareholder or the Shareholder's Estate shall sell, all of the Shareholder's
Stock (which, for all purposes of this Agreement, shall include all shares of
Class C Common Stock acquired by the Shareholder in the future, including as a
result of option exercises) in accordance with the terms and conditions provided
in this ARTICLE TWO.
Section 2.2 Purchase Price. The purchase price to be paid for any Stock
--------------
acquired under this ARTICLE TWO shall be the fair market value of the Stock as
of the date of termination of employment as described in Section 2.1 hereof.
The fair market value of the Stock shall be determined in good faith by
agreement of the Board of Directors of the Corporation (the "Board") and the
Shareholder or the Shareholder's Estate. If the Board and the Shareholder or
the Shareholder's Estate cannot in good faith agree to the determination of fair
market value within thirty (30) days of the Corporation's receipt or delivery of
written notice of any FMV Triggering Event, the determination of such fair
market value shall be submitted within ten (10) days of the end of such 30-day
period to Raymond James & Associates, Inc. (the "Primary Investment Firm"),
whose fees shall be shared equally by the Corporation, on the one hand, and the
Shareholder or the Shareholder's Estate, on the other. If either the
Corporation, the Shareholder or the Shareholder's Estate shall object to the
determination of fair market value made by the Primary Investment Firm, within
ten (10) business days of receipt thereof, the Corporation and the Shareholder
or the Shareholder's Estate shall mutually agree to a second investment banking
or valuation firm (the "Secondary Investment Firm"), who shall determine such
fair market value and whose fees shall be paid by the person objecting to the
determination made by the Primary Investment Firm. The average of the fair
market values as determined by the Primary Investment Firm and Secondary
Investment Firm shall be conclusive and binding for all purposes hereof.
Notwithstanding the foregoing, in no event will the purchase price under this
ARTICLE TWO for the initial Stock purchased under Section 1.1 of this Agreement
be less than the initial purchase price paid by Shareholder of One Thousand
Dollars ($1,000) per share.
6
<PAGE>
Section 2.3 Assignment. The Corporation may assign all or any portion of
----------
its right to purchase Stock under this ARTICLE TWO to one or more persons (each
an "Assignee" and collectively the "Assignees").
Section 2.4 Closing. The Corporation and/or its Assignee(s) shall
-------
purchase the Shareholder's Stock under this ARTICLE TWO at a closing to occur
within forty-five (45) days of the Corporation's receipt or delivery of written
notice of any FMV Triggering Event; provided, however, that if the determination
of fair market value has been submitted to the Primary Investment Firm or the
Secondary Investment Firm, the closing date shall be deferred until the fifth
(5th) business day after the final determination thereof. The closing shall
occur at the principal office of the Corporation, and the closing procedures and
purchase price shall be consistent with the provisions of this ARTICLE TWO.
Section 2.5 Tender Requirements at Closing. At the closing, the
------------------------------
Shareholder or the Shareholder's Estate shall present to the Corporation and/or
its Assignee Shareholder, as the case may be, share certificates for all shares
of Stock to be acquired, such share certificates to be in proper form for
transfer. Such Stock shall be transferred free of all liens and encumbrances or
adverse claims of any kind or character. The Corporation and/or its
Assignee(s), upon receipt of a proper tender from the Shareholder or the
Shareholder's Estate, shall tender payment of the purchase price in cash or by
official bank check (or such other form of consideration as may be mutually
agreed upon by the parties).
Section 2.6 Definitions. For purposes of ARTICLE TWO, ARTICLE THREE OR
-----------
ARTICLE EIGHT, of this Agreement, the terms hereinafter set forth shall have the
following definitions unless otherwise specifically stated.
(a) Cause. The term "Cause" shall mean (i) a willful breach by
-----
the Shareholder of any of the material terms or provisions of this Agreement or
any of the material terms of the Shareholder's employment with the Corporation,
(ii) the conviction of the Shareholder of a felony, or (iii) commission by the
Shareholder of fraud, embezzlement, misappropriation, theft, breach of fiduciary
duty or dishonesty against the Corporation, its properties or personnel.
(b) Estate. The term "Estate" shall mean and include the
------
deceased Shareholder's executor, administrator or similar personal
representative (if one has qualified and is then acting), and his or her
surviving spouse, heirs, beneficiaries, devisees and legatees to the extent, if
any, that their action is required in order to effect a full and complete
transfer of the deceased Shareholder's Stock pursuant to the terms of this
Agreement. The general agent of the persons and entities comprising the
Shareholder's Estate shall be the Shareholder's duly appointed and qualified
personal representative, executor or administrator, or his or her surviving
spouse where no such representative is appointed, and all notices and
communications hereunder shall be effected to and through such general agent.
7
<PAGE>
(c) Retirement. The term "Retirement" means the withdrawal from
----------
the employment with the Corporation at an age of 55 years or more with the
intent not to be employed by the Corporation or to be engaged in any other
substantial business activity.
(d) Good Reason. The term "Good Reason" shall mean (i) the
-----------
assignment to the Shareholder of any duties which result in a significant
diminution of the Shareholder's existing authority, duty or responsibility,
excluding for this purpose an isolated, insubstantial or inadvertent action not
taken in bad faith and which is remedied by the Corporation after receipt of
written notice given by the Shareholder, or (ii) a requirement that the
Shareholder be based at a location other than the Shareholder's current location
or any location more than 50 miles from such location.
ARTICLE III
PURCHASE OF SHAREHOLDER'S STOCK UPON TERMINATION
FOR CAUSE, TERMINATION BY SHAREHOLDER OR BANKRUPTCY
---------------------------------------------------
Section 3.1 Sale and Purchase. Upon (i) the Corporation's termination of
-----------------
the Shareholder for Cause, (ii) the Shareholder's voluntary termination of his
or her employment relationship with the Corporation, other than for Good Reason,
or (iii) the adjudication of the Shareholder as bankrupt, the taking of any
voluntary action by the Shareholder or any involuntary action against the
Shareholder seeking an adjudication of the Shareholder as bankrupt or the
seeking of any relief by or against the Shareholder under any provision of the
Bankruptcy Code (each a "Book Value Triggering Event"), the Corporation shall
purchase from the Shareholder, and the Shareholder shall sell, all of the
Shareholder's Stock in accordance with the terms and conditions provided in this
ARTICLE THREE. The Corporation may assign all or a portion of its right to
purchase Stock under this ARTICLE THREE to one or more Assignees.
Section 3.2 Purchase Price. The purchase price to be paid for each share
--------------
of Stock acquired under this ARTICLE THREE shall be the "Book Value Per Share of
Stock" as of the end of the last complete calendar quarter immediately preceding
the event giving rise to the obligation referred to in Section 3.1. The "Book
Value Per Share of Stock" shall be determined by dividing (a) the Corporation's
common "Shareholder's equity," determined in accordance with generally accepted
accounting principles consistently applied, by (b) aggregate number of
outstanding shares of the Corporation's common stock.
Section 3.3 Closing. The Corporation or its Assignee(s) shall purchase
-------
the Shareholder's Stock under this ARTICLE THREE at a closing to occur within
forty-five (45) days of the Corporation's receipt or delivery of written notice
of any Book Value Triggering Event. The closing shall occur at the principal
office of the Corporation, and the closing procedures and purchase price shall
be consistent with the provisions of this ARTICLE THREE.
Section 3.4 Tender Requirements at Closing. At the closing, the
------------------------------
Shareholder shall present to the Corporation share certificates for all shares
of Stock to be acquired, such share
8
<PAGE>
certificates to be in proper form for transfer. Such Stock shall be transferred
free of all liens and encumbrances or adverse claims of any kind or character.
The Corporation or its Assignee(s), upon receipt of a proper tender from the
Shareholder, shall tender payment of the purchase price in cash.
ARTICLE IV
RESTRICTIONS IMPOSED UPON THE
TRANSFER OF STOCK BY THE SHAREHOLDER
------------------------------------
Section 4.1 General Prohibition on Transfers. Except as is specifically
--------------------------------
permitted by the provisions of this ARTICLE FOUR, the sale, assignment, pledge,
gift, transfer or other disposition of the Shareholder's Stock, either directly
or indirectly, to any person or entity other than the Corporation, is
prohibited.
Section 4.2 Permitted Transfers. The following transfers of Stock shall
-------------------
be permitted transfers which do not require the giving of a Notice of Right of
First Refusal under Section 4.3 of this ARTICLE FOUR.
(a) Transfers with Consent. Notwithstanding the provisions of
----------------------
Section 4.1, a transfer or disposition of any kind or character otherwise
prohibited by this ARTICLE FOUR may be permitted if approved by the Corporation.
(b) Transfers to Family Members. Notwithstanding the provisions
---------------------------
of Section 4.1, the Shareholder shall be permitted to transfer (whether by
purchase, assignment, gift, bequest, devise, levy, execution or other means of
transfer) all or any portion of his Stock to (i) his spouse or any lineal
descendant, (ii) any custodian, guardian or other representative for a spouse or
lineal descendant, and/or (iii) the trustee of any trust created for the benefit
of the Shareholder, his or her spouse and/or lineal descendants (collectively
the "Permitted Family Transferees") provided that each and every such Permitted
Family Transferee executes a written acknowledgment that (i) all Stock held by
the Permitted Family Transferee will, notwithstanding the transfer to such
Permitted Family Transferee, be deemed for all purposes of this Agreement to be
owned by the transferring Shareholder, and (ii) he, she or it agrees to be bound
by all of the terms of this Agreement.
(c) Transfers Under Other Articles. Notwithstanding the
------------------------------
provisions of Section 4.1, a transfer pursuant to the provisions of ARTICLE TWO,
THREE or SIX of this Agreement shall be permitted without complying with the
Right of First Refusal provisions of this ARTICLE FOUR.
Section 4.3 Transfers to Third Parties.
--------------------------
(a) Notice of Right of First Refusal. Notwithstanding the
--------------------------------
provisions of Section 4.1, and absent the right to make a transfer of Stock
pursuant to Section 4.2, commencing on the third anniversary of the Subscription
Closing, the Shareholder may also
9
<PAGE>
transfer all or a portion of his Stock, subject in all respects to the prior
written approval of the Corporation (which approval shall not be unreasonably
withheld) and the following "right of first refusal" provisions of this Section
4.3. Commencing on the third anniversary of the Subscription Closing, if the
Shareholder receives a bona fide offer from a party unrelated to the Shareholder
to sell, assign, transfer or otherwise dispose of Stock owned by the
Shareholder, or any interest therein, and the Shareholder desires to accept such
offer, the Shareholder shall cause such offer to be reduced in writing and the
Shareholder shall, not less than thirty (30) days prior to the date of the
proposed sale, assignment, transfer or other disposition, deliver a request for
the Corporation's approval of the proposed transaction and a Notice of Right of
First Refusal to the Corporation containing the following information:
(i) the number of shares of Stock proposed to be so
transferred (the "Offered Stock");
(ii) the terms and conditions of the proposed transfer,
including the identity of the proposed transferee(s) and the per share price to
be charged (if any) for the shares of Stock to be transferred and the cash
consideration to be received therefor (the "Offered Terms"); and
(iii) an affirmative offer made by the Shareholder to
transfer the Offered Stock to the Corporation at a price (the "Offer Price")
equal to the total cash price in the proposed transfer for the Offered Stock as
indicated in the Notice of Right of First Refusal (i.e., the number of shares
---
multiplied by the per share price, if any, to be charged for the shares of Stock
to be transferred), it being agreed that, without the prior written approval of
the Corporation, all transfers permitted by this Section 4.3 must be solely for
consideration consisting of cash or cash equivalents.
The date that the Notice of Right of First Refusal is received by the
Corporation shall constitute the First Refusal Notice Date.
(b) Primary Right of First Refusal by the Corporation. The
-------------------------------------------------
Corporation shall have the right to approve or disapprove the proposed transfer
of Stock described in the Notice of Right of First Refusal, which approval shall
not be unreasonably withheld or delayed. In addition, the Corporation shall
have the sole and exclusive option to acquire all or any portion of the shares
of Stock offered for transfer in accordance with the provisions of the Notice of
Right of First Refusal for a period of thirty days from the First Refusal Notice
Date. The Corporation may exercise such option by giving written notice of
exercise to the Selling Shareholder prior to the termination of its exclusive
option period. Such notice of exercise shall refer to the Notice of Right of
First Refusal and shall set forth the number of shares to be acquired by the
Corporation and/or any Assignee (it being the parties' agreement and intent that
the Corporation may assign all or a portion of its right to purchase Stock under
this ARTICLE FOUR to one or more Assignees).
10
<PAGE>
(c) Requirement to Purchase All Offered Stock. Notwithstanding
-----------------------------------------
the provisions of the Section 4.3(b), the option to purchase shares of Stock
described in the Notice of Right of First Refusal may be exercised and the
Closing (as hereinafter defined) consummated only if the Corporation and one or
more Assignees, if applicable, collectively agree to purchase all of the shares
of the Offered Stock.
(d) Closing and Tender Requirements. The consummation of any
-------------------------------
transfer required pursuant to an exercise of option rights created by this
ARTICLE FOUR shall constitute the "Closing", and the time and date of such
Closing shall constitute the "Closing Date." The Closing shall be held at the
principal office of the Corporation, at 10:00 a.m. on the thirty-fifth day
subsequent to the date of giving of the Notice of Right of First Refusal to the
Corporation. At the Closing, the Shareholder shall present to the Corporation
and/or the Assignee(s), as the case may be, all share certificates for Stock
required to be sold in proper form for transfer. Such Stock shall be transferred
free of all liens and encumbrances or adverse claims of any kind or character.
At the Closing, the Corporation and/or the Assignee(s), as the case may be, upon
receipt of proper tender of the Stock, shall tender full payment of the Offer
Price in conformity with the Offered Terms as set forth in the Notice of Right
of First Refusal, or upon such other terms and conditions as favorable or more
favorable to the Offered Terms.
(e) Permitted Transfer Following Right of First Refusal. If all
---------------------------------------------------
of the Stock identified in the Notice of Right of First Refusal is not purchased
by the Corporation and/or the Assignee(s) prior to the thirty-sixth day
subsequent to the First Refusal Notice Date, then all of such Stock (including
any Stock for which a proper tender was made) may be transferred by the
Shareholder at any time during the ensuing thirty days in strict conformity with
the Offered Terms set forth in the Notice of Right of First Refusal; provided,
however, the purchaser(s) of such Stock must execute a written acknowledgment
that he or she or they have become a Shareholder as if he or she or they had
been original signatory parties to this Agreement and that he or she or they
agree to be bound by the terms of this Agreement applicable to Shareholder.
Section 4.4 Transfers Include Foreclosure. For purposes of this ARTICLE
-----------------------------
FOUR, a transfer of Stock by the Shareholder shall be deemed to include, but
shall not be limited to, any transfer of legal or beneficial ownership by reason
of foreclosure under any pledge, hypothecation or similar credit transactions
that was previously permitted by the Corporation; provided, however, that the
Corporation shall have the right to prohibit any such pledge or similar
transaction in its sole discretion.
Section 4.5 Compliance Required. Absent the right to make a transfer of
-------------------
Stock pursuant to Section 4.2 or 4.3 hereof, any transfer described in this
ARTICLE FOUR of the Shareholder's Stock without complying with the giving of a
Notice of Right of First Refusal shall be void, and the Corporation shall issue
a Notice of Right of First Refusal upon discovery of such transfer, a copy of
which shall be sent to the person making such transfer and his or her
transferee. The duty of the Corporation to cause the issuance of such Notice of
Right of First Refusal shall not be considered to be elective, but shall be
mandatory. Upon the giving of the
11
<PAGE>
Notice of Right of First Refusal, the time periods for the exercise of the
options specified in Section 4.3 shall commence running. If a Notice of Right of
First Refusal had already been given to the Corporation, but the Corporation is
required to issue a new Notice of Right of First Refusal under this Section 4.5,
the prior Notice of Right of First Refusal shall have no effect and the time
periods under the Notice of Right of First Refusal issued by the Corporation
shall apply.
ARTICLE V
PUBLIC OFFERING CONVERSION, PREEMPTIVE RIGHTS AND SETOFF
--------------------------------------------------------
Section 5.1 Public Offering. Upon and as a condition to the consummation
---------------
of the Corporation's "IPO" (as hereinafter defined), the Corporation shall cause
its Certificate of Incorporation to be amended to provide that the Class C
Common Stock is automatically converted into voting common stock of the same
class that will be held by Questor. The Shareholder agrees to vote in favor of
such amendment.
Section 5.2 Preemptive Rights. If, subsequent to the date hereof and
-----------------
prior to the Corporation's IPO, the Corporation desires to issue and sell
capital stock to Questor or to any other affiliate of the Corporation, other
than pursuant to this Agreement or upon the consent of the holders of at least a
majority of the Stock, the Corporation shall afford the Shareholder "preemptive
rights" in order to permit the Shareholder to maintain his or her percentage
ownership in the Corporation (it being agreed that preemptive rights with
respect to the issuance of voting securities may be satisfied through the
Corporation's offer to issue non-voting securities that otherwise have the same
economic terms). The Shareholder's right to exercise the "preemptive rights"
contemplated by this Section 5.2 shall be subject to the Shareholder's provision
of the undertakings contemplated by Section 8.7 hereof.
Section 5.3 Setoff. Notwithstanding anything contained in this Agreement,
------
in the event that the Corporation shall purchase the Stock from the Shareholder
pursuant to this Agreement, then, in any such event, there shall be a setoff
applied against the full amount of any and all indebtedness of the selling
Shareholder or the Shareholder's Estate owed to the Corporation, whether or not
evidenced by a promissory note or other written instrument, and any and all
interest accrued on such indebtedness.
ARTICLE VI
TAKE-A-LONG-PROVISIONS AND RELATED VOTING AGREEMENT
---------------------------------------------------
The Shareholder hereby agrees, upon the request of Questor, to vote all of
the Shareholder's Stock in favor of any Specified Corporate Transactions (as
defined in Section 8.6(c)) and, at Questor's request, to include the
Shareholder's shares of Stock in any such proposed transaction or any proposed
sale of more than 50% of the capital stock then held by Questor (each a "Sale
Transaction"); provided that the per share consideration to be received by the
Shareholder in the Sale Transaction is not less than the per share consideration
to be received by Questor.
12
<PAGE>
ARTICLE VII
LEGEND
------
All certificates representing Stock of the Corporation issued to the
Shareholder shall bear the following legend. On the face of each such
certificate there shall appear the following statement:
"SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS. SEE REVERSE SIDE."
On the reverse side of each such certificate, the following statement shall
appear:
"RESTRICTIONS ON THE RIGHT TO VOTE, OWN OR TRANSFER THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN
IMPOSED PURSUANT TO AN AGREEMENT DATED AS OF MAY 1, 1998, BY
AND BETWEEN THE CORPORATION AND THE SHAREHOLDER. THE
CORPORATION SHALL FURNISH THE HOLDER HEREOF A COPY OF SUCH
AGREEMENT WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR ITS
REGISTERED OFFICE."
The Corporation may also cause to be imposed upon such certificates such other
legends as counsel to the Corporation shall determine to be required under the
provisions of any federal securities act or any state law. The Corporation
shall incorporate the provisions of this Agreement in its Bylaws as required by
state law.
ARTICLE VIII
OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS OF THE CORPORATION
----------------------------------------------------------------
Section 8.1 Grant of Options. Subject to the terms and conditions set
----------------
forth in this ARTICLE EIGHT, the Corporation hereby grants to the Shareholder
(in such capacity, the "Optionee") an option to purchase (the "Option") Five
Hundred and Fifty (550) shares of Stock.
Section 8.2 Exercise Price and Exercise Schedule. Subject to adjustment
------------------------------------
pursuant to Section 8.6 hereof, the exercise price per share of Stock paid by
the Optionee shall be One Thousand Dollars ($1,000.00). Except as otherwise
provided in this ARTICLE EIGHT, each Option shall be exercisable in whole or in
part (but in any event solely in whole shares) and cumulatively according to the
following schedule, provided in each case that the Optionee did not default in
--------
the performance of his purchase obligation at the Subscription Closing:
13
<PAGE>
20% after May 1, 1999
40% after May 1, 2000
60% after May 1, 2001
80% after May 1, 2002
100% after May 1, 2003
In no event shall any Option be exercisable after May 1, 2008
Section 8.3 Transferability. Each Option granted under this ARTICLE EIGHT
---------------
is not transferable otherwise than by will or the laws of descent and
distribution and during the lifetime of the Optionee is exercisable only by the
applicable Optionee.
Section 8.4 Procedures for Exercise of Option. Each Option shall be
---------------------------------
deemed exercised as to any Optionee when (i) the Corporation has received
written notice of such exercise from the Optionee, (ii) full payment of the
aggregate option exercise price of the shares of Stock as to which the Option is
exercised has been made to the Corporation, and (iii) arrangements that are
satisfactory to the Corporation in its sole discretion have been made for the
Optionee's payment to the Corporation of the amount, if any, that is necessary
for the Corporation to withhold in accordance with applicable Federal or state
tax withholding requirements. The option exercise price of any Stock purchased
shall be paid in cash, by certified or official bank check or by money order;
provided, however, that to the extent that an Option is being exercised in
connection with a sale of Stock pursuant to ARTICLE TWO or ARTICLE THREE hereof
at a price that exceeds the Option exercise price, no payment of the exercise
price shall be required and, instead, appropriate arrangements shall be made for
the Corporation's payment (without duplication) to the Optionee of the positive
difference (net of required withholding) between (x) the purchase price payable
under ARTICLE TWO or ARTICLE THREE with respect to the Stock subject to the
Option, and (y) the aggregate exercise price with respect to such Option. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date of such payment, except as expressly
provided in Section 8.6 hereof.
Section 8.5 Termination of Option Period. The unexercised portion of each
----------------------------
Option granted under this ARTICLE EIGHT as to any Optionee shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) thirty (30) days after the date on which the
Optionee's employment relationship with the Corporation is terminated for any
reason other than by reason of Cause (it being agreed that the "vesting"
schedule set forth in Section 8.2 shall continue through such 30 days); or
14
<PAGE>
(ii) immediately upon the termination of the
Optionee's employment relationship with the Corporation for Cause; or
(iii) on the ten-year anniversary date of the date of
the Subscription Closing.
Section 8.6 Adjustment of Shares.
--------------------
(a) If at any time while an Option is outstanding, the
Corporation in any manner subdivides or combines the outstanding shares of any
class of Common Stock, then and in such event appropriate adjustment shall be
made in the number of shares of Class C Common Stock and the exercise price per
share then subject to such Option, so that the same percentage of the
Corporation's issued and outstanding shares of Class C Common Stock shall remain
subject to purchase at the same aggregate exercise price.
(b) Except as otherwise expressly provided in Section 8.6(a),
the issuance by the Corporation of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Corporation convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to the number of
or exercise price of shares of Stock then subject to any Option.
(c) Without limiting the generality of the foregoing, the
existence of any Option shall not affect in any manner the right or power of the
Corporation and/or the Shareholder to make, authorize or consummate (i) any or
all adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business; (ii) any merger or
consolidation of the Corporation; (iii) any issue by the Corporation of debt or
equity securities, including but not limited to preferred or preference stock
that would rank above the shares of Stock subject to this Option; (iv) the
dissolution or liquidation of the Corporation; (v) any sale, transfer or
assignment of all or any part of the assets or business of the Corporation; or
(vi) any other corporate act or proceeding, whether of a similar character or
otherwise. The Corporation in its sole discretion may, by giving written notice
("Cancellation Notice") cancel, upon the date of the consummation of (i) any
transaction (which shall include a series of transactions occurring within 180
days or occurring pursuant to a plan), other than an IPO, that has the result
that shareholders of the Corporation immediately before such transaction cease
to own at least 51 percent of the voting stock of the Corporation or of any
entity that results from the participation of the Corporation in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction (ii) any merger, consolidation, reorganization,
liquidation or dissolution in which the Corporation does not survive, or (iii)
the sale, lease, exchange or other disposition of all or substantially all the
property and assets of the Corporation, any Option that remains unexercised on
such date (each a "Specified Corporate Transaction"). The Cancellation Notice
shall be given a reasonable period of time prior to the proposed date of
cancellation and may be given either before or after any required shareholder
approval of such Specified
15
<PAGE>
Corporation Transaction. Notwithstanding Section 8.2 hereof, all Options shall
become immediately and fully exercisable immediately prior to any Specified
Corporate Transaction in order to permit the exercise prior to the cancellation
thereof. The Corporation shall also have the right to accelerate the vesting of
all or part of any or all Options for any other reason in its sole discretion.
Section 8.7 Issuance of Shares. As a condition of any sale or issuance of
------------------
Stock upon exercise of any Option, the Corporation may require such agreements
or undertakings, if any, as the Corporation may deem necessary or advisable to
assure compliance with any law or regulation, including, but not limited to, the
following:
(a) a representation and warranty by the Optionee, at the time
an Option is exercised, that he is acquiring the Stock to be issued to him for
investment and not with a view to, or for sale in connection with, the
distribution of any such Stock; and
(b) a representation, warranty and/or agreement to be bound by
any legends that are, in the opinion of the Corporation, necessary or
appropriate to comply with the provisions of any securities law deemed to be
applicable to the issuance of the Stock and are endorsed upon the share
certificates.
Section 8.8 Section 83(b) Election. The Shareholder acknowledges his or
----------------------
her understanding that, if as a result of exercising all or any part of an
Option, the Optionee receives Stock that is subject to a "substantial risk of
forfeiture" and is not "transferable" as those terms are defined for purposes of
section 83(a) of the Code, then the Optionee may elect under section 83(b) of
the Code to include in his or her gross income, for his or her taxable year in
which the Stock is transferred to him, the excess of the "Fair Market Value" of
such Stock at the time of transfer (determined without regard to any restriction
other than one that by its terms will never lapse), over the amount paid for the
Stock. If the Optionee makes the section 83(b) election described above, the
Optionee shall (i) make such election in a manner that is satisfactory to the
Corporation, (ii) provide the Corporation with a copy of such election, (iii)
agree to promptly notify the Corporation if any Internal Revenue Service or
state tax agent, on audit or otherwise, questions the validity or correctness of
such election or of the amount of income reportable on account of such election,
and (iv) agree to such withholding as the Corporation may reasonably require in
its sole and absolute discretion.
Section 8.9 No Right to Continued Employment. Neither this Agreement nor
--------------------------------
any Option shall not confer upon the Optionee any right to continued employment
by the Corporation or any subsidiary or affiliate of the Corporation.
ARTICLE IX
THE GIVING OF NOTICES REQUIRED BY THIS AGREEMENT
------------------------------------------------
Section 9.1 Addresses. Any notices, requests, demands and other
---------
communications required or permitted to be given hereunder must be in writing
and, except as otherwise specified
16
<PAGE>
in writing, will be deemed to have been duly given when personally delivered,
telexed or facsimile transmitted, or three days after deposit in the United
States mail, by certified mail, postage prepaid, return receipt requested, as
follows. The addresses of the Corporation and the Shareholder, which shall be
considered to be their last known addresses unless subsequently changed in
accordance with the provisions of this Agreement, are as follows:
IF TO THE CORPORATION: Ryder TRS, Inc.
1560 Broadway, Suite 1800
Denver, Colorado 80202
Attention: General Counsel
With Copies To:
---------------
Questor Management Company
4000 Town Center, Suite 500
Southfield, Michigan 48075
Attention: President
and
---
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Bruce E. Macdonough
IF TO THE SHAREHOLDER:
Ronald A. Rittenmeyer
4569 Turnberry Court
Plano, TX 75024
Any party may change its address for the purposes of this Agreement by giving
notice of such change of address to the other parties in the manner herein
provided for giving notice.
Section 9.2 Form of Notice. Any notice or communication hereunder must be
--------------
in writing, and may be personally delivered or given by registered or certified
mail, return receipt requested, and if given by registered or certified mail,
shall be deemed to have been given and received forty-eight hours after deposit
in the United States mail of a registered or certified letter, return receipt
requested, containing such notice, properly addressed, with postage prepaid; and
if given otherwise than by registered or certified mail, it shall be deemed to
have been given when received by the party to whom it is addressed at the time
received.
17
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Section 9.3 Failure to Notify of Changed Address. It shall be the
------------------------------------
responsibility of each of the parties to this Agreement to notify all other
parties of their respective addresses and any changes thereof, and any
objections to the performance of any act required hereunder based upon a failure
to receive a notice mailed in conformity with the provisions of this Agreement
shall be meritless.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Termination. This Agreement shall terminate upon the earlier
-----------
to occur of (i) the dissolution of the Corporation, (ii) except with respect to
the Option provisions under ARTICLE EIGHT and Section (S)10.15 hereof, the
consummation of the Corporation's initial underwritten public offering ("IPO")
of common stock registered under the Securities Act of 1933, as amended, and
(iii) upon the date the Shareholder ceases to own any Stock.
Section 10.2 Modification. This Agreement may only be amended, terminated
------------
or modified by the written consent of the Corporation and the Shareholder.
Section 10.3 Successors. This Agreement shall be binding upon the parties
----------
hereto, their heirs, administrators, successors, executors and assigns, and the
parties hereto do covenant and agree that they themselves and their respective
heirs, executors, successors, administrators and assigns will execute any and
all instruments, releases, assignments and consents that may be reasonably
required of them to more fully execute the provisions of this Agreement.
Section 10.4 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall serve as an original for all purposes, but all
copies of which shall constitute but one and the same Agreement.
Section 10.5 Headings. All headings set forth in this Agreement are
--------
intended for convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or of any of the provisions thereof.
Section 10.6 Governing Law. This Agreement shall be governed by and shall
-------------
be construed and enforced in accordance with the laws of the State of Colorado.
Section 10.7 Insurance. The Shareholder agrees to cooperate with the
---------
Corporation and to assist it to the extent required in order to allow the
Corporation to obtain insurance on the life of the Shareholder should the
Corporation decide to purchase such insurance.
Section 10.8 Waiver. The waiver by any party hereto of a breach of any
------
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
Section 10.9 Entire Agreement. This Agreement constitutes the entire
----------------
Agreement of the parties hereto with respect to the transactions contemplated
hereby, and it is hereby agreed
18
<PAGE>
that any prior oral or written agreements concerning the sale or disposition of
Stock shall be null and void.
Section 10.10 Severability. If any provision of this Agreement shall be
------------
held to be illegal or unenforceable, such illegality or unenforceability shall
extend to that provision solely, and the remainder of this Agreement shall be
enforced as if such illegal or unenforceable provision were not incorporated
herein.
Section 10.11 Specific Performance. The right to own and vote Stock is
--------------------
hereby declared by the parties hereto to be a unique right, the loss of which is
not susceptible to monetary quantification. Consequently, the parties hereto
agree that an action for specific performance of the purchase and sale
obligations created by this Agreement is a proper remedy for the breach of its
provisions. If any party to this Agreement institutes legal proceedings in
connection with this Agreement, the prevailing party shall be entitled to
recover their reasonable attorneys' fees and court costs.
Section 10.12 Business Days. Whenever the terms of this Agreement call
-------------
for the performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
Section 10.13 Stock References. References to "Stock" herein shall mean
----------------
(i) any Stock purchased or otherwise acquired by the Shareholder, whether
pursuant to ARTICLE ONE, ARTICLE EIGHT or otherwise, (ii) any equity securities
issued or issuable directly or indirectly with respect to the Stock referred to
in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Corporation held by the Shareholder. As to any particular shares
constituting Stock, such shares will cease to be Stock when they have been (x)
disposed of in accordance with a registration statement effective under the Act,
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or any similar provision then in force) under the Act.
Section 10.14 Failure to Deliver Stock. If the Shareholder (or any
------------------------
personal representative or other representative of the Shareholder) who has
become obligated to sell Stock of the Corporation hereunder shall fail to
deliver such Stock on the terms and in accordance with this Agreement, the
Corporation, in addition to all other remedies it may have, may send to the such
obligated party by registered mail, return receipt requested, the purchase price
for such Stock on the terms provided for in this Agreement. Thereupon, the
Corporation, upon written notice to the Shareholder, shall cancel on its books
the certificates representing the Stock to be sold; and thereupon, all of the
obligated Shareholder's rights in and to such Stock shall terminate.
Section 10.15 Lock-Up. In consideration of the premises and mutual
-------
covenants set forth in this Agreement, the Shareholder severally agrees to
execute and deliver a customary "lock-up" agreement, restricting the transfer of
the Shareholder's Stock for not more than 180 days, in
19
<PAGE>
connection with the IPO and each other underwritten public offering of the
Corporation's securities.
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their
names as of the date first above written.
RYDER TRS, INC.
By: /s/ Michael A. Zawalski
-----------------------
Michael A. Zawalski, Vice President and
Chief Financial Officer
/s/ Ronald A. Rittenmeyer
-------------------------
Ronald A. Rittenmeyer
20
<PAGE>
EXHIBIT 10.22
INFORMATION TECHNOLOGY SERVICES AGREEMENT
-----------------------------------------
AMONG
PEROT SYSTEMS CORPORATION,
CAMBRIDGE TECHNOLOGY PARTNERS, INC.
AND
RYDER TRS, INC.
CONFIDENTIAL
<PAGE>
INFORMATION TECHNOLOGY SERVICES AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
GENERAL OBLIGATIONS
<S> <C>
1.1 Executive Steering Committee..................................... 2
1.2 Program Managers................................................. 2
1.3 Cooperation...................................................... 2
1.4 Service Review Period............................................ 2
1.5 Conduct of Personnel............................................. 3
1.6 Access to Facilities............................................. 3
1.7 Subcontractors................................................... 4
ARTICLE 2
PROGRAM SERVICES
2.1 CPA Account Manager.............................................. 4
2.2 Program Office................................................... 5
2.3 Technology Steering Committee.................................... 6
2.4 Change Control Board............................................. 6
2.5 Change Control Process........................................... 7
2.6 Key Staff........................................................ 9
ARTICLE 3
CAMBRIDGE SERVICES
3.1 Application Development Services................................. 11
3.2 Task Order Process............................................... 12
3.3 Acceptance of Applications....................................... 12
ARTICLE 4
PSC SERVICES
4.1 Transition Services.............................................. 14
4.2 Operations Services.............................................. 14
4.3 [Intentionally Omitted].......................................... 17
4.4 Acceptance Testing and Application Support....................... 17
4.5 Service Levels................................................... 19
4.6 Additional Services.............................................. 20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.7 Access to Services from Perot Systems Subsidiaries, Affiliates
and Joint Ventures............................................... 21
4.8 Transfer of Personnel............................................ 21
ARTICLE 5
CLIENT OBLIGATIONS
5.1 Service Exclusivity.............................................. 21
5.2 Client Facilities................................................ 23
5.3 Transition....................................................... 24
5.4 Third Party Software, Equipment and Third Party Services......... 24
5.5 Certain Obligations.............................................. 25
ARTICLE 6
CHARGES AND PAYMENT
6.1 Charges for PSC Services........................................ 25
6.2 Charges for Cambridge Services.................................. 25
6.3 Charges for Additional Services................................. 25
6.4 Risk/Reward Pricing............................................. 25
6.5 Reimbursable Expenses........................................... 26
6.6 Pass-Through Expenses........................................... 26
6.7 Taxes and Tax Planning.......................................... 27
6.8 Pricing Adjustments............................................. 28
6.9 Invoices and Payment............................................ 28
6.10 Audits by Client................................................ 30
6.11 Benchmarking.................................................... 30
6.12 Client Surveys.................................................. 31
6.13 Extraordinary Events............................................ 32
ARTICLE 7
PROPRIETARY RIGHTS
7.1 PSC Work Product................................................. 33
7.2 Cambridge Work Product........................................... 33
7.3 Third-Party Intellectual Property................................ 34
7.4 Pre-Existing Intellectual Property............................... 34
ARTICLE 8
CONFIDENTIALITY
8.1 Ownership of Client Data......................................... 35
8.2 Confidential Information......................................... 35
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.3 Attorney-Client Privilege........................................ 37
8.4 Internal Audits.................................................. 37
ARTICLE 9
TERM AND TERMINATION
9.1 Initial Term..................................................... 37
9.2 Renewal Terms.................................................... 37
9.3 Termination for Cause............................................ 38
9.4 Termination for Convenience...................................... 40
9.5 Termination in Connection with a Critical Failure................ 41
9.6 Termination for Insolvency....................................... 42
9.7 Termination Assistance........................................... 43
9.8 Survival of Certain Provisions................................... 44
9.9 Termination Within 60 Days....................................... 44
9.10 Termination in Connection with a Change in Control............... 46
ARTICLE 10
WARRANTIES AND CERTAIN COVENANTS
10.1 By Perot Systems................................................. 47
10.2 By Cambridge Technology.......................................... 47
10.3 By Each Party.................................................... 48
10.4 Third Party Warranties........................................... 48
10.5 Warranty Disclaimers............................................. 48
10.6 Certain Covenants................................................ 48
ARTICLE 11
INDEMNITIES
11.1 By Perot Systems................................................. 51
11.2 By Cambridge Technology.......................................... 52
11.3 By Client........................................................ 52
11.4 Intellectual Property............................................ 53
11.5 Indemnification Procedures....................................... 56
11.6 Subrogation...................................................... 57
ARTICLE 12
LIMITATIONS ON LIABILITY AND DAMAGES
12.1 Limitation on Direct Damages..................................... 57
12.2 Limitation on Consequential Damages.............................. 59
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
12.3 Mitigation...................................................... 59
12.4 Time to Bring Actions........................................... 59
12.5 Force Majeure................................................... 59
ARTICLE 13
INSURANCE AND RISK OF LOSS
13.1 Insurance....................................................... 59
13.2 Insurance Documentation......................................... 60
13.3 Risk of Loss.................................................... 60
ARTICLE 14
DISPUTE RESOLUTION
14.1 General......................................................... 61
14.2 Management Meetings............................................. 61
14.3 Arbitration..................................................... 62
14.4 Limited Exceptions for Litigation............................... 63
14.5 Continued Performance........................................... 63
ARTICLE 15
DEFINITIONS AND CONSTRUCTION
15.1 Certain Terms................................................... 63
15.2 Captions........................................................ 63
15.3 Priority of Documents........................................... 63
15.4 Severability.................................................... 64
ARTICLE 16
MISCELLANEOUS
16.1 No Hire Commitments............................................. 64
16.2 Publicity....................................................... 64
16.3 Notices......................................................... 64
16.4 Assignment...................................................... 65
16.5 Counterparts.................................................... 65
16.6 Relationship of Parties......................................... 65
16.7 Approvals and Similar Actions................................... 66
16.8 Modification; Waiver............................................ 66
16.9 No Third-Party Beneficiaries.................................... 66
16.10 Governing Law................................................... 66
16.11 Entire Agreement................................................ 66
</TABLE>
iv
<PAGE>
Attachments
-----------
A. Request for Proposal
B. Responses to Request for Proposal
C. Technology Standards (To be developed)
D. Operating Procedures Manual (To be developed)
E. Disaster Recovery and Security Plan (To be developed)
F. Sample Customer Satisfaction Survey
G. Enterprise Scope Document
H. Cambridge Methodology
Schedules
---------
1.1 Members of the Executive Steering Committee
1.4 Principal Assumptions
Part A -- Principal Assumptions
Part B -- Client Review Materials
2.2 Third Party Vendors
2.3 Members of the Technology Steering Committee
2.6 Key Staff
Part A -- Perot Systems
Part B -- Cambridge Technology
3.1 Cambridge Services
* Procedures for Transition Critical Applications
4.1 Transition Plan
4.2 PSC Services
Part A -- Operations Services
(a) Data Center Operations
(b) Network Operations
(c) Help Desk Services
Part B -- Other Third Party Vendors
4.4 Application Support Services
4.8 Transition Employees
5.1 Cambridge Applications and Fees for Program Services
Part A -- Charges for Transition Critical Applications
Part B -- Charges for Cambridge Program Services
5.3 Managed Contracts, Equipment, Software and Services
Part A -- Managed Contracts
Part B -- Managed Equipment and Managed Software
Part C -- RSI Services
6.1 Charges for PSC Services
6.3 Charges for Additional Services
6.4 Risk Reward Pricing and Service Levels
v
<PAGE>
Part A -- Cambridge Technology
Part B -- Perot Systems
9.4 Early Termination Fees
15.1 Definitions
vi
<PAGE>
INFORMATION TECHNOLOGY SERVICES AGREEMENT
-----------------------------------------
This Information Technology Services Agreement ("Agreement"), dated as of
January 22, 1998, is between Perot Systems Corporation, a Delaware corporation
("Perot Systems"), Cambridge Technology Partners, Inc., a Delaware corporation
("Cambridge Technology") and Ryder TRS, Inc., a Delaware corporation ("Client").
PRELIMINARY STATEMENTS
A. Perot Systems and Cambridge Technology will provide a solution
intended to meet the requirements set forth in Client's Technology Partnership
Request for Proposal (the "RFP"), attached as Attachment A, as such requirements
have been revised as provided in this Agreement. As set forth in Perot Systems'
and Cambridge Technology's joint Response to Request for Proposal and related
documents attached as Attachment B (the "Response to RFP"), Perot Systems and
Cambridge Technology understand that Client intends to develop a long-term
relationship with a technology provider that shares its technology vision and
zeal to achieve the following objectives:
1. Support the creation of an independent systems environment, except the
RyderFirst/POS Systems including but not limited to the DCM
environment, by the October 1998 time frame.
2. Move from a geographically dispersed and disparate mix of technology
platforms connected over a proprietary network to a single
client/server platform with server clusters and Internet access.
Financial and operational data will reside in a single data
repository.
3. Accomplish the above in a manner that transcends the "building of
systems" and the "renting of trucks" such that Client, Perot Systems
and Cambridge Technology might find ways to leverage their investment
to create value in non-traditional ways (e.g., expand Client's
vertical and horizontal markets).
B. For the reasons set forth above, in the RFP, and in the Response to
RFP, Client desires to replace its current information technology services
provider, Ryder System, Inc. ("RSI") and to engage Perot Systems and Cambridge
Technology as its business and information technology services providers, each
of which will perform certain business and information technology services for
Client, which services are described in detail in this Agreement; and
C. Client desires to have Perot Systems (i) serve as the single point of
contact with respect to the provision of services by Perot Systems and Cambridge
Technology with respect to the business and information technology services to
be provided by such parties under this
1
<PAGE>
Agreement and (ii) manage the services provided by Cambridge Technology and
Third Party Vendors as set forth in this Agreement.
Accordingly, the parties agree as follows:
ARTICLE 1
GENERAL OBLIGATIONS
1.1 Executive Steering Committee. Each party will designate up to three
----------------------------
senior executives to participate in the Executive Steering Committee. The
Executive Steering Committee will be chaired by a representative of Client and
will meet semi-annually to review the parties' performance under the Agreement
and to provide general advice and guidance with respect to Client's industry,
business priorities and market opportunities. The individuals initially
designated to serve on the Executive Steering Committee are identified in
Schedule 1.1.
1.2 Program Managers. Each party will designate an individual to serve as
----------------
its "Program Manager" under this Agreement. Each party's Program Manager will
(i) serve as the principal point of accountability for coordinating and managing
that party's obligations under this Agreement, and (ii) be authorized to act for
and on behalf of that party with respect to all matters relating to this
Agreement, subject to the limitations set forth in this Agreement and any other
limitations of which the other parties are notified and to which they agree,
which agreement will not be unreasonably withheld.
1.3 Cooperation. Each party and its Subsidiaries will cooperate with each
-----------
of the other parties and their respective Subsidiaries in connection with their
respective obligations under this Agreement. Such cooperation will include
making available to a party all management decisions, information, approvals and
acceptances that the party reasonably expects to have a material effect on the
obligations to be performed by that party under this Agreement.
1.4 Service Review Period.
---------------------
(a) During the period commencing October 13, 1997, Perot Systems and
Cambridge Technology, with Client's assistance, performed a detailed review
of the business and information technology services being provided by
Client Personnel, RSI, and other Third Party Vendors and of Client's
business processes. That review has resulted in the development of the
Principal Assumptions described in Part A of Schedule 1.4. During the
period beginning on the Effective Date and ending 30 days after the later
of (i) the date Perot Systems receives the materials described in Part B of
Section 1.4, or (ii) the Effective Date (the "Service Review Period"),
Perot Systems and Cambridge Technology will verify, to the extent
reasonably practicable, that the Principal Assumptions are accurate. Upon
completion of the Service Review Period, the CPA
2
<PAGE>
Account Manager will deliver a report to Client's Program Manager
describing the results of Perot Systems' and Cambridge Technology's
detailed review. That report will describe any changes to the Principal
Assumptions and any other revisions to the Schedules requested by Perot
Systems or Cambridge Technology, all of which changes will be reviewed and
approved through the Change Control Process.
(b) If a party becomes aware of any information during the Service
Review Period (or in Client's case, as a result of its review of the report
described in Section 1.4(a)) or thereafter, which information could
reasonably (i) indicate that a Principal Assumption is incorrect in any
material respect, (ii) result in a material increase or material decrease
in the cost of providing Services, (iii) result in a delay in the
performance of Services, or (iv) have a material impact on the performance
of the Services, then such party will promptly notify the affected party of
such information and the parties will use reasonable efforts to mitigate
the adverse impact of such information or circumstances and, if the
information was not known at the Effective Date, the parties will make an
equitable adjustment to the Schedules, all of which adjustments will be
reviewed and approved through the Change Control Process.
1.5 Conduct of Personnel. While at another party's Facility, each party's
--------------------
Personnel will conduct themselves in a businesslike manner and will comply with
the other party's reasonable requests, standard rules and regulations regarding
personal conduct, including all safety and security rules and regulations of
which that party has been notified. Client may, upon giving not less than 30
days' notice to the CPA Account Manager, who will in turn notify the affected
party, require either Perot Systems or Cambridge Technology to reassign, replace
or remove any individual performing services under this Agreement where the
performance of such individual is such that it may, in Client's reasonable
opinion, have a material and adverse impact on the ability of Perot Systems or
Cambridge Technology, as the case may be, to perform its respective obligations
under this Agreement. In addition, Client may, on giving notice to the CPA
Account Manager, require the immediate removal of any PSC Personnel or Cambridge
Technology Personnel who in Client's reasonable opinion have violated any safety
or security rules or regulations of Client, violated any laws or regulations in
the course of performing services under this Agreement, or breached any of the
confidentiality or non-competition provisions of this Agreement. Client may not
request the reassignment, replacement or removal of any individual for reasons
that would be improper under applicable law if Client were such individual's
employer. Perot Systems and Cambridge Technology will each use reasonable
commercial efforts to replace promptly any individual reassigned, replaced or
removed at Client's request.
1.6 Access to Facilities. Each party will grant each other party access
--------------------
during normal business hours (and, to the extent reasonably necessary, outside
normal business hours) to that party's Facilities (including appropriate
equipment and systems located at such facilities) as is reasonably necessary for
the other party to perform the activities contemplated by this Agreement,
provided that (i) each party's Personnel will conduct
3
<PAGE>
themselves as described in Section 1.5, and (ii) no party will make any
structural, mechanical or electrical alterations to another party's Facilities
without the other party's prior approval.
1.7 Subcontractors. Each of Perot Systems and Cambridge Technology may
--------------
engage independent third parties or Affiliates of such party ("subcontractors")
to perform any part of the Services or other obligations to be performed by such
party under this Agreement, provided that:
(a) The CPA Account Manager will obtain Client's prior approval of
any subcontractor (other than an Affiliate of Perot Systems or Cambridge
Technology, as the case may be) that the engaging party reasonably expects,
at the time of the initial engagement, will be paid more than $250,000
during the term of the agreement under which such subcontractor is engaged
or, in the case of multiple agreements with a single subcontractor, during
any 12 month period. Such approval will not be necessary for Affiliates of
Perot Systems or Cambridge Technology unless otherwise agreed in the Change
Control Process.
(b) Each party that engages a subcontractor will be fully responsible
for the work and activities of its subcontractors, including the compliance
of such subcontractors with the terms of this Agreement.
ARTICLE 2
PROGRAM SERVICES
2.1 CPA Account Manager.
-------------------
(a) Perot Systems will designate an individual to
serve as the CPA Account Manager for Perot Systems and Cambridge Technology
under this Agreement. The CPA Account Manager will (i) serve as the
principal point of contact and accountability to Client for coordinating,
managing, and monitoring the performance of Perot Systems' and Cambridge
Technology's obligations under this Agreement, and (ii) be authorized to
act for and on behalf of Perot Systems and Cambridge Technology with
respect to all matters relating to the Services, subject to the limitations
set forth in this Agreement. However, the CPA Account Manager will have no
authority to amend this Agreement to modify Cambridge Technology's
obligations under this Agreement without the approval of the Cambridge
Program Manager and the Client Account Manager, and the CPA Account Manager
and Perot Systems will have no liability to Client in connection with the
performance or non-performance of the Cambridge Services, provided that
this sentence will not excuse any breach of this Agreement by Perot
Systems.
(b) The CPA Account Manager will have general responsibility for
coordinating the planning for and development of Client's Technology Plan,
monitoring
4
<PAGE>
the implementation of the Technology Plan by the parties and Third Party
Vendors, including monitoring the achievement of project milestones, and
monitoring compliance with Client's standards for delivery and quality of
information technology services.
2.2 Program Office.
--------------
(a) The CPA Account Manager will organize and manage a Program Office
composed of the CPA Account Manager, each party's Program Manager, and such
other persons as the CPA Account Manager and the parties' Program Managers
from time to time agree are appropriate. During the first year of the term
of this Agreement, the Program Office will be staffed by full-time
personnel serving in the roles of CPA Account Manager, Cambridge Program
Manager, PSC Program Manager, Technical Architect, and Vendor Manager, and
additional part-time or full-time personnel as the CPA Account Manager and
the parties' Program Managers agree are appropriate. During the second and
subsequent years of the term of this Agreement, the Program Office will be
staffed by full-time personnel serving in the role of CPA Account Manager,
part-time personnel serving in the roles of Cambridge Program Manager, PSC
Program Manager, Technical Architect and Vendor Manager as set forth in the
staffing plan included as part of Schedules 6.1 and 6.2, and such other
part-time or full-time personnel as the CPA Account Manager and the
parties' Program Managers agree are appropriate.
(b) The Cambridge Program Manager, in addition to the obligations set
forth in Section 1.2, will manage the Cambridge Services, including but not
limited to Cambridge Technology's application development services, and
coordinate the performance of the Cambridge Services with the PSC Program
Manager. The project managers for each application development project
will report to the Cambridge Program Manager, who will manage resources,
planning, and issues relating to such project. The Cambridge Program
Manager will be assigned as Key Staff until the Implementation of all the
Cambridge Applications.
(c) The PSC Program Manager (who may also be the CPA Account
Manager), in addition to the obligations set forth in Section 1.2, will
manage the PSC Services (other than the PSC Program Services, which will be
managed by the CPA Account Manager) and coordinate with the Cambridge
Program Manager.
(d) The Technical Architect will (i) coordinate Client's, Cambridge
Technology's, and Perot Systems' technical efforts across application
development projects and operations, (ii) be responsible for the technical
architecture of the Client Systems, (iii) within 90 days after the
Effective Date, establish and submit for Client's approval, and thereafter
maintain technology standards for the Client Systems, (iv) perform mutually
acceptable technical quality assurance procedures with respect to the
Cambridge Applications at the time of their Acceptance and Implementation
(including, among other things, by coordinating Perot Systems'
participation in the Acceptance
5
<PAGE>
Testing process), and (v) periodically evaluate the condition of the Client
Systems as compared to the technological state of the art and recommend to
Client refreshment, new or different technologies, or other methods to
optimize the operations of such Client Systems. The Technical Architect
will work with each project manager, technical team leader, and Perot
Systems' operations team leader on technical issues. The development of,
and any changes in, the technical architecture and technology standards for
Client will be subject to Client's prior approval, which approval will not
be unreasonably withheld. The Technical Architect will compile such
approved technical architecture and technology standards, and any approved
changes to them, in a Technology Plan.
(e) The Vendor Manager will be the liaison between the parties and
the Third Party Vendors listed on Schedule 2.2, who are delivering the
Financial, Maintenance, and CR/CS Applications. The Vendor Manager will
monitor, coordinate and use diligent efforts to assure the transition of
the RSI Services and the delivery of the Financial, Maintenance, and CR/CS
Applications, coordinate dependencies among Applications, and attempt to
resolve issues that arise between those Third Party Vendors and, as the
case may be, Perot Systems, Cambridge Technology or Client. The Vendor
Manager will not be responsible for managing any Third Party Vendors other
than those identified in Schedule 2.2; such other Third Party Vendors,
identified in Part C of Schedule 4.2, will be managed by the PSC Program
Manager.
2.3 Technology Steering Committee.
-----------------------------
(a) The Client Program Manager will organize a Technology Steering
Committee. Each party will designate up to four senior managers, including
that party's Program Manager, and such other persons as the parties
collectively agree are appropriate to participate in the Technology
Steering Committee. The Client Personnel, PSC Personnel and Cambridge
Personnel initially designated to serve on the Technology Steering
Committee are identified in Schedule 2.3.
(b) The Client Program Manager will chair the Technology Steering
Committee, which will (i) participate in the development of and approve
Client's Technology Plan and budgets, (ii) provide senior-level guidance to
Perot Systems and Cambridge Technology on Client's business priorities as
they affect the services to be performed under this Agreement, and (iii)
guide and monitor the work of the Technical Architect. The Technology
Steering Committee will meet at least monthly until the Implementation of
the Initial Systems, and thereafter on a mutually acceptable schedule. All
Changes recommended by the Technology Steering Committee will be subject to
the Change Control Process.
6
<PAGE>
2.4 Change Control Board.
--------------------
(a) The Client Program Manager will organize the Change Control
Board. Each party will designate two management-level employees, including
that party's Program Manager, to participate in the Change Control Board.
(b) The Change Control Board will be chaired by the Client Program
Manager and will meet at least once a week until the Implementation of the
Initial Systems, and thereafter on a schedule to be agreed, for the
purposes of reviewing those Change requests required to be reviewed by the
Change Control Board under Section 2.5(b). If the Change Control Board
cannot agree on a Change request in accordance with the Change Control
Process, then any party may submit the Change request to the dispute
resolution process of Article 14.
(c) The Change Control Board will analyze the effect of each Change
request submitted to it on the Development Schedule, the Development Budget
and the Service Levels and its corresponding effect on the parameters
affecting the performance credits contemplated by Section 6.4, and will
recommend an equitable adjustment deemed necessary to be made to each such
parameter.
2.5 Change Control Process
----------------------
(a) Not later than 30 days after the Effective Date, the CPA Account
Manager will prepare and deliver to Client, for Client's review and
approval, Change Control Procedures to be used by the parties under this
Agreement to control changes in scope, schedule and cost of the Services.
The Change Control Procedures will be one component of the Operating
Procedures Manual and will provide, at a minimum, that (i) all Changes,
including Changes to the Change Control Procedures, will be made pursuant
to the Change Control Procedures, except as may be necessary on an
emergency basis; (ii) no Change which is reasonably expected to materially
or adversely affect the function or performance of any System or result in
a material increase in the charges to Client under this Agreement will be
implemented without Client's approval, except as may be necessary on an
emergency basis; (iii) all Changes, except those made as necessary on an
emergency basis, will be implemented in accordance with a schedule provided
to Client periodically and under circumstances that are reasonably expected
not to interrupt Client's business operations materially; and (iv) the CPA
Account Manager will give Client prompt notice (which may be given orally,
provided that any oral notice is confirmed in writing within five business
days) of any Change made as necessary on an emergency basis.
(b) All Change Orders involving an increase in the charges to Client
or a change in any Implementation Date will be reviewed by the Change
Control Board. All other Change Orders will be reviewed by the CPA Account
Manager in conjunction with
7
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the Client Program Manager and, as appropriate, the Cambridge Program
Manager. The budgetary and schedule effects of reasonably interrelated
Change Orders will be aggregated to determine whether the CPA Account
Manager or the Change Control Board should review such Change Orders. The
parties will use their reasonable commercial efforts to minimize any
adjustments to the Development Schedule, Development Budget and
Requirements.
(c) Changes to the Requirements, Development Budget, or Development
Schedule w ill be made only by mutual agreement of the affected parties
through the use of a Change Order. All requests for Changes by a party will
be communicated by the requesting party's Program Manager or his or her
designee to the CPA Account Manager, who will be responsible for notifying
the other parties of the requested Change. No party will have any
obligation to implement Changes requested through any other means.
(d) Requests for Change Orders will be submitted for review in
accordance with the Change Control Process described in this Section 2.5,
and will include the following information: (i) a detailed description of
the Change requested, (ii) the business, technical or financial
justification for the Change requested, (iii) the price and capital costs
(if separate), associated with the Change requested, (iv) the projected
schedule impact of the Change requested, and (v) the priority of the Change
requested.
(e) Within five business days (or such longer period as is mutually
agreeable) after receiving a request from Client for a Change Order, the
CPA Account Manager will prepare, with the assistance of Perot Systems and
Cambridge Technology as directed by the CPA Account Manager, and provide to
Client a document summarizing the effect, if any, of the proposed change on
(i) the Development Schedule, including but not limited to Client's
obligations under the Development Schedule, (ii) the functionality and
Requirements of the applicable System to be delivered, and (iii) the
Development Budget. In addition, the CPA Account Manager will inform Client
regarding any other business impact that Perot Systems or Cambridge
Technology believes to be relevant to an evaluation of the Change Order.
In the case of Change requests reviewed by the Change Control Board under
Section 2.5(b), the CPA Account Manager also will forward all such
information to the Change Control Board at the same time it is delivered to
Client. The Change Control Board will review the information and, as the
Change Control Board deems necessary, revise it at the next succeeding
Change Control Board meeting and promptly forward its report on the
proposed Change to Client. Within ten business days or, after
Implementation of the Initial Systems, such longer period as is mutually
agreeable to the parties, after receiving such information (or within ten
business days after receiving the Change Control Board's report, in the
case of a Change request reviewed by the Change Control Board), Client will
approve, reject or withdraw the request for such Change Order. Client's
failure to approve, reject or withdraw the request within the applicable
time period will be deemed a withdrawal of such request.
8
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(f) Upon submitting a request for a Change Order initiated by Perot
Systems or Cambridge Technology, the CPA Account Manager will provide to
Client a document summarizing the effect, if any, on (i) the Development
Schedule, including but not limited to Client's obligations under the
Development Schedule, (ii) the functionality and Requirements of the
applicable System to be delivered, and (iii) the Development Budget. In
addition, the CPA Account Manager will inform Client regarding any other
business impact that Perot Systems or Cambridge Technology believes to be
relevant to an evaluation of the Change Order. In the case of Change
requests reviewed by the Change Control Board under Section 2.5(b), the CPA
Account Manager also will forward all such information to the Change
Control Board at the same time it is delivered to Client. The Change
Control Board will review the information and, as the Change Control Board
deem necessary, revise it at the next succeeding Change Control Board
meeting and promptly forward its report to Client. Within ten business days
after receiving such information (or within ten business days after
receiving the Change Control Board's report, in the case of a Change
request reviewed by the Change Control Board), Client will approve or
reject the requested Change Order. Client's failure to approve or reject
the requested Change Order within the applicable time period will be deemed
a rejection of such request.
(g) If, prior to the Implementation of the Initial Systems, the level
of effort necessary for either of Perot Systems or Cambridge Technology to
fulfill its obligations under this Agreement is increased, or is reasonably
expected by Perot Systems or Cambridge Technology to be increased, by (i)
Client's specification of how any Requirement is to be implemented, (ii)
any change in the scope of Perot Systems' or Cambridge Technology's
obligations under this Agreement directed by Client, (iii) Client's delay
in completion or failure to complete any obligation described in Article 5,
or (iv) Force Majeure, the CPA Account Manager will promptly notify Client
of each such situation or claim and propose an equitable adjustment
therefor in a Change Order.
(h) In any case where no final agreement has been reached on a Change
request but the Client's Account Manager nonetheless orders either or both
of Perot Systems or Cambridge Technology, as the case may be, to carry out
such Change, such party will use its commercially reasonable efforts to
carry out such Change within the time requested by Client at the price and
related terms proposed by Perot Systems or Cambridge Technology, as the
case may be; and in such event, the parameters affecting the performance
credits contemplated by Section 6.4 will be adjusted in accordance with the
response to such Change request by Perot Systems or Cambridge Technology,
as the case may be, and any party may refer the disputed Change request to
the procedures provided in Article 14.
(i) Promptly after approval of a Change Order by Client, the CPA
Account Manager will communicate such approval to each party's Program
Manager. Each party will execute such Change Order and communicate its
requirements to its project teams.
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Each party will promptly comply with each Change Order executed as provided
in this Section 2.5.
(j) As soon as practicable after the Implementation of the Initial
Systems, the parties will revise the response periods, approval limits and
other mutually satisfactory items set forth in this Section 2.5 and the
Change Control Procedures to reflect an operating, rather than development,
environment.
2.6 Key Staff.
---------
(a) Part A of Schedule 2.6 lists the CPA Account Manager, Perot
Systems' Program Manager, other key PSC Personnel, the Cambridge Program
Manager and other key Cambridge Personnel (collectively, the "Key Staff").
The parties may modify or amend such list from time to time, and will amend
such list as appropriate to reflect the replacement of Key Staff and as the
development of the Cambridge Applications and the transition of the RSI
Systems progress.
(b) Perot Systems and Cambridge Technology each may nominate
replacement individuals to serve as Key Staff from time to time, by giving
at least 10 days' notice to the CPA Account Manager, who will in turn
notify Client's Account Manager, provided that no such individual will be
assigned as Key Staff without Client's approval, which approval will not be
withheld unreasonably or for reasons that would be improper under
applicable law if Client were their employer.
(c) Perot Systems and Cambridge Technology will each use reasonable
commercial efforts to ensure that their Key Staff (i) will remain employed
by such party for the first year of this Agreement (or such shorter period
as may be reasonably appropriate in recognition of the services being
performed by a particular individual), (ii) will not be reassigned until
their key tasks are completed without Client's consent, and (iii) will have
as their substantially full-time responsibility, where they are intended to
be full-time, the performance of such party's obligations under this
Agreement. In addition, each of Perot Systems and Cambridge Technology
will use reasonable commercial efforts to cause each of their employees who
are designated as Key Staff for purposes of Section 2.6(d) or (e) to
execute an agreement binding such employee to the restrictions set forth in
Section 2.6(d) or (e), as the case may be, and will advise Client as to
whether such an agreement has been executed. If the CPA Account Manager
informs Client that Perot Systems or Cambridge Technology desires any Key
Staff for a temporary assignment to another site or customer (other than a
Named Competitor) for less than five days and if such temporary assignment
will not materially and adversely affect any Services, in Client's
reasonable judgment, Client will honor such request.
10
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(d) Perot Systems will not assign any of its Key Staff to provide
services to or for any Named Competitor during the period that such
employee is performing Services for Client and for two years thereafter.
(e) Cambridge Technology will not assign any of its Key Staff to
provide services to or for a Named Competitor during the period that such
employee is performing Services for Client and for two years thereafter.
The Cambridge Technology project leaders of each Transition Critical
Application will be considered Key Staff with respect to this Section
2.6(e). Part B of Schedule 2.6 lists the individuals who are serving as
project leaders for such Transition Critical Applications as of the
Effective Date.
ARTICLE 3
CAMBRIDGE SERVICES
3.1 Application Development Services.
--------------------------------
(a) Cambridge Technology will develop the Requirements for the
Transition Critical Applications identified in Schedule 5.1 in accordance
with (i) the Enterprise Scope Document, (ii) the technology standards set
forth in the Technology Plan, (iii) other technology standards that may be
mutually agreed to between Cambridge Technology and Client from time to
time and (iv) the Development Budget and Development Schedule contained in
Schedule 5.1.
(b) Each Transition Critical Application will be developed in
accordance with the procedures set forth in Schedule 3.1 as further
detailed by individual Task Orders and accompanying "Statements of Work."
Upon Client's authorization of a Task Order under the process set forth in
Section 3.2, Cambridge Technology will begin development of the Transition
Critical Application covered by the Task Order.
(c) Upon completion of the design phase for each Transition Critical
Application, Client and Cambridge Technology may agree to adjust the
Development Budget based on a better understanding of the Requirements.
Unless an adjustment is the result of additional services or new scope or
functionality (as opposed to a refinement of scope or functionality
described in the Enterprise Scope Document) requested by Client and
implemented through the Change Control Process, the "not to exceed" price
for delivery of all Transition Critical Applications will not be affected.
The parties acknowledge that the Transition Critical Applications are
intended to provide basic functionality similar to the functionality of the
RSI applications they are replacing (as of the date of the Enterprise Scope
Document). Should it be discovered that a basic piece of functionality is
missing from the Requirements of a particular Transition Critical
Application, Cambridge Technology and Client will work together to adjust
the Requirements to include the missing functionality in a way such that
the "not to exceed"
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price is not affected (e.g., delete new functionality to offset any price
increase associated with adding the missing functionality).
(d) The end date and price set forth in Schedule 5.1 for each
Transition Critical Application are based on the start date stipulated in
that Schedule. If Cambridge Technology has prepared and presented to
Client a Task Order and Statement of Work at least five business days in
advance of the start date for a particular Application, and Client has not
approved and executed such Task Order authorizing commencement of a
Transition Critical Application by such start date, Cambridge Technology
will initiate the Change Control Process detailing any impact to the
Requirements, Development Budget, Development Schedule or overall "not to
exceed" price for the Transition Critical Applications. In no event,
however, will the length of the Development Schedule be extended for a
period longer than the period of Client's delay in approving the Task
Order.
3.2 Task Order Process. Prior to the start date identified in Schedule 5.1
------------------
for each Transition Critical Application, Cambridge Technology and Client will
review, and revise as necessary, the Requirements, Development Budget and
Development Schedule for each Transition Critical Application. If such items are
satisfactory to Client, the Cambridge Program Manager will prepare a Statement
of Work confirming the identified Requirements and a Task Order confirming the
Development Budget for performance of the Statement of Work, payment schedule,
not to exceed expense amount and any special terms applicable to performance of
the Statement of Work. Work will begin under the Task Order upon execution by
Client, Perot Systems and Cambridge Technology. Once the Development Budget has
been confirmed it will be considered a Fixed Price.
3.3 Acceptance of Applications. Acceptance of deliverables will be
--------------------------
conducted in accordance with the following procedures.
(a) Written Deliverables. Cambridge Technology may submit interim
--------------------
drafts of a written deliverable to Client for review. Client agrees to
review each interim draft within five business days after receiving it from
Cambridge Technology or as soon as reasonably practicable thereafter, but
in no event more than ten business days after receiving such interim draft
from Cambridge Technology. When Cambridge Technology delivers a final
written deliverable to Client, Client will have the opportunity to review
the written deliverable for an acceptance period of five business days but
not more than 10 business days or such other period as is stated in the
Statement of Work or the Task Order (the "Acceptance Period"). Client
agrees to notify the CPA Account Manager (who will in turn notify the
Cambridge Program Manager) in writing by the end of the Acceptance Period
either stating that the written deliverable is accepted in the form
delivered by Cambridge Technology or describing in reasonable detail any
deficiencies that must be corrected prior to acceptance of the written
deliverable. If Client does not send a deficiency notice by the end of the
Acceptance Period, the written deliverable will
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<PAGE>
be deemed to be Accepted by Client. If Client sends a timely notice of
deficiencies, Cambridge Technology will correct the described deficiencies
as promptly as possible; provided, however, if Cambridge Technology, upon
providing the CPA Account Manager a detailed justification of its position,
does not believe that Client has identified a deficiency, the parties will
follow the procedures set forth in Article 14. Upon receipt of a corrected
written deliverable from Cambridge Technology, Client will have a
reasonable additional period of time, not to exceed 15 business days, to
review the corrected written deliverable to confirm that the identified
deficiencies have been corrected.
(b) Software Deliverables. At least 30 days prior to the date on
---------------------
which Cambridge Technology is scheduled to deliver any Software deliverable
to Client for testing (or by such other date as the Statement of Work or
Task Order may specify), Cambridge Technology will deliver for Client's
review proposed testing procedures for the Software deliverable as required
by the Task Order. At least 15 days prior to the date on which Cambridge
Technology is scheduled to deliver the Software deliverable to Client (or
by such other date as the Statement of Work or Task Order may specify), the
parties will agree upon the testing procedures for the Software deliverable
(the "Acceptance Test Plan"). The purpose of the Acceptance Test Plan will
be to determine whether the Software deliverable performs the functions
described in its approved specifications and performs the Requirements
without any Defects. As used in this Agreement, "Defect" means a
reproducible failure of a Software deliverable to conform in all material
respects to its specifications and Requirements. Acceptance of Software
deliverables will be conducted in accordance with the following procedures.
(i) The Acceptance Test Period for each Software deliverable
will be specified in the relevant Statement of Work or Task Order.
(ii) Cambridge Technology and Client (in conjunction with Perot
Systems, as set forth in Section 4.4) will start to perform Acceptance
Testing on each Software deliverable promptly after receiving
Cambridge Technology's notice that the Software deliverable is ready
for acceptance. Acceptance Testing will be performed as set forth in
the Acceptance Test Plan. If either Client or Perot Systems
determines during the Acceptance Period that the Software deliverable
fails to perform the functions described in its Specifications without
Defects, Client or Perot Systems will promptly send to the CPA Account
Manager (who will in turn deliver the notice to Cambridge Technology)
a notice ("Defect Notice") describing the alleged Defect(s) in
sufficient detail to allow Cambridge Technology to recreate it or
them. The parties will use commercially reasonable efforts to
identify all Defects prior to the end of the Acceptance Test Period.
(iii) Cambridge Technology will correct any Defects in a
Software deliverable promptly after receiving a Defect Notice and
provide the corrections
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to Client for re-testing. The parties will promptly re-test any corrected
portions of a Software deliverable after receiving the corrections from
Cambridge Technology.
(iv) If there are any remaining uncorrected Defects in the Software
deliverable at the end of the Acceptance Test Period, Client or Perot
Systems will provide Cambridge Technology (through the CPA Account Manager)
by the end of the Acceptance Test Period with notice of the final list of
outstanding Defects, describing them in sufficient detail to allow
Cambridge Technology to recreate them (the "Punch List"). Cambridge
Technology will correct any Defects identified on the Punch List promptly
after receiving the Punch List. When all Defects on the Punch List have
been corrected, Cambridge Technology will provide the corrections to
Client. The parties will have 15 days after receipt of the corrections,
unless the parties agree to a different period in writing, to re-test the
corrected Software deliverable to confirm the correction of the Defects
identified on the Punch List and to identify any remaining Defects. If
either Client or Perot Systems determines that any Defects identified in
the Punch List have not been corrected, Client or Perot Systems will
provide Cambridge Technology (through the CPA Account Manager) by the end
of the 15 day re-testing period with notice of a revised Punch List (the
"Revised Punch List"), which may include Defects not identified on the
Punch List. Cambridge Technology will promptly correct any Defects
identified in the Revised Punch List and provide the corrections to Client.
The parties will have a further 15 day period after receipt of the
corrections, unless the parties agree to a different period in writing, to
re-test the corrected Software deliverable to confirm the correction of the
Defects. If either Client or Perot Systems determines as a result of the
re-testing that the Software deliverable still contains one or more
Defects, Client or Perot Systems will so notify the CPA Account Manager,
who will promptly cause Cambridge Technology to perform a root cause
analysis of such Defects and refer the matter to the Technology Steering
Committee. If the Technology Steering Committee is unable to resolve the
matter within 15 days after the matter is submitted to it, any party may
submit the matter to the dispute resolution procedures set forth in Article
14.
(v) Cambridge Technology, Perot Systems, and Client each agrees
to work diligently to achieve Acceptance of Software deliverables at the
earliest possible date.
(c) The Development Schedule will be extended on a day-for-day basis for
each delay caused by Client's failure to comply with its obligations identified
in the Task Order and this Section on a timely basis provided that such delay,
in turn, causes a delay in Cambridge Technology's performance of its obligations
under the Task Order.
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ARTICLE 4
PSC SERVICES
4.1 Transition Services. Perot Systems will perform the services
-------------------
(including the management of the Transition Critical Services and the Transition
Critical Applications to be performed by Cambridge Technology) described in the
Transition plan attached as Schedule 4.1 (the "Transition Plan") that are
necessary to transition the performance of the RSI Services and other
information technology services to Perot Systems so that Perot Systems may
perform the Operations Services (the "Transition Services") and setting forth a
timetable during which the Transition Services will be performed.
4.2 Operations Services. Perot Systems will perform the services
-------------------
described below and in Schedule 4.2 (collectively, the "Operations Services")
for Client substantially in accordance with the Operating Procedures Manual.
Perot Systems and Client acknowledge that Schedule 4.2 is intended to describe
the information technology services performed by or on behalf of Client as of
the Effective Date, other than the Excluded Services described in Schedule 4.2,
and agree that if services other than those described in Schedule 4.2 are
identified after the Effective Date, then Schedule 4.2 will be amended as
appropriate in accordance with the Change Control Process.
(i) Management of Equipment and Software. Perot Systems will operate
------------------------------------
the Managed Equipment and Managed Software and will comply in all material
respects with the applicable operating documentation. In addition, Perot
Systems will manage the installation, maintenance and repair of the Managed
Equipment and Managed Software by Third Party Vendors, provided that Perot
Systems will install Managed Software and personal computers and similar
Managed Equipment for which vendor assistance is not routinely required.
(ii) Technology Refreshment and Continuous Improvement. Perot Systems
-------------------------------------------------
will recommend refreshment of inadequate and obsolete Managed Equipment and
Managed Software on an annual or more frequent basis. If Client elects not
to refresh inadequate or obsolete Managed Equipment or Managed Software
that is having a material adverse impact on Perot Systems' ability to meet
the Service Levels, an equitable adjustment will be made to the affected
Service Levels. In addition, Perot Systems will use reasonable commercial
efforts to improve continuously the economic and technical effectiveness of
the Client Systems and will suggest improvements to Client's business
processes that could result in improvements to Client's business
operations. To further such efforts, Perot Systems may, but will not be
required to, assign business process reengineering or similar resources to
Client's account.
(iii) Management of Contracts and Vendors. Perot Systems will manage
-----------------------------------
the Managed Contracts and Third Party Vendors, including (A) the
performance, in all material respects, of Client's non-financial
operational obligations under the Managed
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Contracts (subject to the provisions of Section 6.9 with respect to the
disbursement of amounts payable under the Managed Contracts) from and after
the later of the Effective Date or the date the applicable Required Consent
is granted, and (B) on an annual or more frequent basis, analyzing and
recommending to Client the renegotiation, replacement, or substitution of
Managed Contracts and Third Party Vendors so as to lower Client's costs or
improve the delivery of services to Client under this Agreement.
(iv) Required Consents. Perot Systems will use reasonable commercial
-----------------
efforts on Client's behalf to identify all Required Consents and to obtain
them as soon as practicable after the Effective Date. Client will assist
Perot Systems to obtain such Required Consents upon request by Perot
Systems. If a Required Consent is not obtained, then, unless and until
such Required Consent is obtained, Perot Systems will determine and adopt,
subject to Client's prior approval, such alternative approaches as are
necessary and sufficient to provide the Operations Services without such
Required Consents.
(v) Safeguarding Client Data. Perot Systems will prepare and deliver
------------------------
to Client, for Client's review and approval, the Disaster Recovery and
Security Plan which will be a component to the Operating Procedures Manual
that sets forth the procedures and physical security measures to be
maintained, after Client's approval of such procedures and physical
security measures, by Perot Systems to protect against the unauthorized
alteration, loss, or destruction of Client's data and information in Perot
Systems' possession or under Perot Systems' control.
(vi) Data Archives and Backup. Perot Systems will archive or destroy
------------------------
data and information in accordance with Client's data retention procedure
or, in the absence of such a procedure, Perot Systems' operating procedures
for Client's account as described in the Operating Procedures Manual.
Client may, at its expense, keep backup data and data files in its
possession or under its control; provided that Client provides Perot
Systems with prompt access to such backup data and data files whenever
reasonably required by Perot Systems.
(vii) Procurement Services. Perot Systems will license, purchase or
--------------------
lease voice, data and other telecommunications services, Third Party
Software, Equipment or Third Party Services on behalf of Client and for
Client's account (the "Procurement Services"). Client will pay the price
paid by Perot Systems for such Third Party Software, Equipment or Third
Party Services and the fee for such Procurement Services described in
Schedule 6.1. In performing the Procurement Services, Perot Systems will
act as Client's agent; will use reasonable commercial efforts to obtain and
pass through to Client all available discounts; and will assign to Client
or enforce on Client's behalf, subject to the provisions of Section 4.2,
all of Perot Systems' title and rights of approval and acceptance of the
Third Party Software, Equipment or Third Party Services and, in so doing,
Perot Systems will carry out Client's reasonable requests with respect to
any Third
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Party Software, Equipment or Third Party Services that Client reasonably
judges to be deficient, defective or otherwise unacceptable to Client. So
long as Perot Systems has used commercially reasonable efforts to carry out
Client's reasonable requests with respect to any Third Party Software,
Equipment or Third Party Services that is reasonably judged by Client to be
deficient, defective or otherwise unacceptable, Client will reimburse Perot
Systems unconditionally for Perot Systems' actual cost for such Third Party
Software, Equipment or Third Party Services, including the cost of freight,
insurance, taxes or other similar charges paid by Perot Systems on Client's
behalf.
(viii) Disaster Recovery. Within 60 days after the Effective Date,
-----------------
Perot Systems will develop and submit for Client's approval a Disaster
Recovery and Security Plan for the continued provision of the Operations
Services in the event of a Disaster. Subject to Client's approval of the
disaster recovery plan and all related fees, costs and expenses, such
disaster recovery plan may provide for (i) the provision by a Third Party
Vendor of a "hot site" having equipment and software sufficient to allow
operation during a Disaster of those Applications deemed by Client to be
critical to its operations (the "Critical Applications"), and (ii)
telecommunications network connections reasonably sufficient to support the
operation of Critical Applications and to provide access to Client's wide
area network from the hot site. Perot Systems will, with Client's prior
approval as to scope and schedule, update and test the operability of the
disaster recovery plan annually, and implement the disaster recovery plan
immediately upon the occurrence of a Disaster. All such testing will be
performed in such a manner as to minimize the disruption to Client's
operations.
(ix) Help Desk. Perot Systems will provide the level one, level two
---------
and level three Help Desk Services described in Schedule 4.2.
(x) Procedures. Within 60 days after the Effective Date, Perot
----------
Systems will develop and submit for Client's approval an Operating
Procedures Manual which will include the components described in Attachment
D.
(xi) Telephony Services. Perot Systems will provide the management,
------------------
troubleshooting, design and planning services for Client's voice and data
telecommunications services and equipment described in Schedule 4.2.
(xii) Capacity and Resource Planning. Perot Systems will provide the
------------------------------
information technology network and equipment capacity and resource planning
services described in Schedule 4.2.
4.3 [INTENTIONALLY OMITTED]
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4.4 Acceptance Testing and Application Support.
------------------------------------------
(a) Acceptance Testing. Each of Client and Perot Systems will
------------------
participate in the Acceptance Testing of the Cambridge Applications on
Client's behalf as set forth in this Section 4.4(a).
(i) Perot Systems will assign a number of FTEs to be agreed
between Perot Systems and Cambridge Technology for each Cambridge
Application to assist Cambridge Technology to design and develop the
Acceptance Test Plan for each Cambridge Application, including the
design and development of the User Acceptance Test and the Production
Availability Test
(ii) After Cambridge Technology submits the Acceptance Test Plan
to Client for its approval, Perot Systems will review the Acceptance
Test Plan with Client to ensure that Client's requirements are met. In
addition, Perot Systems will prepare test cases and scenarios for the
User Acceptance Test and, jointly with Client, will conduct the User
Acceptance Test.
(iii) After Client's acceptance of the User Acceptance Test,
Perot Systems will prepare, with Cambridge Technology's assistance,
the hardware and software environment for the Production Availability
Test in accordance with a schedule to be mutually agreed between
Client, Cambridge Technology and Perot Systems. Perot Systems will
perform all tests described in the Acceptance Test Plan for the
Production Availability Test, including but not limited to
unstructured testing for each Cambridge Application. Upon
satisfactory completion of the Production Availability Test and the
delivery of all applicable documentation, Perot Systems will review
with Client the results of the Production Availability Test and of
Perot Systems' review of the documentation delivered by Cambridge
Technology, and if such results and review are in accordance with the
requirements stated in the applicable Task Order and Acceptance Test
Plan, Client will authorize Perot Systems to notify Cambridge
Technology that the applicable Cambridge Application is accepted for
Implementation.
(iv) Upon accepting a Cambridge Application for Implementation,
Perot Systems will become primarily responsible for its installation,
operation and maintenance, provided that Cambridge Technology will
assign a number of FTEs to be agreed between Perot Systems and
Cambridge Technology for each Cambridge Application to assist Perot
Systems with the production installation of the Cambridge Application.
Upon completion of such production installation, the Cambridge
Application will be deemed to be Implemented, and Perot Systems will
be solely responsible for the maintenance and operation of such
Cambridge Application.
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(v) Promptly after the completion of any test identified in an
Acceptance Test Plan, Client or Perot Systems, as the case may be,
will give notice to Cambridge Technology of its belief, if any, that
such test has not been successfully completed, which notice will
specify the reasons for such belief in reasonable detail.
(vi) The PSC Personnel who participate in such Acceptance Testing
will be drawn from the pool of PSC Personnel assigned to perform
Application Support.
(b) Application Support. Perot Systems will provide a pool of PSC
-------------------
Personnel, consisting of the number of FTEs set forth in Section A.5 of
Schedule 6.1, to perform the Application Support Services described in
Schedule 4.4 to support all Applications following their acceptance by
Client by performing Error Corrections and Minor Enhancements. Perot
Systems and Client will review the number of FTEs assigned to support the
Applications on a mutually acceptable periodic basis, but at least
annually. To the extent the PSC Personnel are not fully utilized to
perform Error Corrections and Minor Enhancements, Perot Systems will, at
Client's discretion and election, (i) make such PSC Personnel available to
perform Major Enhancements, provided that Client may not increase the
number of FTEs in the application support pool for the sole purpose of
performing Major Enhancements, or (ii) reduce, following 60 days notice,
the number of PSC Personnel assigned to the pool and correspondingly reduce
the charges to Client.
4.5 Service Levels.
--------------
(a) Perot Systems will meet or exceed the Service Levels set forth in
Schedule 6.4 after the mutually acceptable transition period (which will
not be less than 30 days nor more than 90 days) set forth in such Schedule
to the extent Perot Systems has commenced providing the applicable PSC
Services.
(b) As contemplated by the Change Order Process, (i) any Change Order
implementing service or resource additions or reductions requested by
Client and any other Change Order changing the manner in which the
Operations Services are provided by Perot Systems will include an equitable
adjustment to the applicable Service Levels, and (ii) Perot Systems will
review with Client as part of the Change Order Process the anticipated
effect of such reduction, addition, or change on Perot Systems' ability to
meet the applicable Service Levels.
(c) If Perot Systems fails to meet any Service Level, Perot Systems
will (i) promptly investigate and perform a root-cause analysis to identify
the cause of the failure; (ii) provide to Client a report on the causes of
the problem; (iii) correct the problem, to the extent such problem is
within its control, or take appropriate steps to cause the problem to be
corrected to the extent such problem is not within its control; (iv)
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to the extent within its control, take appropriate preventive measures to
reduce the probability of a recurrence of the problem; (v) take appropriate
actions to mitigate the adverse effects of the problem prior to its
correction; and (vi) periodically advise the Client of the status of
remedial efforts being undertaken with respect to such problems. If Perot
Systems fulfills its obligations under this Section 4.5(c), Perot Systems
will have no liability to Client for its failure to meet such Service
Level, except as provided in Sections 6.4 and 9.5 or in connection with a
breach of warranty.
(d) Beginning nine months after the Effective Date, and annually
thereafter, Client and Perot Systems will review the Service Levels and, if
mutually agreed, will adjust the Service Levels to reflect appropriate
changes in circumstances, such as technological advances, changes in
methods used generally to perform similar services, or service or resource
changes requested or approved by Client.
(e) Perot Systems will implement appropriate monitoring tools (to the
extent such tools are not already used by Perot Systems to monitor networks
that they manage, the tools will be approved by Client and will be acquired
at Client's expense) and related procedures necessary to measure and report
Perot Systems' compliance with the Service Levels. Perot Systems will
provide Client with (i) a monthly report, in a form and with content
mutually agreed by the parties, and (ii) such other documentation and
information as Client reasonably requests, to verify that the Services are
being performed in compliance with the Service Levels. Upon request, Perot
Systems will provide Client and its designees with information and access
to such tools and procedures for purposes of performing an audit of Perot
Systems' compliance with the Service Levels and these reporting
requirements.
4.6 Additional Services.
-------------------
(a) At Client's request in a Task Order, Perot Systems will perform
Additional Services, including application development services (which may
include the development of Major Enhancements).
(b) Additional Services will be performed under individual Task
Orders that are approved and issued in accordance with this Section 4.6(b)
and the Change Control Process. Upon identification of a need for
Additional Services, the CPA Account Manager and the Client Program Manager
will coordinate the preparation of a proposed Task Order which will set
forth in reasonable detail the Additional Services to be performed, the
specific hardware, software and third party services to be delivered to
Client while the Additional Services are being performed, the objective
completion criteria to be applied in connection with the Additional
Services, the price, Reimbursable Expenses and Pass-Through Expenses to be
paid by Client for the Additional Services and any hardware, software or
third party services to be delivered to Client in connection with the
Additional Services, a payment schedule, and any other special terms and
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conditions relating to the Additional Services, including but not limited
to any terms relating to the early termination of the Task Order. The CPA
Account Manager will present the Task Order to Client and the Change
Control Board for their review and approval. Perot Systems will commence
the Additional Services upon execution of the Task Order by Client and
Perot Systems.
(c) If Client terminates the Cambridge Program Services or a
particular Cambridge Task Order, Perot Systems will complete the Cambridge
Services as an Additional Service in accordance with mutually acceptable
terms and conditions, including price, of a Task Order to be negotiated in
good faith after the applicable Termination Notice is delivered to
Cambridge. If Client terminates the Cambridge Program Services or an in-
process Cambridge Task Order pursuant to Section 9.3(c), Cambridge
Technology will reimburse Client for amounts paid to Perot Systems in
completing the Cambridge Service that, when added to the amounts previously
paid to Cambridge Technology, are in excess of the price agreed to by
Cambridge Technology and Client for the Cambridge Service as stipulated in
this Agreement or the applicable Task Order. The amount of such payments
made by Cambridge Technology shall be subject to the limitations contained
in Article 12. Nothing contained in this Section 4.6(c) shall relieve
Client from the obligation to mitigate its damages and to act reasonably in
the case of a breach by Cambridge Technology nor shall anything in this
Section 4.6(c) increase Cambridge Technology's liability to Client under
the contract law of Colorado.
4.7 Access to Services from Perot Systems' Subsidiaries, Affiliates, and
--------------------------------------------------------------------
Joint Ventures. Upon request by Client, Perot Systems will provide Client with
- --------------
preferential access to the services provided by Perot Systems' Subsidiaries,
Affiliates and joint ventures, including but not limited to HCL Perot Systems,
N.V. and The Doblin Group, Inc., and will use reasonable commercial efforts to
provide Client with preferential access to the services provided by Perot
Systems' clients and alliances, in each case subject to mutually satisfactory
terms and conditions to be negotiated in good faith at the time of the request.
4.8 Transfer of Personnel.
---------------------
(a) Perot Systems will offer to employ, subject to Perot Systems'
standard employment practices and policies, each person identified in
Schedule 4.8 that is an employee of Client on the Effective Date. Perot
Systems will offer each such person a salary and benefits package,
including disability, health and life insurance coverage, comparable to
that offered to other Perot Systems' employees having similar skills and
experience. Perot Systems will use reasonable commercial efforts to employ
each Transitioned Employee as soon as practicable after the Effective Date.
(b) Perot Systems will have no liability whatsoever arising out of
the employment of any individual identified on Schedule 4.8, whether or not
such individual
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becomes a Transitioned Employee, with respect to any period prior to the
date on which such person commences employment with Perot Systems. Client
will have no liability whatsoever arising out of the employment of any
Transitioned Employee with respect to any period on or after the date on
which such person commences employment with Perot Systems; provided
however, that Client will retain all responsibility and liability for
compliance with the requirements of Section 4980B of the Internal Revenue
Code of 1986, as amended.
ARTICLE 5
CLIENT OBLIGATIONS
5.1 Service Exclusivity.
-------------------
(a) Client will obtain from Perot Systems all of Client's
requirements for the PSC Program Services, Transition Services, Operations
Services, and Application Support Services. Client hereby appoints Perot
Systems as its agent for all matters pertaining to such Operations Services
and Application Support Services, and will, at Perot Systems' request,
notify appropriate third parties of such appointment. However, nothing in
this Agreement authorizes Perot Systems to, and Perot Systems will not,
enter into, amend, terminate, or extend or renew any Managed Contract or
any other agreement or arrangement with any third party or bind Client to
any such agreement or arrangement without Client's prior consent.
The parties contemplate that Client after the Effective Date (1) may
acquire (by merger, consolidation, acquisition of assets or otherwise) a
business function or unit (whether the acquired business function or unit
after the acquisition is a subsidiary, division or other business unit of
Client) or (2) may be acquired (in a merger, consolidation, acquisition of
assets, or otherwise) by an entity (the "Acquirer") with a business
function or unit, that is different from or in addition to the business
functions and units operated by Client at the Effective Date (each, a "New
Business"). To the extent Client or Acquirer uses Systems managed by Perot
Systems under this Agreement to provide information technology services to
the New Business, Client or Acquirer, as the case may be, will obtain its
requirements for such services (to the extent such services are reasonably
considered to be PSC Program Services, Operations Services and Application
Support Services as described in the applicable Schedules) from Perot
Systems. Nothing in this Agreement, however, will require that Client or
Acquirer (i) use Systems managed by Perot Systems to provide information
technology services to the New Business or to integrate the information
technology systems for any New Business with Systems managed by Perot
Systems if Client or Acquirer, as the case may be, determines in its sole
discretion not to do so, or (ii) cancel, modify or terminate any third
party information technology services agreement in effect at the time of
the acquisition of the New Business. For purposes of this section, Client
and Acquirer will not be deemed
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to be using Systems managed by Perot Systems to provide information
technology services to a New Business if such Systems and the systems in
place at the New Business merely are modified to enable Client or Acquirer,
as the case may be, to pass information between such systems; provided that
Perot Systems is not required to manage the interface between such systems;
and provided further that Perot Systems will have no liability to Client or
Acquirer under this Agreement for any degradation in Service Levels or
other performance of the Systems that is caused by the interface between
such systems.
(b) Client will obtain from Cambridge Technology all of the Cambridge
Program Services and the Application Development Services relating to the
Transition Critical Applications that are described in Schedule 5.1
(collectively, the "Transition Critical Services"); provided that if
Cambridge Technology proposes to perform a Transition Critical Service for
a price greater than the Development Budget for such Transition Critical
Service set forth in Schedule 5.1 (provided that such Development Budget
may be adjusted as part of the Change Control Process to reflect any
changes in the scope requested by Client affecting the cost of performing
such Transition Critical Service), then Client may seek third party bids to
perform such Transition Critical Service and has the right to obtain such
Service from third parties.
(c) Client may seek third party bids and has the right to obtain
services from third parties to perform information technology services
other than the PSC Program Services, Transition Services, Operations
Services, Application Support Services or the Transition Critical Services
described in the Schedules.
(d) If Client obtains information technology services from any third
party, Perot Systems will have the right to approve, which approval will
not be unreasonably withheld, the implementation and installation of any
resulting Third Party Software, Equipment or services that Perot Systems
will be required to manage or operate as part of the Operations Services,
prior to becoming responsible for such Third Party Software, Equipment or
services as part of the Operations Services. In any case where no final
agreement has been reached on implementation or installation of such Third
Party Software, Equipment or services but Client's Account Manager
nonetheless requests Perot Systems to implement, install, or operate it or
them, Perot Systems will use its commercially reasonable efforts to carry
out such request at a price and on such other reasonable terms proposed by
Perot Systems; and in such event, either of Perot Systems or Client may
refer the disputed request to the procedures provided in Article 14.
5.2 Client Facilities. Commencing on the Effective Date,
-----------------
(a) Client will provide to Perot Systems and Cambridge Technology, at
no charge to Perot Systems or Cambridge Technology, the use of reasonable
space at Client's Facilities in connection with the performance of the
Services, together with parking, office furnishings, telephone equipment
and services, janitorial services, utilities
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(including air conditioning), and non-dedicated office-related equipment,
supplies and duplicating services at such Client premises as reasonably
required in connection with the performance of the Services. When a portion
of the Client Facilities provided to Perot Systems or Cambridge Technology
is no longer required to perform the Services, Perot Systems and Cambridge
Technology will release such portion to Client in substantially the same
condition as when Perot Systems and Cambridge Technology began using such
portion.
(b) Client will provide storage space for backup data files
sufficient to comply with Client's data and document retention policies.
(c) Client will provide Perot Systems and Cambridge Technology with
access to all Client Facilities 24 hours a day, seven days a week to the
extent reasonably necessary to provide the Services. Perot Systems and
Cambridge Technology will use, and will cause all PSC Personnel and all
Cambridge Personnel to use, Client Facilities solely to provide the
Services and, to the extent reasonably necessary for PSC Personnel and
Cambridge Personnel who are assigned to Client's account, to perform other
routine business activities. To the extent a portion of the Client
Facilities is dedicated to occupancy by Perot Systems or Cambridge
Technology and is lockable (e.g., an office, as opposed to a cubicle, or a
file cabinet), Client will not enter such portion outside normal business
hours without the CPA Account Manager's prior consent, except to perform
facilities-related activities.
5.3 Transition. As part of the technology review described in Section
----------
1.4(a), Perot Systems has developed, with Client's assistance, a detailed list
(which list is attached as Schedule 5.3) of all:
(a) licenses, maintenance agreements, support agreements and other
agreements that will be (i) transferred from RSI to, and assumed by,
Client, or (ii) obtained from Third Party Vendors prior to the completion
of the Transition by Client (the "Managed Contracts") in order to support
the Operations Services (Part A of Schedule 5.3);
(b) Third Party Software and Equipment that will be transferred from
RSI to, or leased, purchased or licensed by, Client (the "Managed
Equipment" and "Managed Software") in order to support the Operations
Services (Part B of Schedule 5.3); and
(c) information technology services, if any, that will continue to be
performed by RSI after the Effective Date and the dates on which such
services will be transitioned to Perot Systems (Part C of Schedule 5.3).
Client will use its reasonable commercial efforts to cause RSI and its
other Third Party Vendors to cooperate with Perot Systems in the performance of
the Transition Services.
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5.4 Third Party Software, Equipment and Third Party Services.
--------------------------------------------------------
(a) Client will, at Client's expense (including all lease costs,
depreciation, insurance and taxes), purchase, lease or license, and retain
complete financial and legal responsibility for, and provide and make
available to Perot Systems and Cambridge Technology all Third Party
Software, Equipment and Third Party Services that are reasonably necessary
to provide the Services. In addition, Client will, at Client's expense,
provide to Perot Systems and Cambridge Technology, at no charge to Perot
Systems or Cambridge Technology, for use by PSC Personnel or Cambridge
Personnel performing Services at Client's Facilities (or such substitute
facilities selected by Client), personal computers, workstations,
terminals, printers and other equipment reasonably required by PSC
Personnel or Cambridge Personnel in connection with the performance of the
Services.
(b) Except as otherwise agreed by Client and Perot Systems in a Task
Order or Change Order, Client will obtain and retain financial and legal
responsibility for all Managed Contracts.
(c) Client will take no action or fail to take any required action
relating to a Required Consent that could reasonably be expected to impair
Perot Systems' or Cambridge Technology's ability to perform the Services.
In addition, Client will pay or reimburse Perot Systems or Cambridge
Technology, as the case may be (as Pass-Through Expenses) all fees imposed
by Third Party Vendors in connection with granting Required Consents,
including but not limited to transfer, license, and upgrade fees, and to
obtain rights for Perot Systems or Cambridge Technology to use, or to the
extent necessary, to transfer to Perot Systems or Cambridge Technology, all
Third Party Software and Equipment necessary to perform the Services. Perot
Systems will use its reasonable commercial efforts to eliminate or minimize
all such fees.
5.5 Certain Obligations. Client will, at its expense, provide Perot
-------------------
Systems and Cambridge Technology with specific advice and interpretive direction
regarding federal, state and local legal and regulatory issues specific to
Client's business that affect the Services to be provided under this Agreement.
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ARTICLE 6
CHARGES AND PAYMENT
6.1 Charges for PSC Services. Client will pay Perot Systems the amounts
------------------------
set forth in Schedule 6.1 for the PSC Services, at the times and according to
the terms set forth in that Schedule and this Article 6.
6.2 Charges for Cambridge Services. Client will pay Cambridge Technology
-------------------------------
the amounts set forth in Schedule 5.1 for the Cambridge Services, at the times
and according to the terms set forth in that Schedule and this Article 6.
6.3 Charges for Additional Services. Unless otherwise agreed by the
-------------------------------
affected parties, Client will pay Perot Systems or Cambridge Technology, as the
case may be, for Additional Services at such party's then-current commercial
billing rates for services rendered on a time and materials basis less the
discounts set forth in Schedule 6.3.
6.4 Risk/Reward Pricing.
-------------------
(a) Cambridge Technology. Subject to the limitations set forth in
--------------------
Section 6.4(c), Cambridge Technology will issue performance credits to
Client, and Client will pay performance bonuses to Cambridge Technology, in
accordance with, and subject to the limitations set forth in, Part A of
Schedule 6.4.
(b) Perot Systems. Subject to the limitations set forth in Section
-------------
6.4(c), Perot Systems will issue performance credits to Client, and Client
will pay performance bonuses to Perot Systems, in accordance with, and
subject to the limits set forth in, Part B of Schedule 6.4.
(c) Limitation on Credits. Perot Systems will only be obligated to
---------------------
issue credits under Schedule 6.4 and this Section 6.4 to the extent it is
unable to meet the applicable criteria primarily as a result of actions or
failures to act by its Personnel, and not primarily as a result of actions
or failures to act by Client, Cambridge Technology, a third party other
than a subcontractor of Perot Systems, or Force Majeure. Cambridge
Technology will only be obligated to issue credits under Schedule 6.4 and
this Section 6.4 to the extent it is unable to meet the applicable criteria
primarily as a result of actions or failures to act by its Personnel, and
not primarily as a result of actions or failures to act by Client, Perot
Systems, a third party other than a subcontractor of Cambridge Technology,
or Force Majeure.
(d) Credits as Sole Remedy. Except as provided in Sections 9.3(a),
----------------------
9.3(b), and 9.5, any performance credits issued in accordance with the
provisions of Schedule 6.4 by Perot Systems or Cambridge Technology, as the
case may be, in accordance with this
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Section 6.4 will be Client's sole remedy in connection with the Service
Levels, regardless of the form of the claim.
6.5 Reimbursable Expenses. Client will reimburse each of Perot Systems
---------------------
and Cambridge Technology for its respective actual, reasonable out-of-pocket
expenses incurred in connection with their performance of the PSC Services and
the Cambridge Services ("Reimbursable Expenses"), including but not limited to
all reasonable (i) travel and lodging expenses, (ii) telecommunications network
circuit charges, and (iii) reimbursable sales and use taxes. To be reimbursable,
an expense must have been approved (specifically or by category) by Client in
advance and must comply with Client's standard expense reimbursement policy.
Each Change Order and Task Order will set forth an estimate of Reimbursable
Expenses anticipated to be incurred in connection with such Change Order or Task
Order and Client's approval of such Change Order or Task Order will be deemed to
constitute Client's approval to incur Reimbursable Expenses up to the amount set
forth in such Change Order or Task Order. Commencing 90 days after the Effective
Date, Perot Systems will provide Client with a quarterly estimate of
Reimbursable Expenses anticipated to be incurred over the following 90 days.
6.6 Pass-Through Expenses.
---------------------
(a) Client will establish in its or its nominee's name a pass-through
expense account ("Account") with a mutually satisfactory bank for payment
of Pass-Through Expenses (other than fees for the Cambridge Services to be
treated as Pass-Through Expenses) as Client and Perot Systems agree
appropriate.
(b) Perot Systems, as agent for Client, will issue checks from the
Account for Pass-Through Expenses (other than fees for the Cambridge
Services that will be invoiced in accordance with Section 6.9) in the
amount Client approves in accordance with Section 6.6(c). If Perot Systems
pays any person less than the amount to which such person is entitled under
the relevant Managed Contract (unless Client has not approved such amount),
Perot Systems will promptly adjust the underpayment by issuing an
additional check from the Account. If Perot Systems pays any person more
than the amount to which such person is entitled under the relevant Managed
Contract and this Agreement, or pays any person not entitled to receive
payment under this Agreement, Perot Systems will take all reasonable steps
to recover the overpayment except that Perot Systems will not be required
to initiate litigation or arbitration to recover any overpayment. Perot
Systems will promptly notify the Client if it is unsuccessful in recovering
any overpayment.
(c) Perot Systems will review all invoices for Pass-Through Expenses
to determine whether the charges reflected in such invoices comply in all
material respects with the applicable purchase documentation or contract.
After completing its review, Perot Systems will submit such invoices,
together with Perot Systems' recommendation for payment, nonpayment, or
partial payment, to Client on or about the fifth and twentieth
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days of the month for Client's review and approval. Client will promptly
review and approve the invoices submitted to it (or advise the CPA Account
Manager that an invoice is not approved, with an explanation of the reasons
for not approving the invoice). Upon approval of an invoice, Client will
fund the Account in an amount sufficient to pay the invoice, and Perot
Systems will promptly thereafter pay the invoice (other than invoices from
Cambridge Technology, which will be paid as set forth in Section 6.9) from
the Account as provided in this Section 6.6. In making payments from the
Account, Perot Systems will comply with those financial controls and
procedures of which Client gives Perot Systems notice.
(d) Client will reimburse Perot Systems for all late fees and
interest charges that accrue under the applicable purchase documentation or
contract on any invoiced amounts for which funds are not deposited by
Client in the designated Account at least two business days prior to the
invoice due date, provided that Perot Systems is identified as the
purchaser or payment agent in the applicable purchase documentation.
6.7 Taxes and Tax Planning.
----------------------
(a) Responsibility. Except as set forth in this Section, Client will
--------------
pay, or reimburse Perot Systems for, all taxes and duties levied in
connection with the Services or this Agreement.
(i) Each of Perot Systems or Cambridge Technology, as the case
may be, will pay all sales, use, value-added and similar taxes levied
on any goods or services used or consumed by such party in providing
the PSC Services or the Cambridge Services, as the case may be.
(ii) Each of Perot Systems or Cambridge Technology, as the case
may be, will pay all (A) real and personal property, ad valorem and
similar taxes on real, personal and intangible property such party
owns, leases or licenses, (B) franchise and privilege taxes on such
party's business operations, (C) taxes based on such party's net
income or gross receipts, and (D) payroll and similar taxes related to
such party's Personnel.
(b) Cooperation.
-----------
(i) Each party will cooperate with the other parties in all
reasonable respects to determine and minimize applicable tax
liabilities, including working with the other parties to allocate,
where appropriate, payments made under this Agreement among categories
for (i) taxable goods, services and transactions, (ii) non-taxable
goods, services, and transactions, and (iii) transactions in which
Perot Systems acts solely as a payment agent for Client in receiving
goods or services
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(including leasing and licensing arrangements) that otherwise are non-
taxable or have previously been subjected to tax.
(ii) Each party will provide the other parties with resale
certificates, information regarding out-of-state use of materials,
services or sales, or other exemption certificates or information
reasonably requested by any other party.
(iii) Each party will promptly notify the other parties of, and
coordinate with the other parties the response to and settlement of,
any claim for taxes asserted by applicable authorities for which
liability by the other parties is asserted, it being understood that
with respect to any claim arising out of a form or return signed by a
party, such party will have the right to elect to control the response
to and settlement of the claim.
6.8 Pricing Adjustments. If the Price Index at any anniversary of the
-------------------
Effective Date ("Current Index") is higher than the Price Index on the Effective
Date ("Base Index"), then, effective as of such anniversary, all charges
hereunder (other than Pass-Through Expenses, Reimbursable Expenses and charges
under a fixed-price Statement of Work, Task Order, or Change Order) will be
increased by the percentage that the Current Index increased from the Base
Index, except to the extent otherwise agreed by the parties.
6.9 Invoices and Payment.
--------------------
(a) Cambridge Technology will invoice Client, by submitting invoices
to the CPA Account Manager for processing on or about the 20th day of each
calendar month, for (i) the Cambridge Program Services performed during the
previous month (ii) all Reimbursable Expenses incurred during the previous
month and (iii) the payments due in accordance with the payment schedules
contained in each individual Task Order (collectively, the "Cambridge
Charges").
(b) Perot Systems will invoice Client monthly on or about the 20th
day of each calendar month for (i) the PSC Services to be performed during
the following calendar month, including, to the extent applicable, Perot
Systems' good faith estimate of its fees and expenses for any PSC Services
to be provided on a time and materials or similar basis, (ii) the Cambridge
Charges invoiced pursuant to subsection (a) above, (iii) all Reimbursable
Expenses incurred during the previous month, and (iv) an adjustment for any
underpayments or overpayments made in connection with any previous month's
estimated fees or expenses or other applicable correction.
(c) Each party will substantiate its invoices in reasonable detail
(including, on Client's request, copies of any third-party invoices).
Amounts not disputed within 18 months from Client's receipt of an invoice
will be deemed correct.
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(d) Client will pay all undisputed amounts within 10 days after
receiving the applicable invoice by wire transfer to a bank account
specified by Perot Systems, and will promptly pay Perot Systems any
disputed amounts promptly upon the parties' resolution of such dispute.
Within two business days after receiving funds from Client as payment for
any Cambridge Charges, Perot Systems will transfer such funds to Cambridge
Technology.
(i) Within 45 days after receiving the applicable invoice,
Client will give notice to the CPA Account Manager of any variable
amount due under this Agreement that is reasonably disputed in good
faith by Client, which notice will include a reasonably detailed
explanation of the disputed amount and the grounds for the dispute.
Client's failure to pay amounts disputed in accordance with this
Section 6.9 will not (prior to the resolution of the applicable
dispute) be grounds for a claim of breach or suspension of work by
either Perot Systems or Cambridge Technology unless Client fails to
pursue a resolution of such dispute vigorously within 60 days after
the applicable invoice date in good faith.
(ii) In the event that the aggregate disputed amounts for either
of Perot Systems or Cambridge Technology exceed $100,000, but are less
than $300,000, then Client will pay all such disputed amounts for such
party into escrow in a major United States commercial bank with which
neither party has significant dealings, with interest to be allocated
to the party entitled to the principal upon resolution of the dispute.
In the event that the aggregate disputed amounts for either of Perot
Systems or Cambridge Technology exceed $300,000, then Client will pay
all such disputed amounts in excess of $300,000 in accordance with the
terms of this Agreement and will seek reimbursement of such disputed
amounts through good faith negotiation or otherwise in accordance with
Article 14.
(iii) In the event Perot Systems (A) fails to provide the number
of FTEs set forth in the staffing plan for the Application Support
Services (other than for reasons of short-term illness, vacation or
similar routine absences), or (B) fails to perform a portion of the
PSC Program Services or Operations Services, and such failure has an
adverse impact on Client, Perot Systems and Client will negotiate an
equitable reduction to Perot Systems' fees for the unperformed
services.
(e) Late payments will accrue interest at the Designated Interest
Rate from the applicable due date to the date of actual payment by Client.
Overpayments by Client will accrue interest at the Designated Interest Rate
from the date 10 days after a request by Client for reimbursement of or
credit for the overpayment to the date Client is reimbursed or credited the
overpayment.
(f) Perot Systems will offset all credits due to Client under this
Agreement against amounts then owing by Client starting with the oldest
undisputed amounts owed.
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Any credits owed to Client at the termination or expiration of this
Agreement will be paid to Client in cash by the party owing such credits
within 30 days after termination or expiration.
(g) Perot Systems will credit any overpayments made by Client against
the first invoice issued to Client after discovery of the overpayment to
the extent reasonably practicable.
6.10 Audits by Client.
----------------
(a) At Client's request, but not more often than once per year, each
of Perot Systems and Cambridge Technology will allow Client or its
designated representatives to audit such party's accounting books and
records to the extent necessary to verify such party's charges to Client
for the preceding 12-month period. In the case of Statements of Work and
Task Orders performed by a party on a fixed-price basis, however, the audit
will be limited to the party's Pass-Through Expenses and Reimbursable
Expenses. Perot Systems or Cambridge Technology, as the case may be, will
cooperate with, and comply with all reasonable requests from, Client or its
designated representatives in connection with such audit. Prior to
conducting such audit, Client's designated representatives will execute and
deliver to the party to be audited a confidential information agreement
containing terms reasonably acceptable to such party.
(b) Upon completion of any such audit, Client and Perot Systems or
Cambridge Technology, as the case may be, will review the audit report
together and work in good faith to agree upon (i) any adjustment of charges
to Client (including any credit or reimbursement of any overpayment by
Client) and (ii) any appropriate adjustments to such party's billing
practices. If any such audit discloses overpayments that in the aggregate
equal five percent or more of the amounts that were actually due, as shown
by the audit (or, in the case of audits of Pass-Through Expenses and
Reimbursable Expenses in connection with fixed-price Statements of Work or
Task Orders, five percent or more of such expenses that were actually due,
as shown by the audit), then the audited party will reimburse Client for
the costs of the audit.
6.11 Benchmarking.
------------
(a) Perot Systems will perform an annual internal technology review
to assess the Services and the performance of the Systems then being
managed by Perot Systems. Such review will include comparisons with similar
information technology installations to the extent information about
similar information technology installations are reasonably available.
Perot Systems will present the results of such review and any
recommendations for Changes based on such results to the Technology
Steering Committee.
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(b) Client may initiate at its expense a third-party review of the
Services being performed by Perot Systems, provided, however, that there
will be no more than one such review during any 12-month period during the
term of this Agreement. If Client initiates a third party review, Client
will, within five business days after sending notice of such election,
provide Perot Systems with a list of three unbiased third party
benchmarkers acceptable to Client. Perot Systems will select one of such
third party benchmarkers to be engaged by Client. Client and Perot Systems
will negotiate in good faith to determine jointly the information to be
provided to the benchmarker (the "Benchmark Information") and the scope and
cost of the review, and will (1) review the Benchmark Information and (2)
schedule a meeting to address any issues either party may have with the
Benchmark Information. The parties will cooperate in good faith with the
benchmarker selected by the parties. The benchmarker will review the scope
and level of Services then being provided under this Agreement, the total
number of personnel assigned to perform those Services, and the charges for
the Services and compare the scope and level of Services, the total number
of personnel assigned to perform such Services, and the charges for the
Services against similar services that are performed by other full service
systems integration and information technology outsourcing providers who
compete with Perot Systems in similar markets in a similar period. If the
benchmarker reasonably determines that Perot Systems' performance of the
Services, the number of personnel assigned to perform the Services, or the
charges for the Services are substantially above or below competitive
levels and the Executive Steering Committee agrees with such determination,
then the parties will agree in good faith on an equitable adjustment to the
Services, Service Levels, the number of personnel assigned to provide the
Services under this Agreement, or the charges for the Services (with
respect to Services to be provided in the future); provided, however, that
no adjustment will be made if (i) Perot Systems' performance of the
Services is determined to be less than 5% below, or the number of personnel
assigned to perform the Services or the charges for the Services are
determined to be less than 5% above, competitive levels, or (ii) Perot
Systems' performance of the Services is determined to be more than 10%
above, or the number of personnel assigned to perform the Services or the
charges for the Services are determined to be more than 10% below,
competitive levels. If either affected party disputes the auditor's
determination, the parties will resolve the dispute in accordance with
Article 14.
6.12 Client Surveys.
--------------
(a) Baseline Customer Satisfaction Survey. During the 90-day period
-------------------------------------
after the Effective Date, and as part of the Operations Services, Perot
Systems will conduct a survey to measure end-user satisfaction with the
Systems at each Client site. The survey will contain questions to be agreed
upon by Client and Perot Systems within 60 days after the Effective Date.
The survey will be administered according to procedures agreed upon by
Perot Systems and Client within 60 days after the Effective Date. Perot
Systems will promptly share the results of each such survey with Client,
including, without limitation,
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copies of the user questionnaires completed by any Client Personnel. A
sample Client Satisfaction Survey is attached as Attachment F.
(b) Regular Customer Satisfaction Surveys. At least once every six
-------------------------------------
months during the term of this Agreement during a mutually agreed time
period, and as part of the Operations Services, Perot Systems will conduct
a survey to measure end-user satisfaction with the Systems and Perot
Systems' responsiveness to requests for PSC Services at each Client site.
The survey will at a minimum cover at least the following classes of users:
(i) end users of the PSC Services, (ii) senior management of end users, and
(iii) senior managers of Client's information management function. The
survey will contain questions to be agreed upon by Client and Perot Systems
no later than 30 days before the date on which the survey is scheduled to
begin. Perot Systems will promptly share the results of each such survey
with Client, including, without limitation, copies of the user
questionnaires completed by any Client Personnel. The content, scope, and
method of each such survey will be consistent with the baseline customer
survey conducted under Section 6.12(a), and the timing of the surveys will
be subject to mutual agreement. Perot Systems agrees that increasing
customer satisfaction, as measured by such surveys, may be a factor in
determining performance credits under Section 6.4.
6.13 Extraordinary Events. If an Extraordinary Event occurs or is
--------------------
reasonably expected to occur, Client and Perot Systems or Client and Cambridge
Technology, as the case may be, will negotiate in good faith appropriate changes
to the charges assessed or the scope, nature or volume of Services provided
under this Agreement. For purposes of this Agreement, "Extraordinary Event"
means an event or transaction or series of events or transactions relating to
Client's business that results or is reasonably expected to result in a material
increase or decrease of Perot Systems' or Cambridge Technology's cost of
providing the Services or in the resources required to provide the Services. The
term "Extraordinary Events" includes (i) changes to the principal locations
where Client operates; (ii) material changes in products or services of, or in
the users served by, Client; (iii) mergers, annexations, or divestitures of a
material nature involving Client; (iv) changes in the method of service delivery
by Client not contemplated by this Agreement; (v) changes in service priorities;
and (vi) increases or decreases of greater than ten percent in the baseline
volumes set forth in Schedule 6.1 (except to the extent Schedule 5.1 or Part B
of Schedule 6.1 provides for incremental charges in connection with such volume
changes).
ARTICLE 7
PROPRIETARY RIGHTS
7.1 PSC Work Product.
----------------
(a) Subject to Client's payment for the related PSC Services and the
provisions of Section 7.1(b), Perot Systems hereby assigns to Client, to
the maximum
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extent permitted by applicable law, all right, title and interest in and to
all PSC Work Product, including but not limited to all trade secret,
copyright, patent and other intellectual property rights in and to such PSC
Work Product. Perot Systems will cooperate reasonably with Client in
connection with such assignment, including the execution of documents and
the taking of such further action as may be reasonably requested by Client.
(b) Except as otherwise provided in this Agreement (including Perot
Systems' confidentiality obligations under Article 8), Perot Systems may
(1) develop or distribute products or perform services similar to the PSC
Work Product or the PSC Services, or (2) use any concepts, know-how or
techniques developed by Perot Systems as a direct result of developing the
PSC Work Product or performing the PSC Services to develop or distribute
products or to perform services for any other person (provided that Perot
Systems may not use any such concepts, know-how or techniques to develop
similar products for the Key Competitors unless such concepts, know-how or
techniques are publicly available without a breach of this Agreement or
generally known in the industry).
7.2 Cambridge Work Product.
----------------------
(a) Subject to Client's payment for the related Cambridge Services
and the provisions of Section 7.2(b), Cambridge Technology hereby assigns
to Client, to the maximum extent permitted by applicable law, all right,
title and interest in and to all Cambridge Work Product, including but not
limited to all trade secret, copyright, patent and other intellectual
property rights in and to such Cambridge Work Product. Cambridge Technology
will cooperate reasonably with Client in connection with such assignment,
including the execution of documents and the taking of such further action
as may be reasonably requested by Client.
(b) Except as otherwise provided in this Agreement (including
Cambridge Technology's confidentiality obligations under Article 8),
Cambridge Technology may (1) develop or distribute products or perform
services similar to the Cambridge Work Product or the Cambridge Services,
or (2) use any concepts, know-how or techniques developed by Cambridge
Technology as a direct result of developing the Cambridge Work Product or
performing the Cambridge Services to develop or distribute products or to
perform services for any other person (provided that Cambridge Technology
may not use any such concepts, know-how or techniques to develop similar
products for the Key Competitors unless such concepts, know-how or
techniques are publicly available without a breach of this Agreement or
generally known in the industry).
7.3 Third-Party Intellectual Property.
---------------------------------
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(a) Unless authorized to do so by Client or the authorized licensor
of any applicable Third-Party Intellectual Property, neither Perot Systems
nor Cambridge Technology will incorporate into any PSC Work Product or
Cambridge Work Product, as the case may be, or use for the benefit of
Client in connection with the PSC Services or Cambridge Services, as the
case may be, any Third-Party Intellectual Property.
(b) To the extent that Perot Systems or Cambridge Technology is
reasonably expected to use, reproduce or create derivative works of Third-
Party Intellectual Property owned by or licensed to Client to fulfill its
obligations under this Agreement, Client hereby authorizes Perot Systems or
Cambridge Technology, as the case may be, as an independent contractor of
Client, and grants to Perot Systems or Cambridge Technology, as the case
may be, to the extent permitted by any applicable agreement to which Client
is a party, a non-exclusive, non-transferable, royalty-free license, to
use, reproduce and create derivative works of such Third-Party Intellectual
Property to the extent necessary to, and for the sole purpose of,
fulfilling such party's obligations under this Agreement. Client, at no
charge to Perot Systems or Cambridge Technology, as the case may be, and
with Perot Systems' or Cambridge Technology's, as the case may be,
cooperation and assistance, will use commercially reasonable efforts to
obtain any consents from third parties necessary to grant Perot Systems or
Cambridge Technology these rights.
(c) If (1) Perot Systems or Cambridge Technology, as the case may be,
acquires the right to use, reproduce or create derivative works of any
Third-Party Intellectual Property and (2) the PSC Work Product or Cambridge
Work Product, as the case may be, contemplated by this Agreement to be
developed by such party cannot reasonably be used as contemplated by this
Agreement unless such party can transfer such rights to Client in
accordance with the terms of this Agreement, then such party will obtain
the right to transfer such rights to Client. Subject to the license or
other restrictions imposed by the owner or licensor of that Third-Party
Intellectual Property, none of which will impair Client's use of such PSC
Work Product or Cambridge Work Product, as the case may be, as contemplated
by this Agreement, Perot Systems or Cambridge Technology, as the case may
be, assigns or sublicenses, as the case may be, to Client all rights in and
to all Third-Party Intellectual Property that forms part of a PSC Work
Product or Cambridge Work Product, as the case may be, that are necessary
to allow Client to use that PSC Work Product or Cambridge Work Product as
contemplated by this Agreement upon acceptance of, and payment for, that
PSC Work Product or Cambridge Work Product, as the case may be.
7.4 Pre-Existing Intellectual Property. Unless otherwise agreed in a
----------------------------------
Task Order or an amendment to this Agreement, if Perot Systems or Cambridge
Technology delivers to Client any Pre-Existing Intellectual Property as part of
an Application or System, such party will, and hereby does, grant to Client a
non-exclusive, royalty-free, world-wide, perpetual license to make, have made,
use, reproduce, modify, adapt, such Pre-Existing Intellectual Property provided
that Client will not use such Pre-Existing Intellectual
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Property to sell service bureau services to third parties who are not
Subsidiaries, Affiliates, or retail dealer or franchisees of Client, or
sublicense any third party to make, have made, use, reproduce, modify, or adapt
such Pre-Existing Intellectual Property (provided that Client may sublicense to
a Subsidiary (for so long as such entity remains a Subsidiary) any of the rights
that Client is permitted to exercise with respect to Pre-Existing Intellectual
Property). Perot Systems or Cambridge Technology, as the case may be, will
advise Client in the relevant Work Order of all Pre-Existing Intellectual
Property to be delivered to Client under the Work Order. Perot Systems and
Cambridge Technology each agree not to license to any Named Competitor any
combination of Pre-Existing Intellectual Property and PSC Work Product or
Cambridge Work Product that performs a substantial portion of any Application
delivered to Client under this Agreement, except to the extent the functionality
embodied in such Pre-Existing Intellectual Property performs functions that are
commonly available in the market.
ARTICLE 8
CONFIDENTIALITY
8.1 Ownership of Client Data. All data and information relating to
------------------------
Client's business operations that is provided by or on behalf of Client to Perot
Systems or Cambridge Technology in connection with the Services will remain the
property of Client. Each of Perot Systems and Cambridge Technology will use such
data or information solely in connection with performing the Services.
8.2 Confidential Information.
------------------------
(a) Each party (a "receiving party") agrees that all information
regarding each other party's (a "disclosing party") methodologies,
financial affairs, business activities and plans communicated to the
receiving party will be treated as confidential information ("Confidential
Information"). For purposes of the foregoing, Confidential Information
will not include information that (1) was known by the receiving party
without an obligation of confidentiality prior to its receipt from the
disclosing party, (2) is independently developed by the receiving party
without reliance on Confidential Information, (3) is or becomes publicly
available without a breach of this Agreement by the receiving party, (4) is
disclosed to the receiving party by a third person who is not required to
maintain its confidentiality, or (5) is required to be disclosed by reason
of legal, accounting or regulatory requirements beyond the reasonable
control of the receiving party. The receiving party has the burden of
proving the applicability of the foregoing exceptions.
(b) Each receiving party will use at least the same degree of care,
but no less than a reasonable degree of care, to avoid unauthorized
disclosure or use of each disclosing party's Confidential Information as it
employs with respect to its own Confidential Information of similar
importance.
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(c) Each receiving party may disclose Confidential Information only
to the other parties to this Agreement and its own officers, directors, and
employees and to its consultants, subcontractors and advisors who
reasonably need to know it. Each receiving party will be responsible to the
disclosing party for any violation of this Agreement by its officers,
directors, employees, consultants, subcontractors or advisors.
(d) No receiving party may print or copy, in whole or in part, any
documents or other media containing a disclosing party's Confidential
Information, other than copies for its officers, directors, employees,
consultants or advisors who are working on the matter, without the prior
consent of the disclosing party.
(e) No receiving party may use a disclosing party's Confidential
Information for competing with the disclosing party or for any purpose not
in furtherance of this Agreement.
(f) Promptly after the earlier of the completion of a receiving
party's obligations under, or the termination of, this Agreement, such
receiving party will return or, with the consent of each disclosing party,
destroy all of that disclosing party's Confidential Information, except for
(i) archive and backup copies that are not readily accessible for use, (ii)
business records required by law to be retained by the receiving party and
(iii) information assigned or licensed to Client under Article 7.
(g) If a receiving party is requested, as part of an administrative
or judicial proceeding, to disclose any of a disclosing party's
Confidential Information, the receiving party will, to the extent permitted
by applicable law, promptly notify the disclosing party of such request and
cooperate with the disclosing party, at the disclosing party's expense, in
seeking a protective order or similar confidential treatment for such
Confidential Information.
(h) Each receiving party agrees that in the event of a breach or
threatened breach by a disclosing party, or any officer, director,
consultant, subcontractor, advisor or employee of such disclosing party, of
the provisions of this Article, the disclosing party will have no adequate
remedy in money damages and, accordingly, will be entitled to seek an
injunction against such breach, in addition to any other legal or equitable
remedies available to the disclosing party.
8.3 Attorney-Client Privilege.
-------------------------
(a) Perot Systems acknowledges that Client may assert that certain
documents, data and databases created by Perot Systems as part of the
Operations Services provided under this Agreement and all communications
related thereto (collectively, "Privileged Work Product") are subject to
certain privileges under
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applicable law, including the attorney-client privilege, and may seek to
protect such Privileged Work Product from disclosure by Rule 26 of the
Federal Rules of Civil Procedure or other applicable rules or laws.
(b) Client will notify Perot Systems of any Privileged Work Product
to which Perot Systems has or may have access. After Perot Systems receives
such notice, Perot Systems will use reasonable commercial efforts to limit
access to such Privileged Work Product solely to those PSC Personnel for
whom such access is required to fulfill Perot Systems' obligations under
this Agreement.
(c) If Perot Systems is requested to provide any third party with
access to Privileged Work Product, Perot Systems will, to the extent
permitted by applicable law, promptly notify Client and take, at Client's
expense, such reasonable actions as may be requested by Client to resist
providing such access. Perot Systems will have the right, at Client's
expense, to retain independent legal counsel in connection with any such
request. If Perot Systems is ultimately required, pursuant to an order of a
court or other authority reasonably believed by Perot Systems to be of
competent jurisdiction, to disclose Privileged Work Product, Perot Systems
will have no liability under this Agreement in connection with such
disclosure.
8.4 Internal Audits. Each of Perot Systems and Cambridge Technology may
---------------
periodically perform, or cause to be performed, internal compliance reviews of
its activities under this Agreement. The specific findings of these reviews,
whether performed by Perot Systems, Cambridge Technology, or a third person,
will be deemed Privileged Work Product and neither Perot Systems nor Cambridge
Technology will be required to disclose such findings to Client under any
circumstances.
ARTICLE 9
TERM AND TERMINATION
9.1 Initial Term. The term of this Agreement (the "Initial Term") will
------------
begin at 8:00 a.m. Denver, Colorado time on the Effective Date and end at 7:59
a.m. Denver, Colorado time on the fifth anniversary of the Effective Date,
unless extended or earlier terminated in accordance with this Article 9.
9.2 Renewal Terms. The term of this Agreement will be automatically
-------------
extended for additional periods (each, a "Renewal Term") of one year unless
Client or Perot Systems gives notice to the other at least six months prior to
the then-current Termination Date of its intention to allow this Agreement to
expire at the end of the Initial Term or then-current Renewal Term. Fees payable
by Client in connection with the PSC Services and the Cambridge Program Services
will be adjusted during each Renewal Term in accordance with Section 6.8.
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9.3 Termination for Cause.
---------------------
(a) Client may terminate this Agreement with respect to any one or
more of the major categories of PSC Services (i.e., the Transition
Services, PSC Program Services, Operations Services, or Application Support
Services) or one or more individual Task Orders being performed by Perot
Systems if Perot Systems (i) breaches any of its material duties or
material obligations to Client under this Agreement or the applicable Task
Order with respect to such major category of PSC Services, (ii) repeatedly
breaches a particular duty or obligation to Client under this Agreement or
the applicable Task Order with respect to such major category of PSC
Services or Task Order within the immediately preceding 12-month period
which repeated breaches collectively constitute a material breach of this
Agreement, or (iii) contemporaneously breaches a number of its duties or
obligations to Client under this Agreement or the applicable Task Order
with respect to such major category of PSC Services or Task Order which
collectively, based on the number, nature and relationship of such breaches
constitute a material breach of this Agreement, by delivering to Perot
Systems a notice of termination for cause (a "Termination Notice") setting
forth the date of termination, which date will not be more than six months
after the date of the Termination Notice, and a description in reasonable
detail of the breach for which Client is terminating this Agreement. Client
will be deemed to terminate this Agreement with respect to the PSC Program
Services upon termination of the last of all other major categories of PSC
Services to be terminated under this Agreement.
(b) If there occurs a Critical Service Level Failure, as that term is
defined in Schedule 6.4, primarily as a result of actions or failures to
act by Perot Systems or PSC Personnel, and not primarily as a result of
actions or failures to act by Client or a third party other than Perot
Systems or PSC Personnel, or Force Majeure, Client may give Perot Systems
at least 30 days' prior notice of its intention to terminate this Agreement
with respect to the PSC Services ("Notice Period"). During such Notice
Period, Perot Systems may seek to cure the problems that are causing the
Critical Service Level Failure. If Client is reasonably satisfied that the
problems have been cured within the Notice Period, upon expiration of such
period, Client will rescind its notice. If Client is not reasonably
satisfied that the problems have been cured within the Notice Period, upon
expiration of such period, Client may exercise its right of termination
granted in this paragraph upon notice thereof to Perot Systems during the
90 day period after the Notice Period; provided that the cure period
provided by 9.3(f) will not apply in the event Client exercises such right
of termination.
(c) Client may terminate this Agreement or one or more individual Task
Orders with respect to the Cambridge Services if Cambridge Technology (i)
breaches any of its material duties or material obligations to Client under
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this Agreement with respect to such Task Order, (ii) repeatedly breaches a
particular duty or obligation to Client under this Agreement with respect
to such Task Order within the immediately preceding 12-month period which
repeated breaches collectively constitute a material breach of this
Agreement, or (iii) contemporaneously breaches a number of its duties or
obligations to Client under this Agreement which collectively, based on the
number, nature and relationship of such breaches constitute a material
breach of this Agreement, by delivering to the CPA Account Manager a notice
of termination for cause (a "Termination Notice") setting forth the date of
termination, which date will not be more than six months after the date of
the Termination Notice, and a description in reasonable detail of the
breach for which Client is terminating this Agreement. The CPA Account
Manager will deliver such Termination Notice to Cambridge Technology within
two business days after receiving it from Client.
(d) Perot Systems may terminate this Agreement with respect to the PSC
Services if Client (i) breaches any of its material duties or material
obligations to Perot Systems under this Agreement, (ii) repeatedly breaches
a particular duty or obligation to Perot Systems within the immediately
preceding 12-month period which breaches collectively constitute a material
breach of this Agreement, or (iii) contemporaneously breaches a number of
its duties or obligations to Perot Systems under this Agreement which
collectively, based on the number, nature and relationship of such breaches
constitute a material breach of this Agreement, by delivering to Client a
notice of termination for cause (a "Termination Notice") setting forth the
date of termination, which date will not be less than 30 days after the
date of the Termination Notice, and a description in reasonable detail of
the breach for which Perot Systems is terminating this Agreement.
(e) Cambridge Technology may terminate this Agreement with respect to
the Cambridge Services if Client (i) breaches any of its material duties or
material obligations to Cambridge Technology under this Agreement, (ii)
repeatedly breaches a particular duty or obligation to Cambridge Technology
within the immediately preceding 12-month period which breaches
collectively constitute a material breach of this Agreement, or (iii)
contemporaneously breaches a number of its duties or obligations to
Cambridge Technology under this Agreement which collectively, based on the
number, nature and relationship of such breaches constitute a material
breach of this Agreement, by delivering to Perot Systems a notice of
termination for cause (a "Termination Notice") setting forth the date of
termination, which date will not be less than 30 days after the date of the
Termination Notice, and a description in reasonable detail of the breach
for which Cambridge Technology is terminating this Agreement. Perot Systems
will deliver such Termination Notice to Client within two business days
after receiving it from Cambridge Technology.
(f) This Agreement will terminate (solely with respect to the
applicable major category of PSC Services or the applicable Perot Systems
Task Order in the case of a termination pursuant to Section 9.3(a) or (b),
or the applicable Cambridge Technology
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Task Order in the case of a termination pursuant to Section 9.3(c), the PSC
Services in the case of a termination pursuant to Section 9.3(d) or the
Cambridge Services in the case of a termination pursuant to Section 9.3
(e)) on the date (the "Termination Date") set forth in the Termination
Notice unless, the breaching party substantially cures its breach within
(i) 10 days from the date of the Termination Notice in the case of a
party's failure to pay any amount due hereunder, or (ii) the greater of (A)
30 days from the date of the Termination Notice (or such later date set
forth in the Termination Notice) in the case of any other breach that can
reasonably be cured within 30 days, or (B) a reasonable period (but not to
exceed 90 days in any event) in the case of any other breach that the
breaching party demonstrates, to the reasonable satisfaction of the
terminating party, cannot reasonably be cured within 30 days. Upon
receiving the Termination Notice, the breaching party will diligently
proceed to cure the breach specified in the Termination Notice.
9.4 Termination for Convenience.
---------------------------
(a) Termination of the PSC Services or Cambridge Program Services.
-------------------------------------------------------------
(i) On or after the second anniversary of the Effective Date,
Client may terminate this Agreement with respect to either the PSC
Services, the Cambridge Program Services or both for convenience by
delivering to Perot Systems during the 30 day period ending on January
31 or July 31 (A) a notice of termination for convenience (a
"Termination Notice") setting forth the date of termination (the
"Termination Date"), which date will be at least 90 days after the
applicable anniversary and (B) a certified check payable to Perot
Systems for the Early Termination Fee which will be computed as set
forth in Schedule 9.4.
(ii) If the Termination Notice and Early Termination Fee are
properly delivered, this Agreement will terminate on the Termination
Date, unless the Termination Notice is revoked not more than 45 days
prior to such date. If Client revokes the Termination Notice, Perot
Systems will, within 10 business days, refund the Early Termination
Fee paid by Client to Perot Systems, less any Make-Whole Costs
incurred between the date the Termination Notice was received and the
date the Termination Notice was revoked.
(iii) At least 30 days prior to the Termination Date, Perot
Systems will provide to Client an invoice for the estimated Make-Whole
Costs (including any Cambridge Technology estimated Make-Whole Costs).
On the Termination Date, Client will pay Perot Systems the estimated
Make-Whole Costs and all other outstanding amounts payable to Perot
Systems under this Agreement. Within 60 days after the Termination
Date, Perot Systems will provide to Client a final invoice for the
Make-Whole Costs (including any Cambridge Technology Make-Whole
Costs), which invoice will reflect any corrections to the estimated
Make-
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Whole Costs. Within 30 days after such invoice is provided to Client,
Client will pay Perot Systems any additional amount due or Perot
Systems or Cambridge Technology, as the case may be, will refund to
Client any amount overpaid by Client. Such payments will not relieve
Client of its obligation to pay any other amounts payable to Perot
Systems under this Agreement.
(iv) If an arbitration panel or court of competent authority
determines that a purported termination for cause by Client under
Section 9.3 was not properly a termination for cause, then such
termination will be deemed to be a termination for convenience under
this Section 9.4 and Client will pay to Perot Systems the Early
Termination Fee, Make-Whole Costs (including any Cambridge Technology
Make-Whole Costs) and all other amounts payable to Perot Systems under
this Agreement within 30 days after receiving an invoice therefor. If
such termination occurs prior to two years after the Effective Date,
Client will pay all Make-Whole Costs (including any Cambridge
Technology Make-Whole Costs) determined in accordance with this
Section 9.4 as though the termination occurred two or more years after
the Effective Date under this Section and an Early Termination Fee in
an amount determined as though the termination had occurred under
Section 9.10. Such payment will be Client's sole liability and Perot
Systems' and Cambridge Technology's sole recovery with respect to the
termination.
(b) Termination of a Task Order. Client may terminate an individual
---------------------------
Task Order for convenience by providing a 30 day written termination notice
to the CPA Account Manager. Upon receipt of such notice, Perot Systems or
Cambridge Technology, as the case may be, will cease work in an orderly
fashion with respect to such Task Order and turn over all work in process.
Client will be responsible for payment of any amounts described in Schedule
9.4, any amounts described in the applicable Task Order, and all authorized
travel and living expenses incurred..
9.5 Termination in Connection with a Critical Failure. Notwithstanding
-------------------------------------------------
anything in this Agreement to the contrary, if either or both of Perot Systems
or Cambridge Technology fails to perform its respective obligations under this
Agreement (other than primarily as a result of actions or failures to act by
Client) and, as a result, Client is unable to perform the business functions
that are reasonably necessary to rent vehicles to the public ("Critical Business
Functions") at its rental locations that regularly represent more than 50% of
its rental revenue as a result of the unavailability of the Services then being
performed by such parties (excluding any portion of such Services that are being
performed by RSI) for more than 60 consecutive hours, then Client may terminate
this Agreement with respect to either or both the PSC Services or the Cambridge
Services, as the case may be (provided that in no event will the PSC Services be
terminated solely in connection with a failure to perform by Cambridge
Technology and in no event will the Cambridge Services be terminated solely in
connection with a failure to perform by Perot Systems), by providing notice
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to the CPA Account Manager, Perot Systems and Cambridge Technology. If Perot
Systems or Cambridge Technology, as the case may be, does not cure the failure
within two business days following its receipt of the notice (or, if the failure
cannot be cured within such two business day period, provide Client with a work-
around or other solution that permits Client to perform its Critical Business
Functions), then this Agreement will terminate with respect to either the PSC
Services or the Cambridge Services, as the case may be, as of the date specified
in the notice. If Client terminates this Agreement pursuant to this Section 9.5,
such termination will be Client's sole remedy, and neither Perot Systems nor
Cambridge Technology will have any liability for damages or otherwise to Client,
in connection with the unavailability of such Services by Perot Systems or
Cambridge Technology, as the case may be, unless the unavailability of such
Services is primarily the result of Perot Systems' or Cambridge Technology's, as
the case may be, acts or failures to act, in which case this limitation of
liability will not apply to the party at fault.
9.6 Termination for Insolvency.
--------------------------
(a) Either Perot Systems or Cambridge Technology may terminate this
Agreement if Client (i) files for bankruptcy; (ii) becomes or is declared
insolvent or is the subject of any proceedings related to its liquidation,
insolvency or the appointment of a receiver or similar officer for it;
(iii) makes an assignment for the benefit of all or substantially all of
its creditors; (iv) is unable to pay its debts generally as they come due;
or (v) enters into an agreement for the composition, extension, or
readjustment of substantially all of its obligations, by giving notice to
Client of its intention to terminate this Agreement as of a date specified
in the notice which date will not be less than 90 days after the date of
the notice. This Agreement will terminate on the date set forth in the
notice unless (i) the termination event specified in the notice is cured
within such 90 day period, or (ii) Client is not past due with respect to
any amount properly due under this Agreement to either Perot Systems or
Cambridge Technology and otherwise continued to perform its obligations
under this Agreement, including its obligations to make payments under
Article 6.
(b) Client may terminate this Agreement with respect to the Services
to be provided by Perot Systems or Cambridge Technology, as the case may
be, if such party (i) files for bankruptcy; (ii) becomes or is declared
insolvent or is the subject of any proceedings related to its liquidation,
insolvency or the appointment of a receiver or similar officer for it;
(iii) makes an assignment for the benefit of all or substantially all of
its creditors; (iv) is unable to pay its debts generally as they come due;
or (v) enters into an agreement for the composition, extension, or
readjustment of substantially all of its obligations, by giving notice to
Perot Systems and Cambridge Technology of its intention to terminate this
Agreement as of a date specified in the notice which date will not be less
than 90 days after the date of the notice. This Agreement will terminate
with respect to the Services to be provided by the applicable party on the
date set forth in the notice.
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9.7 Termination Assistance.
----------------------
(a) Upon expiration or termination of this Agreement for any reason,
other than termination of this Agreement under Sections 9.6(a) or 9.9,
Perot Systems will, at Client's request and subject to the provisions of
this Section 9.7, provide Termination Assistance Services under this
Agreement (the "Termination Assistance Period") for a period of up to six
months.
(b) Client will pay Perot Systems in advance for the services
described in Section 9.7(c) on a time and materials basis at Perot Systems'
then current commercial rates, discounted as set forth in Schedule 6.3, or
another mutually acceptable basis. Client will pay Perot Systems, on the
first day of each month and as a condition to its obligation to provide
such assistance, an amount equal to Perot Systems' reasonable estimate of
the total amount payable to Perot Systems for such assistance for that
month. Perot Systems will invoice Client on or about the fifth day of the
following month for the actual costs incurred by Perot Systems in providing
such assistance. Such invoice will reflect any adjustments necessary
(including a credit or refund of any overpayment by Client) to reconcile
the amounts paid by Client (as estimated by Perot Systems) and the charges
actually incurred.
(c) During the Termination Assistance Period, Perot Systems and
Cambridge Technology will cooperate with Client and its designees and
provide the assistance reasonably requested by Client or its designee to
allow Client's business operations to continue without material
interruption or adverse effect and to facilitate the orderly transfer of
responsibility for the Services then being provided by Perot Systems and
Cambridge Technology to Client or its designees, including the following:
(i) Continuing to perform any or all of the Services then being
performed by Perot Systems and Cambridge Technology.
(ii) Developing, with the assistance of Client or its designees,
a plan for the transition of the Services then being performed by
Perot Systems and Cambridge Technology to Client or its designees.
(iii) Providing training for personnel of Client or its
designees in the performance of PSC Services and Cambridge Program
Services then being performed.
(iv) Using reasonable commercial efforts to grant, subject to
reasonable terms and conditions, or to assist Client or its designees
to obtain, a sublicense or other right for Client or its designees to
use any Software owned by or licensed to Perot Systems or Cambridge
Technology that is (A) substantially dedicated to the performance of
the PSC Services or Cambridge Program Services, or (B)
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reasonably necessary to the performance of the PSC Services or
Cambridge Program Services. In addition, Perot Systems and Cambridge
Technology will use reasonable commercial efforts to provide Client or
its designees with appropriate interface information for Software that
is not commercially available.
(v) Making available to Client or its designees, pursuant to
reasonable terms and conditions, any Equipment owned or leased by
Perot Systems that is substantially dedicated to the performance of
the PSC Services. Client may in its discretion purchase any such
equipment owned by Perot Systems at Perot Systems' then-current book
value and, subject to the terms of the applicable lease, may assume
Perot Systems' rights and obligations with respect to any such
equipment leased by Perot Systems.
(vi) Perot Systems and Cambridge Technology will use reasonable
commercial efforts to assist Client or its designees to obtain (on a
non-exclusive basis) any third party services then being utilized by
Perot Systems and Cambridge Technology in the performance of the PSC
Services and Cambridge Program Services.
(vii) To the extent any part of Client's data or communications
network services are being provided on the Termination Date by Perot
Systems using a proprietary network furnished by Perot Systems, Perot
Systems will, at Client's request, continue to provide such network
services to Client or its designees, subject to reasonable terms and
conditions, for a period not to exceed 12 months after the Termination
Date.
(d) Upon request by Client, Perot Systems and Cambridge Technology
will provide Client a non-binding estimate of such party's Make-Whole Costs
that would be payable under this Agreement if Client were to terminate this
Agreement within a reasonable period after the date of Client's request.
9.8 Survival of Certain Provisions. The provisions of this Agreement
------------------------------
which by their nature should survive any termination of this Agreement,
including but not limited to Sections 16.1, 16.2, 16.4 and 16.10 and Articles 6,
7, 8, 9, 11, 12 and 14 will survive any expiration or other termination of this
Agreement.
9.9 Termination Within 60 Days.
--------------------------
(a) Client may terminate this Agreement with respect to the PSC
Services and the Cambridge Program Services for its convenience by
delivering to Perot Systems, on any date during the period ending 60 days
after the Effective Date, a notice of termination for convenience (a
"Termination Notice") setting forth the date of termination (the
"Termination Date"), which date, unless otherwise agreed by Client and
Perot Systems,
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will be at least 60 days after the date the Termination Notice is delivered
to Perot Systems.
(b) If Client properly delivers a Termination Notice to Perot Systems
within the 60-day period after the Effective Date, (i) Perot Systems,
Cambridge Technology and Client will develop a reasonable schedule for
reducing the number of PSC and Cambridge Technology Personnel assigned to
Client's account during the period from the date of the Termination Notice
to the Termination Date, and (ii) this Agreement will terminate on the
Termination Date.
(c) At least 30 days prior to the Termination Date, Perot Systems will
provide to Client an invoice for the estimated Make-Whole Costs (which
shall include any Cambridge Make-Whole Costs). On the Termination Date,
Client will pay Perot Systems the estimated Make-Whole Costs and all other
outstanding amounts payable to Perot Systems under this Agreement. Within
60 days after the Termination Date, Perot Systems will provide to Client a
final invoice for the Make-Whole Costs, which invoice will reflect any
corrections to the estimated Make-Whole Costs. Within 30 days after such
invoice is provided to Client, Client will pay Perot Systems any additional
amount due or Perot Systems will refund to Client any amount overpaid by
Client. Such payments will not relieve Client of its obligation to pay any
other amounts payable to Perot Systems or Cambridge Technology under this
Agreement.
(d) Notwithstanding the provisions of Section 6.1 and anything else to
the contrary in this Agreement, Client will pay Perot Systems for the PSC
Services from the Effective Date through the date Perot Systems ceases
providing PSC Services under this Agreement at Perot Systems' commercial
billing rates for services rendered on a time and materials basis at the
undiscounted weekly rates set forth in Schedule 6.3, at the times set forth
in Schedule 6.1. If Client does not deliver a Termination Notice to Perot
Systems or otherwise terminate this Agreement within the 60-day period
after the Effective Date, (i) the amounts payable by Client for the PSC
Services on or after the Effective Date will be those established in
Section 6 and other applicable provisions of this Agreement, and (ii) Perot
Systems will provide a credit against fees payable by Client under this
Agreement in an amount equal to the excess of (A) the amount Client paid
for the PSC Services from the Effective Date through the end of such 60-day
period, over (B) the amount Client would have been charged for the PSC
Services from the Effective Date through the end of such 60-day period if
the PSC Personnel assigned to Client's account had been providing such PSC
Services at the rates provided in Section 6 and other applicable provisions
of this Agreement, which credit will be applied in three equal installments
against the first three invoices for PSC Services delivered to Client after
the end of such 60-day period.
(e) If the Client's termination of this Agreement under this Section
9.9, includes termination of Task Orders for Application Development
Services, such Task Orders will terminate in accordance with Section
9.4(b).
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(f) If Client terminates this Agreement under this Section 9.9, (i)
the provisions of Sections 2.6(d) and (e) will not apply to any PSC or
Cambridge Technology Personnel, (ii) Perot Systems' limit of liability to
Client in connection with this Agreement, whether based on contract,
equity, negligence, tort, intentional conduct or otherwise, for any and all
events, acts or omissions relating in any way to this Agreement, other than
any liability under Section 11.1 of this Agreement, will not exceed, in the
aggregate, $1,000,000 and (iii) Cambridge Technology's limit of liability
to Client in connection with this Agreement, whether based on contract,
equity, negligence, tort, intentional conduct or otherwise, for any and all
events, acts or omissions relating in any way to this Agreement, other than
any liability under Section 11.2 of this Agreement, will not exceed, in the
aggregate, one month's fees for the Cambridge Program Services.
9.10 Termination in Connection With a Change in Control.
--------------------------------------------------
(a) During the period commencing 61 days after the Effective Date and
ending two years after the Effective Date, Client may terminate this
Agreement with respect to the PSC Services and the Cambridge Program
Services within 30 days after a Change of Control Event by delivering to
Perot Systems during such 30-day period (i) a notice of termination for
change of control (a "Termination Notice") setting forth the date of
termination (the "Termination Date"), which date, unless otherwise agreed
by Client and Perot Systems, will be at least 60 days after the date the
Termination Notice is delivered to Perot Systems, and (ii) a certified
check payable to Perot Systems for an Early Termination Fee in an amount
equal to the excess of (A) the amount that Client would have been charged
for the PSC Services from the Effective Date through the earlier of (1) the
date such Termination Notice is delivered or (2) the date 12 months after
the Effective Date if the PSC Personnel assigned to Client's account had
been providing such PSC Services at Perot Systems' commercial billing rates
for services rendered on a time and materials basis at the undiscounted
monthly rates set forth in Schedule 6.3, over (B) the price actually paid
to Perot Systems on or before such date for such PSC Services. Upon request
by Client, Perot Systems will promptly provide Client with its computation
of the amount of the Early Termination Fee (including any Cambridge
Technology costs).
(b) If such Termination Notice and the Early Termination Fee are
properly delivered to Perot Systems within the 30-day period after the
Change of Control Event, this Agreement will terminate on the Termination
Date.
(c) At least 30 days prior to the Termination Date, Perot Systems will
provide to Client an invoice for the estimated Make-Whole Costs. On the
Termination Date, Client will pay Perot Systems the estimated Make-Whole
Costs (including any Cambridge Technology Make-Whole Costs) and all other
outstanding amounts payable to Perot Systems under this Agreement. Within
60 days after the Termination Date, Perot
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Systems will provide to Client a final invoice for the Make-Whole Costs,
which invoice will reflect any corrections to the estimated Make-Whole
Costs. Within 30 days after such invoice is provided to Client, Client will
pay Perot Systems any additional amount due or Perot Systems will refund to
Client any amount overpaid by Client. Such payments will not relieve Client
of its obligation to pay any other amounts payable to Perot Systems or
Cambridge Technology under this Agreement.
(d) If the Client's termination of this Agreement under this Section
9.10, includes termination of Task Orders for Application Development
Services, such Task Orders will terminate in accordance with Section
9.4(b).
(e) If Client terminates this Agreement under this Section 9.10, (i)
the provisions of Sections 2.6(d) and (e) will not apply to any PSC or
Cambridge Personnel, (ii) Perot Systems' limit of liability to Client in
connection with this Agreement, whether based on contract, equity,
negligence, tort, intentional conduct or otherwise, for any and all events,
acts or omissions relating in any way to this Agreement, other than any
liability under Section 11.1 or 11.4 of this Agreement, will not exceed, in
the aggregate, $2,000,000 (except in connection with Perot Systems' failure
to provide the services described in Section 9.7) and (iii) Cambridge
Technology's limit of liability to Client in connection with this
Agreement, whether based on contract, equity, negligence, tort, intentional
conduct or otherwise, for any and all events, acts or omissions relating in
any way to the Cambridge Program Services provided under this Agreement,
other than any liability under Section 11.2 or 11.4 of this Agreement, will
not exceed, in the aggregate, two month's fees for the Cambridge Program
Services.
ARTICLE 10
WARRANTIES AND CERTAIN COVENANTS
10.1 By Perot Systems. Perot Systems warrants that (i) the PSC Services
----------------
will be performed in a diligent and workmanlike manner, in accordance with good
industry practices, by individuals of suitable training and skill, (ii) in
providing the PSC Services, Perot Systems and PSC Personnel will comply with all
federal, state, and local laws and regulations that apply to, and obtain all
permits and licenses that pertain to, the provision of the PSC Services
generally, and (iii) in providing the PSC Services, Perot Systems and PSC
Personnel will, at no additional charge to Client, comply with all federal,
state, and local laws and regulations specific to Client's business of which
Client gives Perot Systems notice and interpretive direction.
10.2 By Cambridge Technology. Cambridge Technology warrants that (i) the
-----------------------
Cambridge Services will be performed in a diligent and workmanlike manner, in
accordance with good industry practices, by individuals of suitable
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training and skill, (ii) in providing the Cambridge Services, Cambridge
Technology and Cambridge Personnel will comply with all federal, state, and
local laws and regulations that apply to, and obtain all permits and licenses
that pertain to, the provision of the Cambridge Services generally, and (iii) in
providing the Cambridge Services, Cambridge Technology and Cambridge Personnel
will, at no additional charge to Client, comply with all federal, state, and
local laws and regulations specific to Client's business of which Client gives
Cambridge Technology notice and interpretive direction.
10.3 By Each Party. Each party warrants that:
-------------
(a) it is a corporation duly incorporated, validly existing, and in
good standing under the laws of its state of incorporation,
(b) it has all requisite power and authority to execute, deliver, and
perform its obligations under this Agreement,
(c) the execution, delivery, and performance of this Agreement has
been duly authorized by such party, and
(d) no approval, authorization, or consent of any governmental or
regulatory authority is required to be obtained or made by it in order for
it to enter into and perform its obligations under this Agreement.
10.4 Third Party Warranties. Upon the earlier of a request by Client or
----------------------
the termination of this Agreement, Perot Systems will assign to Client all the
warranty and indemnification rights obtained by Perot Systems from any
manufacturer, supplier or licensor of Third Party Software or Equipment as a
result of performing Procurement Services, except to the extent such rights may
not be assigned. As part of Operations Services, Perot Systems will use
reasonable commercial efforts to enforce, on Client's behalf, any warranty or
indemnification rights with respect to Third Party Software, Managed Equipment
(whether or not assigned or assignable to Client) or Equipment purchased
pursuant to Section 4.2(vii), provided that Perot Systems will have no
obligation to initiate or conduct litigation, arbitration or similar proceedings
to enforce such warranty or indemnification rights. Perot Systems will maintain
appropriate records of each warranty given by suppliers in connection with such
Equipment or Software and deliver to Client any documentation evidencing such
warranty issued by such suppliers. At Client's request, Perot Systems will
provide to Client a copy of each purchase, license, maintenance, support or
similar agreement relating to such Third Party Software, Managed Equipment or
purchased Equipment.
10.5 Warranty Disclaimers. EXCEPT AS SET FORTH IN THIS AGREEMENT, A
--------------------
SCHEDULE, OR A TASK ORDER, NO PARTY MAKES ANY OTHER EXPRESS OR IMPLIED
WARRANTIES TO ANY OTHER PARTY, INCLUDING,
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BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE IN CONNECTION WITH THIS AGREEMENT.
10.6 Certain Covenants.
-----------------
(a) Viruses.
-------
(i) Each Party will use reasonable commercial efforts to
prevent any software viruses or other surreptitious software codes
(collectively, "Virus") from being introduced into the Systems. Perot
Systems will evaluate, recommend and maintain up-to-date, subject to
Client's approval, virus detection and removal products to be used in
connection with the Systems, on a mutually satisfactory periodic
basis.
(ii) If a Virus is introduced into a System, each party will use
reasonable commercial efforts to identify and neutralize such Virus
and to mitigate any adverse effect of such Virus, and Perot Systems
will repair or restore, as soon as, and to the extent, reasonably
practicable any data, information or Systems damaged by such Virus.
The priority and intensity of the efforts undertaken by the parties to
identify and neutralize the Virus, and to repair or restore any
affected data, information or systems, will be determined by Client
based on its evaluation of the situation, based on such factors as it
deems appropriate, including but not limited to, the number of sites
affected, the severity of the damage being caused, and the relative
importance of the Systems affected.
(b) Neither Perot Systems nor Cambridge Technology will, without the
prior consent of Client, intentionally introduce into any System or
intentionally invoke any code which is intended to disable or wrongfully
impair or shut down such System.
(c) Cambridge Technology will cause the Cambridge Applications
(including Third Party Intellectual Property that is provided by Cambridge
Technology and incorporated into a Cambridge Application) and Perot Systems
will cause any Perot Applications (including Third Party Intellectual
Property that is provided by Perot Systems and incorporated into a Perot
Application) and Perot Modifications, to:
(i) record, store, process, and present calendar dates falling
on or after January 1, 2000, but before December 31, 2099, in the same
manner, and with the same functionality and accuracy, as performed on
or before December 31, 1999;
(ii) require a century indicator on all dates produced therein
as output or results from the operation of such software where the
absence of such an indicator will cause a subsequent failure of the
software or hardware that subsequently processes such output or
results;
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(iii) not cause an abnormal ending or generate an incorrect
result when performing date calculations involving either a single
century or multiple centuries;
(iv) sort all files in an accurate sequence when sorted by date
and read and write in an accurate sequence when the date is used as
the key for such reading or writing; and
(v) be capable of determining leap years prior to December 31,
2099.
Notwithstanding the foregoing, (A) Perot Systems will have no obligation to
modify any Application (other than a Cambridge Application that has been
accepted by Client (provided that Perot Systems has approved and
participated in the acceptance testing process), a Perot Application, or a
Perot Modification (solely with respect to such modification)) or any
portion thereof to satisfy the foregoing requirements, except to the extent
set forth in a Task Order; and (B) Cambridge Technology will have no
obligation to modify any Application (other than a Cambridge Application)
or any portion thereof to satisfy the foregoing requirements, except to the
extent set forth in a Task Order.
(d) Perot Systems will request that each manufacturer or licensor of
Third Party Software and Managed Equipment acknowledge, whether by means of
a response to a specific request or, with respect to mass market software
or hardware, through such manufacturer's or licensor's normal customer
communications methods (e.g., a manufacturer's web site) that such software
or hardware will:
(i) record, store, process, and present calendar dates falling
on or after January 1, 2000, but before December 31, 2099, in the same
manner, and with the same functionality and accuracy, as performed on
or before December 31, 1999;
(ii) require a century indicator on all dates produced therein
as output or results from the operation of such software;
(iii) not cause an abnormal ending or generate an incorrect
result when performing date calculations involving either a single
century or multiple centuries;
(iv) sort all files in an accurate sequence when sorted by date
and read and write in an accurate sequence when the date is used as
the key for such reading or writing; and
(v) be capable of determining leap years prior to December 31,
2099.
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Neither Perot Systems nor Cambridge Technology will have any liability to
Client for (A) the failure of any Third Party Software or Equipment to
comply with the requirements described in clauses (i) through (v) above, or
(B) either of such party's inability to perform its obligations under this
Agreement as a result of the failure of any Third Party Software or
Equipment to comply with the requirements described in clauses (i) through
(v) above.
ARTICLE 11
INDEMNITIES
11.1 By Perot Systems.
----------------
(a) Perot Systems will indemnify, defend and hold harmless Client and
its officers, directors, employees, agents, successors and assigns (each,
an "indemnitee"), from any and all Losses and threatened Losses arising
from or in connection with any of the following:
(i) Perot Systems' breach of its obligations to Client under
Article 8 of this Agreement;
(ii) the death or bodily injury of any agent, employee,
customer, business invitee, or business visitor or other person caused
by the negligence or willful misconduct of Perot Systems or PSC
Personnel;
(iii) the damage, loss or destruction of any real or tangible
personal property caused by the negligence or willful misconduct of
Perot Systems or PSC Personnel; and
(iv) any claim, demand, charge, action, cause of action, or
other proceeding asserted against the indemnitee arising from an act
or omission of Perot Systems or its Subsidiaries or subcontractors in
their respective capacity as an employer of any person.
(b) Perot Systems will indemnify, defend and hold harmless Cambridge
Technology and its officers, directors, employees, agents, successors and
assigns (each, an "indemnitee"), from any and all Losses and threatened
Losses arising from or in connection with any of the following:
(i) Perot Systems' breach of its obligations to Cambridge
Technology under Article 8 of this Agreement;
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(ii) the death or bodily injury of any agent, employee,
customer, business invitee, or business visitor or other person caused
by the gross negligence or willful misconduct of Perot Systems; or
(iii) the damage, loss or destruction of any real or tangible
personal property caused by the gross negligence or willful misconduct
of Perot Systems.
11.2 By Cambridge Technology.
-----------------------
(a) Cambridge Technology will indemnify, defend and hold harmless
Client and its officers, directors, employees, agents, successors and
assigns (each, an "indemnitee"), from any and all Losses and threatened
Losses arising from or in connection with any of the following:
(i) Cambridge Technology's breach of its obligations to Client
under Article 8 of this Agreement;
(ii) the death or bodily injury of any agent, employee,
customer, business invitee, or business visitor or other person caused
by the negligence or willful misconduct of Cambridge Technology or
Cambridge Personnel;
(iii) the damage, loss or destruction of any real or tangible
personal property caused by the negligence or willful misconduct of
Cambridge Technology or Cambridge Personnel; and
(iv) any claim, demand, charge, action, cause of action, or
other proceeding asserted against the indemnitee arising from an act
or omission of Cambridge Technology or its Subsidiaries or
subcontractors in their respective capacity as an employer of any
person.
(b) Cambridge Technology will indemnify, defend and hold harmless
Perot Systems and its officers, directors, employees, agents, successors
and assigns (each, an "indemnitee"), from any and all Losses and threatened
Losses arising from or in connection with any of the following:
(i) Cambridge Technology's breach of its obligations to Perot
Systems under Article 8 of this Agreement;
(ii) the death or bodily injury of any agent, employee,
customer, business invitee, or business visitor or other person caused
by the gross negligence or willful misconduct of Cambridge Technology;
and
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(iii) the damage, loss or destruction of any real or tangible
personal property caused by the gross negligence or willful misconduct
of Cambridge Technology.
11.3 By Client.
---------
(a) Client will indemnify, defend and hold harmless Perot Systems and
its officers, directors, employees, agents, successors and assigns (each,
an "indemnitee"), from any and all Losses and threatened Losses arising
from or in connection with any of the following:
(i) Client's breach of its obligations to Perot Systems under
Article 8 of this Agreement;
(ii) the death or bodily injury of any agent, employee,
customer, business invitee, or business visitor or other person caused
by the negligence or willful misconduct of Client or Client Personnel;
(iii) the damage, loss or destruction of any real or tangible
personal property caused by the negligence or willful misconduct of
Client or Client Personnel; and
(iv) any claim, demand, charge, action, cause of action, or
other proceeding asserted against the indemnitee but resulting from an
act or omission of Client or its Subsidiaries in their respective
capacity as an employer of any person.
(b) Client will indemnify, defend and hold harmless Cambridge
Technology and its officers, directors, employees, agents, successors and
assigns (each, an "indemnitee"), from any and all Losses and threatened
Losses arising from or in connection with any of the following:
(i) Client's breach of its obligations to Cambridge Technology
under Article 8 of this Agreement;
(ii) the death or bodily injury of any agent, employee,
customer, business invitee, or business visitor or other person caused
by the negligence or willful misconduct of Client;
(iii) the damage, loss or destruction of any real or tangible
personal property caused by the negligence or willful misconduct of
Client; and
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(iv) any claim, demand, charge, action, cause of action, or
other proceeding asserted against the indemnitee but resulting from an
act or omission of Client or its Subsidiaries or subcontractors in
their respective capacity as an employer of any person.
11.4 Intellectual Property.
---------------------
(a) By Perot Systems. Perot Systems will, at its expense, indemnify
----------------
and defend Client, Cambridge Technology, their Affiliates, and their
respective officers, directors, employees, agents, successors and assigns
from any third-party claims (i.e., claims made by a party other than
Cambridge Technology, Client or any of their respective Affiliates) made
against Cambridge Technology, Client, or any of their Affiliates alleging
that (i) PSC Work Product infringes a third person's copyright, or trade
secret enforceable in the United States, (ii) the method chosen and used by
Perot Systems to implement the applicable Requirements for the applicable
PSC Work Product infringes a third person's patent issued by the United
States prior to the date the applicable PSC Work Product was delivered to
Client, or (iii) Client's use, in accordance with the terms of this
Agreement, of Third-Party Intellectual Property owned by or licensed (by a
licensor other than by Perot Systems) to Client infringes a third person's
copyright, trade secret or patent enforceable in the United States to the
extent that such infringement is solely the result of Perot Systems'
failure to obtain a Required Consent. Perot Systems will pay any judgments
finally awarded by a court of competent jurisdiction, any settlements of
such third party claims approved by Perot Systems, and reasonable
attorneys' fees incurred prior to giving the Notice of Election arising
from such third party claims.
(b) By Cambridge Technology. Cambridge Technology will, at its
-----------------------
expense, indemnify and defend Client, Perot Systems, their Affiliates, and
their respective officers, directors, employees, agents, successors and
assigns from any third-party claims (i.e., claims made by a party other
than Perot Systems, Client or any of their respective Affiliates) made
against Perot Systems, Client, or any of their Affiliates alleging that (i)
Cambridge Work Product infringes a third person's copyright, or trade
secret enforceable in the United States, (ii) the method chosen and used by
Cambridge Technology to implement the applicable Requirements for the
applicable Cambridge Work Product infringes a third person's patent issued
by the United States prior to the date the applicable Cambridge Work
Product was delivered to Client, or (iii) Client's use, in accordance with
the terms of this Agreement, of Third-Party Intellectual Property owned by
or licensed (by a licensor other than by Cambridge Technology) to Client
infringes a third person's copyright, trade secret or patent enforceable in
the United States to the extent that such infringement is solely the result
of Cambridge Technology's failure to obtain a Required Consent. Cambridge
Technology will pay any judgments finally awarded by a court of competent
jurisdiction, any settlements of such third party claims
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approved by Cambridge Technology and reasonable attorneys' fees incurred
prior to giving the Notice of Election arising from such third party
claims.
(c) By Client.
---------
(i) Client will, at its expense, defend Perot Systems, its
Subsidiaries and their officers, directors, employees, agents,
successors and assigns, from any claim by a third-party (i.e., a party
other than Perot Systems, Cambridge Technology, Client or any of their
respective Affiliates) brought against Perot Systems or its
Subsidiaries alleging that (i) the functionality set forth in the
Requirements for the applicable PSC Work Product infringes a third
person's patent issued by the United States prior to the date the
applicable PSC Work Product was delivered to Client regardless of the
method of implementation selected, or (ii) Perot Systems' use, in
accordance with the terms of this Agreement, of Third-Party
Intellectual Property owned by or licensed (by a licensor other than
by Perot Systems or its Subsidiaries) to Client infringes a third
person's copyright, trade secret or patent issued in the United States
to the extent that such infringement is solely the result of Client's
failure to obtain a Required Consent. Client will pay any judgments
finally awarded by a court of competent jurisdiction, any settlements
of such third party claims approved by Client, and reasonable
attorneys fees incurred prior to giving the Notice of Election arising
from such third party claims.
(ii) Client will, at its expense, defend Cambridge Technology,
its Subsidiaries and their officers, directors, employees, agents,
successors and assigns, from any claim by a third-party (i.e., a party
other than Perot Systems, Cambridge Technology, Client or any of their
respective Affiliates) brought against Cambridge Technology or its
Subsidiaries alleging that (i) the functionality set forth in the
Requirements for the applicable Cambridge Work Product infringes a
third person's patent issued by the United States prior to the date
the applicable Cambridge Work Product was delivered to Client
regardless of the method of implementation selected, or (ii) Cambridge
Technology's use, in accordance with the terms of this Agreement, of
Third-Party Intellectual Property owned by or licensed (by a licensor
other than by Cambridge Technology or its Subsidiaries) to Client
infringes a third person's copyright, trade secret or patent issued in
the United States to the extent that such infringement is solely the
result of Client's failure to perform its obligations under this
Agreement. Client will pay any judgments finally awarded by a court
of competent jurisdiction, any settlements of such third party claims
approved by Client, and reasonable attorneys fees incurred prior to
giving the Notice of Election arising from such third party claims.
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(d) By Third Parties. Except as otherwise provided in this Section
----------------
11.4, no party will seek indemnification from any other party from and
against any Losses arising out of or resulting from any third-party claims
brought against such party's use of Third-Party Intellectual Property and
alleging that such use infringes such third party's trademark, copyright,
trade secret or patent. Instead, the affected party will seek
indemnification from the owner or licensor of such Third-Party Intellectual
Property.
(e) Mitigation. Upon receiving notice of an infringement claim, the
----------
indemnitor may, in its sole discretion, (i) modify the allegedly infringing
item to be non-infringing without materially impairing its functionality,
(ii) replace the allegedly infringing item with a non-infringing item of
substantially equivalent functionality, or (iii) if, in the indemnitor's
reasonable discretion, modification or replacement is not commercially
practicable, obtain for the indemnitee the right to continue to use the
item in accordance with the terms of the Agreement. If the indemnitor
elects to modify the allegedly infringing item, (A) the indemnitee will,
without charge, give the indemnitor all reasonable assistance and
information necessary to allow the indemnitor to make such modifications as
promptly as practicable at the indemnitor's expense, and (B) all relevant
test and acceptance criteria and schedules will be revised as appropriate
to reflect such modifications.
(f) Exclusions. Notwithstanding any other provisions of this Section
----------
11.4, the indemnitor will have no liability to the indemnitee for any claim
of infringement based on the use or licensing of any portion of a System
that was:
(i) modified by the indemnitee without the indemnitor's
involvement or approval if the claim reasonably relates only to such
modification by the indemnitee;
(ii) not provided or recommended by the indemnitor to the
indemnitee; or
(iii) due to a combination of non-infringing portions of a
System provided by the indemnitor and infringing portions provided by
the indemnitee or some third party, and such infringement is the
result of such combination.
11.5 Indemnification Procedures. The following procedures will apply to
--------------------------
all claims for indemnification under this Article:
(a) Promptly after receipt by any entity entitled to indemnification
under this Article of notice of the commencement or threatened commencement
of any civil, criminal, administrative, or investigative action or
proceeding involving a claim in respect of which the indemnified party will
seek indemnification, the indemnified party will notify the indemnifying
party of such claim in writing. No failure to so notify the
57
<PAGE>
indemnifying party will relieve it of its obligations under this Agreement
except to the extent that it can demonstrate damages attributable to such
failure. Within 15 days following receipt of notice from the indemnified
party relating to any claim, but no later than 10 days before the date on
which any response to a complaint, summons, or other legal process is due,
the indemnifying party will notify the indemnified party in writing if the
indemnifying party elects to assume control of the defense and settlement
of that claim (a "Notice of Election").
(b) If the indemnifying party delivers a Notice of Election relating
to any claim within the required notice period, the indemnifying party will
be entitled to have sole control over the defense and settlement of such
claim; provided, however, that (A) the indemnified party will be entitled
to participate in the defense of such claim and to employ counsel at its
own expense to assist in the handling of such claim, and (B) the
indemnifying party will obtain the prior approval, which approval will not
be unreasonably delayed or withheld, of the indemnified party in respect of
any non-cash aspects of a proposed settlement of such claim from the
indemnified party before entering into any settlement of such claim or
ceasing to defend against such claim. After the indemnifying party has
delivered a Notice of Election relating to any claim in accordance with
Subsection 11.5(a), the indemnifying party will not be liable to the
indemnified party for any legal expenses incurred by such indemnified party
in connection with the defense of that claim. In addition, the
indemnifying party will not be required to indemnify the indemnified party
for any amount paid or payable by such indemnified party in the settlement
of any claim for which the indemnifying party has delivered a timely Notice
of Election if such amount was agreed to without the consent of the
indemnifying party.
(c) If the indemnifying party does not deliver a Notice of Election
relating to any claim within the required notice period, the indemnified
party will have the right to defend the claim in such manner as it may deem
appropriate, at the cost and expense of the indemnifying party. The
indemnifying party will promptly reimburse the indemnified party for all
such costs and expenses, demand for which may be made periodically.
11.6 Subrogation. In the event that an indemnifying party will be obligated
-----------
to indemnify an indemnified party pursuant to this Article 11, the indemnifying
party will, upon payment of such indemnity in full, be subrogated to all rights
of the indemnified party with respect to the claims to which such
indemnification relates.
58
<PAGE>
ARTICLE 12
LIMITATIONS ON LIABILITY AND DAMAGES
12.1 Limitation on Direct Damages.
----------------------------
(a) Except as provided in Article 11, Perot Systems will be liable to
Client only for any direct damages, including costs of cover reasonably
incurred by Client and performance credits issued pursuant to Section 6.4,
arising out of Perot Systems' breach of contract, breach of warranty, or
negligence or willful misconduct in the performance of its obligations
under this Agreement; provided, however, that the liability of Perot
Systems, whether based on contract, equity, negligence, tort, intentional
conduct or otherwise, for any and all events, acts or omissions relating in
any way to this Agreement (including without limitation breach of warranty
or breach of any obligation to indemnify Client other than as provided in
Article 11) will not exceed, in the aggregate, the greater of (i)
$5,000,000 or (ii) the fees (excluding any Pass-Through Expenses or
Reimbursable Expenses) paid by Client to Perot Systems during the six month
period prior to the date on which the applicable claim arises, reduced, in
either case, by the excess (i.e., in no event will this clause be
interpreted to increase Perot Systems' limit of liability as described in
the preceding clauses) of any performance credits issued pursuant to
Section 6.4 (after excluding any performance credits that have been earned
back by Perot Systems) over the amount of any performance bonuses paid to
Perot Systems pursuant to Section 6.4.
(b) Except as provided in Article 11, Cambridge Technology will be
liable to Client only for any direct damages, including costs of cover
reasonably incurred by Client, arising out of Cambridge Technology's breach
of contract, breach of warranty, or negligence or willful misconduct in the
performance of its obligations under this Agreement; provided, however,
that the liability of Cambridge Technology, whether based on contract,
equity, negligence, tort, intentional conduct or otherwise, for any and all
events, acts or omissions relating in any way to this Agreement (including
without limitation breach of warranty or breach of any obligation to
indemnify Client other than as provided in Article 11) will not exceed, in
the aggregate, (i) with respect to the Cambridge Program Services, the fees
(excluding any Pass-Through Expenses or Reimbursable Expenses) paid by
Client to Cambridge Technology (or to the CPA Account Manager for the
benefit of Cambridge Technology) during the six month period prior to the
date on which the applicable claim arises, and (ii) with respect to each
Cambridge Application, the fixed price established for such Cambridge
Application in the applicable Task Orders.
(c) Except as provided in Article 11, Client will be liable to Perot
Systems and Cambridge Technology only for any direct damages, including
costs of cover reasonably incurred by Perot Systems or Cambridge
Technology, as the case may be,
59
<PAGE>
arising out of Client's breach of contract, breach of warranty, or
negligence or willful misconduct in the performance of its obligations
under this Agreement; provided, however, that the aggregate liability of
Client to Perot Systems and Cambridge Technology, whether based on
contract, equity, negligence, tort, intentional conduct or otherwise, for
any and all events, acts or omissions relating in any way to this Agreement
(including without limitation breach of warranty or breach of any
obligation to indemnify Perot Systems or Cambridge other than as provided
in Article 11) will not exceed, in the aggregate, (i) $5,000,000 with
respect to Perot Systems, and (ii)(A) with respect to the Cambridge Program
Services, the fees (excluding any Pass-Through Expenses or Reimbursable
Expenses) paid by Client to Cambridge Technology (or to the CPA Account
Manager for the benefit of Cambridge Technology) during the six month
period prior to the date on which the applicable claim arises, and (B) with
respect to each Cambridge Application, the fixed price established for such
Cambridge Application in the applicable Task Orders.
(d) Perot Systems will have no liability to Client for any direct,
indirect or other damages arising from the performance of the Cambridge
Services or any other obligations of Cambridge Technology relating to this
Agreement, except to the extent such liability arises from Perot Systems'
breach of contract, breach of warranty, or negligence or willful misconduct
in the performance of its obligations with respect to Cambridge Technology
and the Cambridge Services under this Agreement.
(e) Cambridge Technology will have no liability to Client for any
direct, indirect or other damages arising from the performance of the PSC
Services or any other obligations of Perot Systems relating to this
Agreement.
(f) Except as provided by Sections 6.9 and 11.4, neither Perot Systems
nor Cambridge Technology will have any liability to the other for any
direct, indirect or other damages arising from the performance of any
obligations of the other party relating to this Agreement.
(g) The limitation on Client's liability under clause (c) will not
apply to Client's obligations to pay amounts properly due and owing to
either Perot Systems or Cambridge Technology under this Agreement.
12.2 Limitation on Consequential Damages. No party will be liable for, nor
-----------------------------------
nor will the measure of damages assessed against any other party include, any
indirect, incidental, special, consequential or punitive damages or amounts for
loss of income, data, profits or savings arising out of the liable party's
performance under this Agreement.
60
<PAGE>
12.3 Mitigation. Each party will have a duty, and will use reasonable
----------
commercial efforts, to mitigate damages for which any other party may
be responsible under this Agreement.
12.4 Time to Bring Actions. Except for claims for indemnification made
---------------------
under Article 11, no claim may be asserted by any party against any other party
with respect to any event, act or omission which occurred more than two years
prior to the claim being asserted.
12.5 Force Majeure. If any party is prevented, hindered or delayed in the
-------------
performance or observance of any of its obligations hereunder by reason of any
circumstance beyond its reasonable control, including but not limited to fire,
flood, earthquake, elements of nature or acts of God, riots, civil disorders,
rebellions or revolutions in any country ("Force Majeure"), that party will be
excused from any further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and that party continues to
use all commercially reasonable efforts to recommence performance whenever and
to whatever extent possible without delay. Each party affected by a Force
Majeure event will advise each other party in reasonable detail of the event as
promptly as practicable (including the estimated duration of the event) and keep
each other party reasonably apprised of progress in resolving the event.
ARTICLE 13
INSURANCE AND RISK OF LOSS
13.1 Insurance. At all times while obligated to perform services under
---------
this Agreement, Perot Systems and Cambridge Technology will each maintain in
force, at their respective expense, insurance of the type and in the amounts set
forth below:
(a) statutory workers' compensation insurance in accordance with the
legal requirements of each country, state, territory and locality
exercising jurisdiction over personnel performing Services in such country,
state, territory or locality;
(b) employer's liability insurance with a minimum limit in an amount
not less than $1,000,000 per accident, covering bodily injury by accident,
and $1,000,000 per policy covering bodily injury by disease, including
death;
(c) commercial general liability insurance (including contractual
liability insurance) in an amount not less than $1,000,000 per occurrence
and a $2,000,000 annual aggregate;
61
<PAGE>
(d) comprehensive automobile liability insurance with a combined
single limit in an amount not less than $2,000,000 per accident for bodily
injury and property damage liability;
(e) to the extent commercially available to Perot Systems or Cambridge
Technology, as the case may be, in the insurance market, errors and
omissions liability insurance with a per claim and policy aggregate limit
in an amount not less than $1,000,000;
(f) a fidelity bond in an amount not less than $500,000 for the PSC
Personnel having signature authority on the Account identified in Section
6.6; and
(g) umbrella/excess liability in an amount not less than $5,000,000
per occurrence and annual aggregate.
To the extent commercially available to Perot Systems or Cambridge Technology,
as the case may be, in the insurance market, such insurance policies will be
written by reputable insurers reasonably acceptable to Client, preferably by
insurance companies rated at least A by A.M. Best's rating service or
equivalent.
13.2 Insurance Documentation. Upon Client's reasonable request, each of
-----------------------
Perot Systems and Cambridge Technology will furnish to Client certificates of
insurance or other appropriate documentation (including evidence of renewal of
insurance) evidencing all coverages referenced in Section 13.1. Such
certificates or other documentation will include a provision whereby the
applicable insurer will give at least 30 days' notice to Client prior to
cancellation or material alteration of the coverage. Each of Perot Systems and
Cambridge Technology will, to the extent reasonably practicable, cause the
applicable insurer to name Client and its Subsidiaries (and such other entities
as the parties may agree) as an additional insured and will furnish Client with
documentation thereof.
13.3 Risk of Loss. Each party will be responsible for risk of loss of, and
------------
damage to, any Equipment, Software or other materials in its possession or under
its control; provided that Client will be responsible for risk of loss of, and
damage to, all Equipment during shipment of such Equipment from (i) its
manufacturer in the case of Equipment purchased by Perot Systems as part of the
Procurement Services or (ii) the location where the RSI Services are being
rendered on the Effective Date to a PSC Facility. In all cases where Client is
responsible for risk of loss under clauses (i) and (ii) of the preceding
sentence, Perot Systems will arrange for appropriate insurance during shipment
and invoice the costs of such insurance to Client as a Pass-Through Expense.
ARTICLE 14
DISPUTE RESOLUTION
62
<PAGE>
14.1 General. Any dispute between any two or more parties to this
-------
Agreement, either with respect to the interpretation of any terms of this
Agreement or with respect to the performance by a party of its obligations under
this Agreement, will be resolved as provided in this Article 14. The parties
involved in the dispute will diligently seek to resolve all disputes pursuant to
Section 14.2, without resort to the more formal proceedings described in
Sections 14.3 and 14.4.
14.2 Management Meetings. Prior to the initiation of arbitration or
-------------------
Agreement, litigation under this Agreement, the parties will first attempt to
resolve their disputes as follows:
(a) Upon request of a party, each party involved in the dispute will,
within 10 business days of the request, appoint a senior manager who is not
directly involved in performance of this Agreement or the dispute to meet
with the other party's appointed senior manager to endeavor to resolve such
dispute. These senior managers will meet as often as they reasonably deem
necessary for each party involved in the dispute to gather and furnish to
the other party involved in the dispute all information with respect to the
dispute which the parties involved in the dispute believe to be appropriate
and germane to the resolution of the dispute. All such meetings will take
place in Denver, Colorado, unless the parties agree to a different site.
The senior managers will discuss the dispute and negotiate in good faith in
an effort to resolve the dispute without the necessity of any formal
proceeding. The specific format for these discussions will be left to the
discretion of the senior managers, but may include the preparation of
agreed-upon statements of fact or statements of position.
(b) Each party, whether or not such party is involved in the relevant
dispute, will comply with all reasonable requests made by the other parties
for non-privileged information (as determined by the disclosing party in
its sole discretion) that is reasonably related to the relevant dispute in
order that each party may be fully advised of the other party's position.
(c) If the parties involved in the dispute fail to resolve the dispute
within a time period not more than 30 days set by the senior managers
during their first meeting, the Presidents of each party (or their
respective designees) will meet (in person at a site reasonably selected by
Client's President or by telephone) to endeavor to resolve the dispute
prior to initiating arbitration under Section 14.3.
14.3 Arbitration. Except as provided in Section 14.4, any dispute that
-----------
is not resolved through negotiation pursuant to Section 14.2 will be resolved
exclusively by final and binding arbitration in accordance with the following:
63
<PAGE>
(a) Arbitration arising out of a dispute will not be commenced until
10 days after the President of a party to the dispute notifies the
President of the other parties to the dispute that he or she has concluded
in good faith that amicable resolution of the dispute through continued
negotiation does not appear likely.
(b) Except as specified below or otherwise agreed, the arbitration
will be conducted in accordance with the then-current Commercial
Arbitration Rules of the American Arbitration Association. The arbitrators
will be three neutral persons selected by agreement of the parties or,
failing such agreement, in accordance with the AAA Rules. One arbitrator
will be an information technology professional with technical experience;
one arbitrator will be a certified public accountant with a major
international accounting firm with experience in long-term project
contracts; and one arbitrator will be an experienced business attorney with
experience in information technology transactions and contracts. If the
amount in dispute is less than $250,000, the arbitration will be conducted
by a single neutral arbitrator selected in accordance with those Commercial
Arbitration Rules who will be an experienced business attorney with
experience in information technology transactions and contracts.
(c) Any demand for arbitration or any counterclaim will specify in
reasonable detail the facts and legal grounds forming the basis for the
claimant's request for relief, and will include a statement of the total
amount of damages claimed, if any, and any other remedy sought by the
claimant.
(d) The arbitration proceedings will take place in Denver, Colorado,
regardless of which party initiates the arbitration.
(e) The arbitration panel or sole arbitrator may render an award of
monetary damages to any party to the dispute and direct any party or all
parties to the dispute to take or refrain from taking action, or both.
However, the arbitration panel or sole arbitrator may not award monetary
damages or direct any action whose fair market value would be in excess of
the damages allowed pursuant to Article 12.
(f) Judgment upon the award rendered in the arbitration may be entered
in any court of competent jurisdiction.
14.4 Limited Exceptions for Litigation.
---------------------------------
(a) The parties agree that the provisions of Sections 14.2 and 14.3
will not apply when a party to a dispute makes a reasonable determination
in good faith that a breach of the terms of this Agreement by the other
party to the dispute is such that the damages to the determining party
resulting from the breach will be so immediate, so large or severe, and so
incapable of adequate redress after the fact that a temporary restraining
64
<PAGE>
order or other immediate injunctive relief is the most appropriate remedy,
and that party seeks such relief.
(b) This Article 14 will not be construed to prevent a party from
instituting, and a party is authorized to institute, litigation solely and
exclusively (i) to toll the expiration of any applicable limitations
period; (ii) to preserve a superior position with respect to other
creditors; (iii) to seek immediate injunctive relief with respect to an
infringement or alleged infringement of such party's intellectual property
rights; (iv) to enforce an arbitration award under Section 14.3; or (v) as
permitted under Section 14.4(a). Subject to the foregoing, this Article 14
will provide the exclusive procedure for resolving disputes under this
Agreement.
(c) Any litigation under this Agreement will be brought in a state or
federal court sitting in Denver, Colorado unless litigation in another
venue is required to protect or preserve a party's property located in that
venue.
14.5 Continued Performance. Each party will continue performing its
---------------------
respective obligations under this Agreement while any dispute submitted to
arbitration or litigation under this Article 14 is being resolved until such
obligations are terminated by the expiration or termination of this Agreement or
by a final and binding arbitral award, order, or judgment to the contrary under
this Article 14.
ARTICLE 15
DEFINITIONS AND CONSTRUCTION
15.1 Certain Terms. Capitalized terms used in this Agreement will have the
-------------
meanings ascribed to such terms in Schedule 15.1.
15.2 Captions. The captions used in this Agreement are for convenience of
--------
reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no captions had been used in this Agreement.
15.3 Priority of Documents. In the event of a conflict among the terms of
---------------------
this Agreement and any Exhibit, Schedule, or Task Order under this Agreement,
such documents will have the following order of precedence: (i) Task Orders,
(ii) Schedules, (iii) this Agreement (excluding Task Orders, Schedules, and
Exhibits), and (iv) Exhibits. The RFP and Response to RFP, attached as Exhibits
A and B, may be used to explain any term or provision of this Agreement, but may
not be used or interpreted in such fashion as to add a term or provision to this
Agreement.
65
<PAGE>
15.4 Severability. Whenever possible, each term of this Agreement will be
------------
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be deemed restated to reflect the
original intentions of the parties as nearly as possible in accordance with
applicable law, and, if capable of substantial performance, the remaining
provisions of this Agreement will be enforced as if this Agreement was entered
into without the invalid provision.
ARTICLE 16
MISCELLANEOUS
16.1 No Hire Commitments. During the term and, except as provided in
-------------------
Section 9.7, for 12 months thereafter, each party agrees that neither it nor any
of its Affiliates will recruit or hire any person employed then or within the
preceding 12 months by any other party or any of its Affiliates who performed
work in connection with this Agreement without the prior consent of that party.
Upon expiration or termination of this Agreement, Client will have the right,
but not the obligation, to make employment offers to any or all of the
Transitioned Employees who are then in the employ of Perot Systems and the
right, but not the obligation, to make employment offers to the PSC Personnel
who are then providing (or within the previous six months have provided)
services to Client under this Agreement. The decision to make employment offers
shall be within Client's sole discretion, and Perot Systems shall have no
responsibility or liability to Client with respect to such decision.
16.2 Publicity. No party will use any other party's name, trademarks or
---------
service marks or refer to the other party directly or indirectly in any media
release, public announcement or public disclosure relating to this Agreement or
its subject matter to the extent the materials in such media release,
announcement or disclosure have not previously been made publicly available.
This restriction includes, but is not limited to, any promotional or marketing
materials, customer lists or business presentations (but not including any
announcement intended solely for internal distribution by a party or any
disclosure required by legal, accounting or regulatory requirements beyond the
reasonable control of a party) without obtaining consent from the other party
for each such use or release. Notwithstanding the foregoing limitation, any
party may use another party's name (solely for purposes of identifying the party
as a vendor or customer) in any promotional or marketing materials designed for
a particular potential customer, provided such potential customer has signed a
confidentiality agreement requiring it not to disclose the contents of such
promotional or marketing materials to an unaffiliated third party.
16.3 Notices. All consents, notices, requests, demands, and other
-------
communications to be given or delivered under or by reason of the provisions of
this Agreement will be in writing and will be deemed given when delivered
personally against receipt, on the next business day when sent by overnight
courier, and on the fifth business day after being mailed by certified mail,
return receipt requested, to each party at the following address (or to
66
<PAGE>
such other address as that party may have specified by notice given to the other
party pursuant to this provision):
If to Perot Systems: With a copy to:
Perot Systems Corporation Perot Systems Corporation
Attn: President Attn: General Counsel
12377 Merit Drive, Suite 1100 12377 Merit Drive, Suite 1100
Dallas Texas 75251 Dallas, Texas 75251
If to Cambridge Technology: With a copy to:
Cambridge Technology Partners, Inc. Cambridge Technology Partners, Inc.
Attn: President Attn: General Counsel
304 Vassar Street 304 Vassar Street
Cambridge, Massachusetts 02139 Cambridge, Massachusetts 02139
If to Client: With a copy to:
Ryder TRS, Inc. Ryder TRS, Inc.
Attn: President Attn: General Counsel
1560 Broadway, Suite 1800 1560 Broadway, Suite 1800
Denver, Colorado 80202 Denver, Colorado 80202
16.4 Assignment. This Agreement and all of the provisions hereof will be
----------
binding upon and inure to the benefit of each party and its respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any party without
the prior consent of the other parties, except that (i) any party may assign
this Agreement to the surviving entity in connection with the merger,
consolidation, or sale of all or substantially all of the assets of that party;
or (ii) if such a business combination is with a party to which Perot Systems or
Cambridge Technology is then providing services, this Agreement and the relevant
agreements between Perot Systems or Cambridge Technology and such other party
will be amended as appropriate to provide the surviving entity of the business
combination with the benefits of consolidating the agreements.
16.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts all of which taken together will constitute one and the same
instrument.
16.6 Relationship of Parties. Perot Systems and Cambridge Technology, in
-----------------------
furnishing services to Client hereunder, are each acting only as an independent
contractor. Except as otherwise provided herein, neither Perot Systems nor
Cambridge Technology undertakes by this Agreement or otherwise to perform any
obligation of Client or each other, whether regulatory or contractual, or to
assume any responsibility for
67
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Client's or each other's business or operations, and Perot Systems and Cambridge
Technology, respectively, has the sole right and obligation to supervise,
manage, contract, direct, procure, perform or cause to be performed, all work to
be performed hereunder by such party. In no event will Client be deemed to be an
employer or co-employer of any PSC Personnel or Cambridge Personnel.
16.7 Approvals and Similar Actions. Where agreement, approval,
-----------------------------
acceptance, consent or similar action by any party is required by any provision
of this Agreement, such action will not be unreasonably delayed or withheld
unless otherwise expressly permitted.
16.8 Modification; Waiver. This Agreement may be modified only by a
--------------------
written instrument duly executed by or on behalf of each party whose obligations
are affected by such modification. No delay or omission by any party to exercise
any right or power hereunder will impair such right or power or be construed to
be a waiver thereof. A waiver by any party of any of the obligations to be
performed by any other party or any breach thereof will not be construed to be a
waiver of any succeeding breach thereof or of any other obligation herein
contained.
16.9 No Third-Party Beneficiaries. The parties agree that this
----------------------------
Agreement is for the benefit of the parties hereto and is not intended to confer
any rights or benefits on any third-party, including any employee of any party,
and that there are no third-party beneficiaries to this Agreement or any
specific term of this Agreement.
16.10 Governing Law. The laws of the State of Colorado will govern all
-------------
questions concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this Agreement.
16.11 Entire Agreement. This Agreement, including any exhibits,
----------------
schedules, task orders, or appendices hereto or thereto, constitutes the final,
entire and exclusive agreement among the parties with respect to its subject
matter.
68
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed and
delivered by their duly authorized representative to be effective as of the
Effective Date first set forth above.
RYDER TRS, INC.
By: /s/ Ronald A. Rittenmeyer
----------------------------------
Name: Ronald A. Rittenmeyer
Title: President and Chief Operating Officer
Date: January 22, 1998
CAMBRIDGE TECHNOLOGY PARTNERS, INC.
By: /s/ Michael Murphy
----------------------------------
Name: Michael Murphy
Title: Vice President
Date: January 22, 1998
PEROT SYSTEMS CORPORATION
By: /s/ Ross Perot
----------------------------------
Name: Ross Perot
Title: President and Chief Executive Officer
Date: January 22, 1998
69
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<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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0
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