<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the Period ended June 15, 1996.
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 0-600
ROADWAY EXPRESS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 34-0492670
- - -------------------------------------------------------------- -----------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No)
</TABLE>
1077 Gorge Boulevard Akron, OH 44310
- - ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 384-1717
---------------
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 .
--- ---
The number of shares of common stock ($.01 par value) outstanding as of July 8,
1996 was 20,543,164.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 15, 1996 December 31, 1995
----------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 22,657 $ 23,341
Accounts receivable, net 232,839 227,121
Other current assets 24,150 19,530
----------------------------------------------------------------------
Total current assets 279,646 269,992
Carrier operating property at cost 1,423,862 1,433,712
Allowance for depreciation 1,019,750 1,008,952
----------------------------------------------------------------------
Carrier operating property, net 404,112 424,760
Deferred income taxes 18,733 18,855
----------------------------------------------------------------------
Total assets $ 702,491 $ 713,607
======================================================================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 124,285 $ 125,263
Salaries and wages payable 113,531 110,968
Freight and casualty claims payable 54,538 60,225
----------------------------------------------------------------------
Total current liabilities 292,354 296,456
Long-term liabilities
Casualty claims payable 79,544 95,379
Future equipment repairs 26,509 29,191
Accrued pension and retiree medical 92,789 86,939
----------------------------------------------------------------------
Total long-term liabilities 198,842 211,509
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,458 shares 206 206
Other shareholders' equity 211,089 205,436
----------------------------------------------------------------------
Total shareholders' equity 211,295 205,642
----------------------------------------------------------------------
Total liabilities and equity $ 702,491 $ 713,607
======================================================================
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
<PAGE> 3
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended
(Second Quarter)
June 15, 1996 June 17, 1995
----------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Revenue $ 532,749 $ 521,122
Operating expenses:
Salaries, wages and benefits 351,621 358,534
Operating supplies and expenses 90,070 93,820
Purchased transportation 40,537 33,861
Operating taxes and licenses 18,070 17,383
Insurance and claims expense 10,517 13,173
Provision for depreciation 15,298 17,014
Net (gain) loss on disposal of operating property (687) 57
----------------------------------------------------
Total operating expenses 525,426 533,842
----------------------------------------------------
Operating income (loss) 7,323 (12,720)
Other (expense), net (178) (417)
----------------------------------------------------
Income (loss) before income taxes 7,145 (13,137)
Provision (benefit) for income taxes 3,092 (4,548)
----------------------------------------------------
Net income (loss) $ 4,053 $ (8,589)
====================================================
Net income (loss) per share $ 0.20 $ (0.42)
Average shares outstanding 20,484 20,556
</TABLE>
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
(Two Quarters)
June 15, 1996 June 17, 1995
----------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Revenue $ 1,049,712 $ 1,043,411
Operating expenses:
Salaries, wages and benefits 697,195 710,486
Operating supplies and expenses 177,152 184,146
Purchased transportation 79,895 65,570
Operating taxes and licenses 35,686 35,055
Insurance and claims expense 20,006 26,737
Provision for depreciation 30,834 33,880
Net (gain) on disposal of operating property (3,321) (181)
----------------------------------------------------
Total operating expenses 1,037,447 1,055,693
----------------------------------------------------
Operating income (loss) 12,265 (12,282)
Other (expense), net (510) (1,928)
----------------------------------------------------
Income (loss) before income taxes 11,755 (14,210)
Provision (benefit) for income taxes 5,079 (5,062)
----------------------------------------------------
Net income (loss) $ 6,676 $ (9,148)
====================================================
Net income (loss) per share $ 0.33 $ (0.45)
Average shares outstanding 20,520 20,556
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
(Two Quarters)
June 15, 1996 June 17, 1995
----------------------------------------------------
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 6,676 $ (9,148)
Depreciation and amortization 30,854 33,860
Other operating adjustments (30,324) (37,691)
----------------------------------------------------
Net cash provided (used) by operating activities 7,206 (12,979)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (13,068) (15,614)
Sales of carrier operating property 6,205 2,525
----------------------------------------------------
Net cash used by investing activities (6,863) (13,089)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (1,027) (7,500)
Net borrowings - 20,500
----------------------------------------------------
Net cash (used) provided by financing activities (1,027) 13,000
Net (decrease) in cash & cash equivalents (684) (13,068)
Cash and cash equivalents at beginning of period 23,341 24,028
----------------------------------------------------
Cash and cash equivalents at end of period $ 22,657 $ 10,960
====================================================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
Roadway Express, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 12 weeks and 24 weeks ended June 15,
1996 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the registrant's annual
report on Form 10-K for the year ended December 31, 1995.
Note B--Accounting Period
The registrant operates on a 13 four-week period calendar with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Roadway Express reported a net income of $4,053,000, or $0.20 per share, for the
second quarter ended June 15, 1996. This improvement is the result of cost
controls and tonnage growth, and compares to a loss of $8,589,000, or $0.42 per
share, in the second quarter of last year. Revenues were $532,749,000 for the
second quarter of 1996, compared to $521,122,000 for the second quarter of 1995.
Cost reductions enabled the Company to compensate for weak revenue rates and
generate a profit for the second quarter.
Roadway's tonnage was up 1.9% in the second quarter. Our less-than-truckload
(LTL) tons were up 3.1% and truckload tonnage was down 2.9%, compared to second
quarter 1995. Freight rate levels have increased 0.3% above those of second
quarter 1995, and have improved by approximately 3% over year-end 1995. Current
rate levels are not sufficient to support long term operational needs. As
industry capacity is reduced, rate levels are expected to improve.
Cost savings resulting from our ongoing network refinement, reduced corporate
overhead, and the positive impact of our safety and risk management programs
contributed to a 3.3% decrease in operating costs per ton of freight compared to
last year, excluding the gain on sale of operating property. The gain on sale of
operating property added $1.9 million to net income in the first half of 1996.
While we plan to sell additional facilities during 1996, we don't anticipate
this level of gain on future sales. Our cost containment strategies are on
schedule. At the end of the quarter our system count was 451 terminals, compared
to 583 terminals at the end of the second quarter 1995. Our strategy also
includes the increased use of railroads in certain linehaul operations, which is
reflected in the 21.8% increase in purchased transportation expense during the
first half of 1996 compared to 1995. Rising fuel costs were a concern during the
second quarter, but the increased use of intermodal transportation and purchases
of fuel on contract minimized the negative impact.
At the end of the quarter, there were no borrowings against the credit facility,
as opposed to a $20.5 million increase of short term borrowings during the first
half of 1995. The short term debt in 1995 was used to fund working capital needs
and a dividend to our former parent. In 1996 our cash flow from operations has
been sufficient to meet working capital needs. We entered into an operating
lease agreement to replace 3,250 (approximately 11%) of our linehaul trailers
during 1996. By the end of the quarter, we had replaced 690 of our aging
trailers with these new leased units.
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
On April 1, 1996 a wage and benefit increase of 3.8% became effective under the
terms of the National Master Freight Agreement with the International
Brotherhood of Teamsters. Working with the Teamsters, the Company implemented
the Roadway Express Union Stock Plan, a stock incentive opportunity for our
18,000 Teamster employees who, through incentive-based distributions of stock
tied to Company operating margin, can be rewarded for contributing to a safe,
reliably-staffed, and injury-free work environment. An Employee Stock Purchase
Program was implemented for qualifying employees, allowing them an opportunity
to purchase company stock through payroll deduction at a discount of 15% of the
market price. The Company has finished the previously announced repurchase of
320,000 shares of its outstanding common stock to fund the Management Incentive
Stock Plan. Additionally, on July 10, the Board of Directors announced a cash
dividend of $0.05 per share on the Company's common stock payable on September
3, 1996, to shareholders of record on August 15, 1996. The increase in union
wage rates is expected to be partially offset by reductions in the terminal
network to better utilize existing capacity, improve efficiency, and reduce
fixed costs. The stock plans will better link employee actions to shareholder
interests.
The portions of narrative set forth in this discussion that are not historical
in nature are forward-looking statements. The Company's actual future
performance and operating and financial results may differ from those described
in the forward-looking statements as a result of a variety of factors that,
besides those mentioned, include the condition of the industry and the economy
and the success of the Company's operating plans.
5
<PAGE> 7
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 10, 1996, the Board of Directors announced a cash dividend of $0.05 per
share on the Company's common stock payable on September 3, 1996, to
shareholders of record on August 15, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.
- - ----------
10.18 Operating lease agreement by and between Roadway Express, Inc. and
ABN AMRO North America, Inc.
27 Financial Data Schedule.
List of the Current Reports on Form 8-K which have been filed since April 16,
1996:
Date of Form 8-K Items reported
- - ---------------- --------------
July 2, 1996 Press Release dated July 2, 1996 announcing second quarter
1996 operating results.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ROADWAY EXPRESS, INC.
Date:July 17, 1996 By: /s/ J. Dawson Cunningham
------------- --------------------------
J. Dawson Cunningham, Vice President-Finance and
Administration, and Treasurer (Principal Financial and
Accounting Officer)
6
<PAGE> 1
EXHIBIT 10.18, PART 1
PARTICIPATION AGREEMENT
Dated as of March 15, 1996
Entered Into By and Among
ROADWAY EXPRESS, INC.,
as Lessee,
ABN AMRO BANK N.V.,
not individually, except as expressly
set forth herein, but as Agent
and
The Lessors Listed on
Schedule I Hereto
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
Definitions..........................................................1
Purchase and Lease of Vehicles.......................................1
Fundings; Payment of Purchase Price................................1
Application of Funds; Sale and Lease of Vehicles...................3
Time and Place of Delivery Dates...................................3
Executory and Underwriting Fee.....................................4
Commitment Fee.....................................................4
Conditions to Delivery Date Closings.................................4
Delivery Date Notice; Invoices.....................................4
Appraisals.........................................................4
Participation Agreement............................................5
Lease..............................................................5
Lease Supplements..................................................5
Financial Reports..................................................6
Financing Statements...............................................6
Certificates of Title..............................................6
Transaction Costs; Fees............................................7
Opinions of Counsel................................................7
Corporate Status and Proceedings...................................7
Consents and Approvals.............................................7
Payment of Impositions.............................................7
Search Reports.....................................................8
Insurance..........................................................8
Proceedings Satisfactory, Etc......................................8
Absence of Material Adverse Effect.................................8
Representations and Warranties True; Absence of Defaults...........8
General Provisions...................................................8
Nature of Transaction..............................................8
Replacements.......................................................9
Representations and Warranties.......................................9
Representations and Warranties of Lessee...........................9
Representations and Warranties of Lessors.........................13
Representations and Warranties of Agent...........................14
Covenants...........................................................15
Covenants of Lessee...............................................15
Covenants of Agent and Lessors....................................20
General Indemnities.................................................21
<PAGE> 3
Indemnity.......................................................21
Excessive Use Indemnity.........................................22
Increased Capital Costs.........................................22
LIBO Rate Unlawful..............................................23
Funding Losses..................................................23
Actions of Affected Lessors.....................................23
General Tax Indemnity.............................................24
General Tax Indemnity...........................................24
Contest....................................................... 24
Gross Up....................................................... 25
Tax Returns.....................................................26
Withholding Tax Exemption.......................................26
Agent.............................................................27
Appointment of Agent; Powers and Authorization to Take
Certain Actions...............................................27
Reliance........................................................28
Action Upon Instructions Generally..............................28
Indemnification.................................................29
Independent Credit Investigation................................29
Refusal to Act..................................................30
Resignation or Removal of Agent; Appointment of Successor.......30
Separate Agent..................................................31
Termination of Agency...........................................31
Compensation of Agency..........................................31
Limitations.....................................................31
Amendments to Operative Agreements................................32
Amendments to Operative Agreements With Consent of Lessors......32
Amendments to Operative Agreements Affecting Agent..............33
Miscellaneous.....................................................33
Survival of Covenants...........................................33
APPLICABLE LAW..................................................33
Distribution and Application of Rents and Other Payments........33
Notices.........................................................33
Transaction Costs; Other Expenses...............................34
Counterparts....................................................35
Severability....................................................35
Successors and Assigns; Transfers...............................35
JURY TRIAL......................................................37
Captions; Table of Contents.....................................37
FINAL AGREEMENT.................................................37
No Third-Party Beneficiaries....................................37
Further Assurances..............................................37
Reproduction of Documents.......................................37
Consideration for Consents to Waivers and Amendments............38
Submission to Jurisdiction......................................38
<PAGE> 4
LIST OF SCHEDULES AND EXHIBITS
------------------------------
Schedule I - Commitments of Lessors; Payment Instructions
*Schedule II - Description of Vehicles
*Schedule X - Definitions
Exhibit A - Form of Lease
*Schedule I - Description of Vehicles
*Exhibit A - Form of Lease Supplement
*Exhibit B - Form of Delivery Date Notice
*Schedule I - Vehicle List and Purchase Price
*Exhibit C-1 - Form of Opinion of Lessee's General Counsel
*Exhibit C-2 - Form of Opinion of Lessee's Local Counsel
*Exhibit D - Form of Officer's Certificate
*Exhibit E - Form of Assumption Agreement
*Exhibit F - Form of Investor's Letter
*Exhibit G - Form of Schedule I to Lease Supplement
*Exhibit H - Form of Schedule II to Lease Supplement
* Not filed as an exhibit to form 10-Q
<PAGE> 5
PARTICIPATION AGREEMENT
-----------------------
THIS PARTICIPATION AGREEMENT, dated as of March 15, 1996 (this
"Participation Agreement"), is entered into among ROADWAY EXPRESS INC., a
Delaware corporation, as Lessee ("Lessee"), ABN AMRO BANK N.V., a bank organized
under the laws of the Netherlands, not in its individual capacity, except as
otherwise expressly provided herein, but solely as Agent for the Lessors (the
"Agent"), and the several Lessors listed on Schedule I hereto (together with
their respective permitted successors, assigns and transferees, each a "Lessor"
and collectively the "Lessors").
WHEREAS, on each Delivery Date, Lessee will transfer to Agent, for the
benefit of Lessors, and Agent, on behalf of Lessors, will purchase and receive
from Lessee, an interest in certain of the Vehicles described on Schedule II
hereto;
WHEREAS, upon the transfer of the Vehicles on each Delivery Date,
Agent, on behalf of Lessors, will lease such Vehicles to Lessee and Lessee will
lease such Vehicles from Agent, for the benefit of Lessors, pursuant to the
terms of the Lease substantially in the form of Exhibit A hereto; and
WHEREAS, on the final Delivery Date during each Interim Period Lessee
shall execute and deliver to Agent a Lease Supplement in the form of Exhibit A
to the Lease covering the Vehicles purchased on all of the Delivery Dates
occurring during such Interim Period;
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereto agree as follows:
I
-
Definitions
-----------
Capitalized terms used but not defined herein (including those used in
the foregoing recitals) shall have the meanings specified in Schedule X hereto
unless the context otherwise requires, which Schedule X shall for all purposes
constitute a part of this Participation Agreement.
II
--
Purchase and Lease of Vehicles
------------------------------
II.1 FUNDINGS; PAYMENT OF PURCHASE PRICE.
-----------------------------------------------
(a) Subject to the terms and conditions hereinafter set forth, and in
reliance on the representations and warranties contained herein or made pursuant
hereto, upon receipt of each Delivery Date Notice, each Lessor shall transfer to
Agent on the specified Delivery Date an amount equal to the product of the
aggregate Purchase Price of the Vehicles specified in such Delivery Date Notice,
multiplied by such Lessor's Commitment Percentage (each such transfer being
referred to herein as a "Funding"). In no event
-1-
<PAGE> 6
shall any Lessor be required to provide funds under this Participation Agreement
in an aggregate amount exceeding such Lessor's Commitment.
(b) Remittances pursuant to this Section 2.1 shall be made in
immediately available federal funds by wire transfer to the account of Agent set
forth below (or as otherwise specified by Agent to each Lessor from time to time
not less than three Business Days prior to the date of the requested Funding)
and must be received by Agent by 2:00 p.m., New York time on the applicable
Delivery Date:
Bank: ABN AMRO Bank N.V.
New York Branch
New York, NY
ABA Routing #: 026009580
Account #: 651001063441
Payee: ABN AMRO Bank N.V., Pittsburgh Branch
Reference: Roadway Express, Inc.
(c) If the Agent determines that any Lessor (a "Defaulting
Lessor") will not make available the amount (the "Defaulted Amount") which would
constitute its Commitment Percentage of the total Purchase Price of the Vehicles
specified in a Delivery Date Notice, Agent shall promptly notify each other
Lessor (each, a "Non-Defaulting Lessor") and specify the additional amounts
required to be funded by each Non-Defaulting Lessor. Each Non-Defaulting Lessor,
as soon as practical after receipt of notice but not before the Delivery Date,
shall transfer to the Agent, in immediately available funds, its pro rata share
of the Defaulted Amount, determined in the same proportion that such
Non-Defaulting Lessor's Commitment bears to the aggregate Commitments of all
Non-Defaulting Lessors; provided that such amount, together with all amounts
previously funded by each Non-Defaulting Lessor, shall not exceed the
Non-Defaulting Lessor's Commitment. If the Defaulted Amount cannot be fully
funded by the Non-Defaulting Lessors, Agent shall so notify the Non-Defaulting
Lessors and give to all Non-Defaulting Lessors the opportunity to increase their
respective Commitments by notice in writing to the Agent; provided that should
the aggregate proposed increased Commitments by one or more Non-Defaulting
Lessors exceed the Defaulted Amount, Agent shall increase the Commitments of the
participating Non-Defaulting Lessors on a pro-rata basis in accordance with the
respective amounts by which such Non-Defaulting Lessors have offered to
participate, it being understood that in no event shall the aggregate amount
funded by any Lessor exceed the amount of such Lessor's Commitment, after giving
effect to any increase in such Commitment pursuant to this sentence.
In the event of any funding of all or a portion of the Defaulted Amount
by the Non-Defaulting Lessors, the following rules shall apply notwithstanding
any other provision in any Operative Agreement:
(i) The Commitment of the Defaulting Lessor shall be decreased
in an amount equal to the total aggregate increase in the Commitments of the
Non-Defaulting Lessors pursuant to this Section 2.1(c);
(ii) A Defaulting Lessor shall be obligated to fund
any deliveries occurring after its default based upon its revised Commitment
Percentage;
-2-
<PAGE> 7
(iii) A Defaulting Lessor shall not have the right to fund its
Defaulted Amount without the written consent of the Agent and Lessee and then
only to the extent such Defaulted Amount has not been funded by the
Non-Defaulting Lessors;
(iv) If and to the extent that the Defaulted Amount is not
funded by the Non-Defaulting Lessors, Agent may delete Vehicles from the
Delivery Date Notice so that the total Purchase Price of the Vehicles specified
in the Delivery Date Notice equals the aggregate revised Fundings for the
Delivery Date; and
(v) The Defaulting Lessor shall not be responsible for any
consequential damages suffered by Lessee or any of Lessee's Affiliates as a
result of its failure to so fund.
II.2 APPLICATION OF FUNDS; SALE AND LEASE OF VEHICLES. On each Delivery
Date, upon (a) receipt by Agent of all amounts to be paid by the Lessors
pursuant to Section 2.1, and (b) satisfaction or waiver of each of the
conditions set forth in Article III, (i) Agent shall purchase, for the benefit
of the Lessors, an interest in the Vehicles to be acquired on such Delivery
Date, as specified in the relevant Delivery Date Notice delivered pursuant to
Section 3.1, (ii) in consideration therefor, Agent, on behalf of the Lessors,
shall pay, from the funds made available by the Lessors pursuant to Section 2.1,
an amount equal to the aggregate Purchase Price of the interest in the Vehicles
being so sold and purchased in immediately available federal funds remitted by
wire transfer to the account specified by Lessee in the relevant Delivery Date
Notice, and (iii) Agent, on behalf of the Lessors, shall lease to Lessee the
Vehicles so purchased by Agent and Lessee shall accept delivery of and lease
from Agent such Vehicles pursuant to the Lease. Each Lessor shall hold an
undivided interest in the Vehicles equal to such Lessor's Investment Percentage.
II.3 TIME AND PLACE OF DELIVERY DATES. Each Delivery Date Closing shall
take place on the Delivery Date set forth in the relevant Delivery Date Notice,
and the Initial Delivery Date Closing shall take place at the offices of Winston
& Strawn, 35 W. Wacker Drive, Chicago, Illinois at 10:00 a.m. Chicago time,
subject to the following:
(i) no more than thirteen Fundings and thirteen Delivery Dates
may occur;
(ii) the Initial Delivery Date shall occur on a Business Day on
or prior to April 5, 1996;
(iii) the first Subsequent Delivery Date shall occur (A) on April
5, 1996 or a monthly anniversary thereof that is a Business Day if the Initial
Delivery Date occurs prior to such date or (B) if the Initial Delivery Date
occurs on April 5, 1996, on a monthly anniversary thereof that is a Business
Day;
(iv) each Subsequent Delivery Date shall occur on the 5th day of
a month if such date is a Business Day;
(v) the aggregate number of Vehicles delivered on all Delivery
Dates shall not exceed 3,250 without the consent of all Lessors; and
-3-
<PAGE> 8
(vi) in no event shall the aggregate amount advanced by the
Lessors exceed the Total Commitment.
II.4 EXCUTORY AND UNDERWRITING FEE. Lessee shall pay the Executory and
Underwriting Fee to the Agent on the Initial Delivery Date.
II.5 COMMITMENT FEE. On each Payment Date Lessee shall pay to Agent, for
the benefit of the Lessors, a commitment fee (the "Commitment Fee") equal to the
amount accrued on the unfunded portion of the Total Commitment from the date
hereof through such Payment Date and remaining unpaid at the rate of .15% per
annum.
III
---
Conditions to Delivery Date Closings
------------------------------------
The obligation of each Lessor and Agent to perform its obligations on any
Delivery Date, and of each Lessor to make its Funding, shall be subject to the
fulfillment to the satisfaction of (including, with respect to writings, such
writings being in form and substance reasonably satisfactory to the addressee
or beneficiary thereof), or the waiver in writing by, each Lessor and Agent of
the conditions precedent set forth in this Article III on or prior to such
Delivery Date (except that the obligation of any party hereto shall not be
subject to the performance or compliance of such party or of any of such party's
Affiliates).
III.1 DELIVERY DATE NOTICE; INVOICES. Lessee shall have delivered to Agent
and each Lessor, not later than 1:00 p.m. Eastern time not earlier than the
tenth (10th) and not later than the third (3rd) Business Day prior to the
proposed Delivery Date, an irrevocable notice (a "Delivery Date Notice")
substantially in the form of Exhibit B, specifying (i) the proposed Delivery
Date, (ii) a description (including model, make, serial number and registration)
of each Vehicle to be purchased on such Delivery Date and a representation and
warranty that as of the date Lessee takes possession of each such Vehicle and at
all times thereafter, such Vehicle will either be (a) used in interstate
commerce, titled in a State with respect to which Agent and Lessors have
received an opinion in the form of Exhibit C-2 and registered in a State which
is a party to the International Registration Plan or (b) used in intrastate
commerce, registered in the State in which it is so used and titled in a State
with respect to which Agent and Lessors have received an opinion in the form of
Exhibit C-2, (iii) the respective Purchase Prices of such Vehicles, and (iv)
wire transfer instructions for the disbursement of funds. Concurrently with each
Delivery Date Notice, Lessee shall deliver to Agent true and correct copies of
the remanufacturer's invoice for the Vehicles to be delivered on such Delivery
Date, which invoices shall set forth the Invoice Cost of each such Vehicle. All
Vehicles shall be acceptable to the Required Lessors.
III.2 APPRAISALS. At least three Business Days prior to the Initial
Delivery Date, Agent and each Lessor shall have received an Appraisal to their
reasonable satisfaction opining:
(a) that the Appraised Value of the Vehicles to be delivered
with respect to each Interim Period is reasonably expected to be as follows:
-4-
<PAGE> 9
Vehicles Delivered in
First Interim Period
--------------------
Date Value
---- -----
Sum of Appraised Values of Vehicles
on the applicable Lease Commencement Date $12,400,000
End of Base Period $ 8,812,500
End of First Renewal Term $ 7,162,500
End of Second Renewal Term $ 5,262,500
End of Third Renewal Term $ 3,725,000
Vehicles Delivered in
Second Interim Period
---------------------
Date Value
---- -----
Sum of Appraised Values of Vehicles
on the applicable Lease Commencement Date $12,400,000
End of Base Period $ 8,812,500
End of First Renewal Term $ 7,162,500
End of Second Renewal Term $ 5,262,500
End of Third Renewal Term $ 3,725,000
(b) that the remaining economic useful life of each Vehicle is not less
than eight (8) years from the applicable Lease Commencement Date; and
(c) that the values set forth in clause (a) above assume an increase for
inflation of 2% per annum, and that such inflation assumption is reasonable.
III.3 PARTICIPATION AGREEMENT. On or prior to the Initial Delivery Date,
each of the Participants shall have received a fully executed counterpart of
this Participation Agreement.
III.4 LEASE. On or prior to the Initial Delivery Date, each Participant
shall have received a fully executed counterpart of the Lease.
III.5 LEASE SUPPLEMENTS. On the last Delivery Date in each Interim Period,
Lessee shall execute and deliver to Agent and each Lessor a Lease Supplement in
form and substance reasonably satisfactory to Lessors and substantially in the
form of Exhibit A to the Lease (each a "Lease Supplement"); provided, however,
only Agent shall receive the Lease Supplement delivered on a particular Delivery
Date marked "Counterpart No. 1 - Agent's Original Copy". Each Lease Supplement
to be executed and delivered by Lessee on each Delivery Date shall set forth:
(a) in Schedule I thereto, a description of and the Purchase Price for the
Vehicles covered thereby; and
(b) in Schedule II thereto, the Interest Only Rent, a schedule of the
installments of Fixed Rent, the Payment Dates therefor payable during the Base
Period and during each Renewal Term applicable thereto, the Supplement Balance
of such Lease Supplement as of the Delivery Date therefor and as of each Payment
Date in the Base Term and each Renewal Term applicable thereto, assuming in each
case that all installments of Fixed
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Rent due and payable thereunder to and including such Payment Date have been
paid, (iii) the Lease Supplement Termination Percentages applicable thereto,
(iv) the Lease Supplement Lessee Risk Percentages applicable thereto and (v) the
Lease Supplement Lessor Risk Percentages applicable thereto.
An amortization schedule, providing for equal quarterly installments of Fixed
Rent and Variable Rent over the full five years of the Lease Term (that is, the
Base Term and the three Renewal Terms), will be prepared for each Lease
Supplement using the Interest Rate as determined on the date of the Delivery
Date Notice delivered with respect to such Lease Supplement, such that at the
end of the Lease Term for such Lease Supplement the Supplement Balance of such
Lease Supplement shall be equal to the Appraised Value at such date of the
Vehicles subject to such Lease Supplement. The installments of Fixed Rent so
determined shall be set forth in Schedule II to such Lease Supplement and shall
be payable by Lessee on the dates and in the amounts set forth in said Schedule
II. The installments of Variable Rent shall vary over the Lease Term, based upon
changes in the applicable Interest Rate. Schedules I and II to each Lease
Supplement shall be prepared by Agent, and the items set forth by Agent in such
Schedules shall be conclusive and binding upon Lessee for all purposes
hereunder. To assist the Agent in preparing Schedules I and II to each Lease
Supplement, attached hereto as Exhibits G and H are hypothetical Schedules I and
II which have been prepared using certain assumed information.
III.6 FINANCIAL RECORDS. At least three (3) Business Days prior to the
Initial Delivery Date, Lessee shall have delivered to Agent and Lessors copies
of its financial statements dated December 31, 1995 prepared in accordance with
GAAP, applied on a consistent basis throughout the periods covered thereby and
on a basis consistent with prior periods (except as disclosed therein).
III.7 FINANCIAL STATEMENTS. On or prior to the Initial Delivery Date, Agent
shall have received from Lessee duly executed UCC financing statements covering
all of Lessee's pup trailers that Lessee intends to have remanufactured during
the next four years, identifying Lessee as debtor and Agent as secured party for
the benefit of the Lessors, and describing the Lease as a secured transaction,
and such financing statements shall have been filed in (a) the jurisdiction in
which Lessee has its principal office and (b) each jurisdiction in which any
such Vehicle is or is to be titled. If any such Vehicles not scheduled to be
included as Vehicles under the Lease on or prior to the Second Lease
Commencement Date pursuant to a Lease Supplement are ultimately not included
under any expended lease program between Lessee and Agent, for the benefit of
Lessors, Agent will, upon the request of Lessee, execute such amendments to such
UCC financing statements as shall be necessary to release the lien of Agent
covering such Vehicles in all applicable jurisdictions.
III.8 CERTIFICATES OF TITLE. On or prior to each Delivery Date, Agent and
each Lessor shall have received a duly executed Officer's Certificate from
Lessee, certifying that (a) Lessee has submitted to each applicable motor
vehicle Authority the Certificate of Title or Certificate of Origin for each
Vehicle to be delivered on such Delivery Date, together with (i) applications
duly completed by Lessee requesting that such Authority record the interests of
Agent, on behalf of the Lessors, as lienholder on each such Certificate of Title
and (ii) payment of all applicable fees and charges and (b) as so submitted,
such Certificates of
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<PAGE> 11
Title do not evidence title, or any interest in or Lien against title, in any
such Vehicle in any Person other than the Lessee and the Agent.
III.9 TRANSACTION COSTS; FEES. On or prior to each Delivery Date, Lessee
shall have paid to Agent, for the benefit of Agent and the Lessors, any
Transaction Costs invoiced and not previously paid. Such payment shall be made
by wire transfer of immediately available funds to the account specified for
Agent at Schedule I.
III.10 OPINIONS OF COUNSEL. On or prior to the Initial Delivery Date, each
Lessor and Agent shall have received the opinions of (a) John M. Glenn, Vice
President and General Counsel to Lessee, substantially to the effect of the
matters set forth in Exhibit C-1, and (b) Anderson, Crump, Duzane & Maxwell,
special Tennessee counsel to Lessee, substantially to the effect of the matters
set forth in Exhibit C-2. By their execution hereof, Lessee expressly instructs
Anderson, Crump, Duzane & Maxwell and such general counsel to execute and
deliver such opinions to Agent and the Lessors. To the extent that any Vehicle
to be delivered on any Delivery Date is titled in a jurisdiction with respect to
which Agent and the Lessors have not previously received a satisfactory opinion
or memorandum of counsel establishing to their satisfaction that title to such
Vehicle may be held in the name of the Lessee thereof, with the interest of
Agent, as lienholder on behalf of the Lessors, noted on the Certificate of Title
(and that the Lien of Agent is thereby perfected), then Lessee shall cause such
an opinion or memorandum in substantially the form of Exhibit C-2 and
satisfactory to the Lessors to be delivered to Agent and each Lessor on or prior
to such Delivery Date.
III.11 CORPORATE STATUS AND PROCEEDINGS. On or prior to the Initial
Delivery Date, Agent shall have received:
(a) certificates of existence and good standing with respect to Lessee from
the Secretary of State of the State of its incorporation, dated no earlier than
the 15th day prior to the Initial Delivery Date; and
(b) with respect to Lessee, an Officer's Certificate substantially in the
form of Exhibit D, dated the Initial Delivery Date, with respect to such
Person's governing documents, resolutions and incumbent officers,
representations and warranties and absence of defaults.
III.12 CONSENTS AND APPROVALS. On or prior to the Initial Delivery Date,
all necessary consents, approvals and authorizations of, and declarations,
registrations and filings with, Authorities and nongovernmental Persons required
to consummate the transactions contemplated by this Agreement and the other
Operative Agreements shall have been obtained or made by Lessee and shall be in
full force and effect.
III.13 PAYMENT OF IMPOSITIONS. All Impositions payable on or prior to each
Delivery Date in connection with the execution, delivery, recording or filing of
any of the Operative Agreements, in connection with the filing of any of the
financing statements, any applications regarding certificates of title and any
other documents, in connection with the consummation of any other transactions
contemplated hereby or by any of the other Operative Agreements, shall have been
paid in full by Lessee.
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<PAGE> 12
III.14 SEARCH REPORTS. Prior to each Delivery Date, Agent shall have
received reports acceptable to Agent and counsel to the Lessors as to Lessee by
the office of the Secretaries of State and the appropriate county filing or
recording offices (if applicable) of each jurisdiction contemplated by Section
3.7, each dated as close to the relevant Delivery Date as practicable, in
respect of a search of the applicable UCC files and any indices of Liens
maintained by such offices (including, if applicable, indices of judgment,
revenue and tax liens).
III.15 INSURANCE. On or prior to the Initial Delivery Date, Agent shall
have received (and each Lessor shall have received a copy of) current
certificates to the effect that insurance complying with Section 7.1 of the
Lease is in full force and effect, and there shall be no past due premiums in
respect of any such insurance.
III.16 PROCEEDINGS SATISFACTORY, ETC. All proceedings taken in connection
with such Delivery Date and all documents relating thereto shall be reasonably
satisfactory to each Participant and its counsel, and each Participant and its
counsel shall have received copies of such documents as such Participant or its
counsel may reasonably request in connection therewith, all in form and
substance reasonably satisfactory to such Participant and its counsel.
III.17 ABSENCE OF MATERIAL ADVERSE EFFFECT. Since December 31, 1995, no
Material Adverse Effect shall have occurred and be continuing.
III.18 REPRESENTATIONS AND WARRANTIES TRUE; ABSENCE OF DEFAULTS. Each of
the representations and warranties made by or on behalf of Lessee under the
Operative Agreements shall be true on and as of each Delivery Date, and no
Incipient Default or Event of Default shall have occurred and be continuing on
and as of each Delivery Date.
IV
--
General Provisions
------------------
IV.1 NATURE OF TRANSACTION. It is the intent of the Participants that: (a)
the transaction contemplated hereby constitutes an operating lease from Agent
and Lessors to Lessee for purposes of Lessee's financial reporting, (b) the
transaction contemplated hereby preserves ownership in the Vehicles to Lessee
for purposes of Federal and state income tax, bankruptcy and UCC purposes, (c)
the Lease grants a security interest in the Vehicles and the other Collateral to
Agent for the benefit of Agent and the Lessors, and (d) the obligations of
Lessee to pay Fixed Rent and Variable Rent shall be treated as payments of
principal and interest, respectively. Nevertheless, Lessee acknowledges and
agrees that Agent has not made any representations or warranties concerning the
tax, accounting or legal characteristics of the Operative Agreements and that
Lessee has obtained and relied upon such tax, accounting and legal advice
concerning the Operative Agreements as it deems appropriate. Except as
specifically provided for herein or in the Lease, Agent, for the benefit of the
Lessors, shall retain an interest in the Vehicles, free and clear of all Liens
other than Permitted Liens, as security for the obligations of Lessee under the
Operative Agreements. Lessee shall not have any right, title or interest in the
Vehicles except as expressly set forth in this Agreement or in the
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<PAGE> 13
Lease. Without limiting the foregoing, Lessee shall be permitted to be named as
the record owner of each Vehicle leased by Lessee on the Certificate of Title
and the registration issued for such Vehicle by each applicable Authority so
long as Agent is listed on the same Certificate of Title as having a security
interest in the Vehicle or Lessee has taken such other steps as may be necessary
to perfect Agent's security interest, on behalf of the Lessors, in such Vehicle.
Other than Agent, who will hold a security interest on behalf of the Lessors,
and the Lessors, no Person shall be named on the Certificate of Title of any
Vehicle as having a security interest in such Vehicle.
IV.2 REPLACEMENTS. Lessors hereby agree that they shall instruct Agent to
release a Part or Vehicle from the Lease and evidence such release by the
execution and delivery of a termination statement release, a release of Lien
from the applicable Certificate of Title and such other documents as may be
required to release the replaced Part or Vehicle from the Lease and which are in
form and substance satisfactory to the Required Lessors subject to the
satisfaction of the conditions set forth in the Lease with respect to the
release of such Part or Vehicle.
V
-
Representations and Warranties
------------------------------
V.1 REPRESENTATIONS AND WARRANTIES OF LESSEE. As of each Delivery Date,
Lessee makes the representations and warranties set forth in this Section 5.1 to
Agent and each Lessor:
(a) TITLE. Lessee has record title to each of the Vehicles listed opposite
such Lessee's name on Schedule I to the applicable Delivery Date Notice or has
beneficial title to such Vehicle with record title being subject only to the
issuance in the ordinary course of the original Certificate of Title, for which
an application has already been submitted to the appropriate titling Authority,
and each of the Vehicles and all of the other Collateral is free from all Liens
except for Permitted Liens.
(b) PERFECTION OF SECURITY INTERESTS. No filing, recordation or
registration is necessary or advisable in order to perfect the security interest
of Agent, for the benefit of the Lessors, in the Vehicles and other Collateral
referred to in the foregoing subsection (a) other than (i) the filing or
recording of financing statements under Article 9 of the applicable UCC in the
jurisdictions contemplated by Section 3.7, and the recordation on the
Certificate of Title for each Vehicle with the applicable Authority of the
security interest of Agent on behalf of the Lessors or (ii) in the case of any
Sublease, the delivery to Agent of the chattel paper original of such Sublease,
and upon the actions described in the foregoing clauses (i) and (ii) the
security interests in the Vehicles and the other Collateral are enforceable,
properly perfected, first-priority Liens, subject only to Permitted Liens;
provided, however, that such actions may not be effective to perfect such
security interest in certain Intellectual Property Collateral that can only be
perfected by filing with the United States Patent and Trademark Office and
certain items described in clause (e) of the definition of "Collateral" to the
extent such items are stored in (but not made a part of) a Vehicle and located
from time to time in jurisdictions where no such filing has been made or to the
extent that any
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such item consists of a type of collateral in which a security interest cannot
be perfected by taking such actions.
(c) APPRAISAL DATA. The information provided by Lessee to the Appraiser and
forming the basis for the conclusions set forth in the Appraisal, taken as a
whole, was true and correct in all material respects and did not omit any
information necessary to make the information provided not materially misleading
as of the time provided.
(d) CORPORATE EXISTENCE. Lessee is a corporation duly incorporated validly
existing and in good standing under the laws of the State of Delaware, and
Lessee is duly qualified or licensed and in good standing as a foreign
corporation authorized to do business in each state where, because of the nature
of its activities or properties, such qualification or licensing is required,
except for such jurisdictions where the failure to be so qualified or licensed
would not have a Material Adverse Effect.
(e) CORPORATE AUTHORITY. Lessee has all requisite corporate power and
authority to execute, deliver, and perform its respective obligations under each
Operative Agreement to which it is a party.
(f) AUTHORZATION; NON-CONTRAVENTION. The execution and delivery by Lessee
of the Operative Agreements to which it is or will be a party, and the
performance by Lessee of its obligations under such Operative Agreements, have
been duly authorized by all necessary corporate action (including any necessary
stockholder action) on its part, and do not and will not: (i) violate any
provision of any law, rule or regulation or of any order, writ, judgment,
decree, determination or award, which violation or violations would have,
individually or in the aggregate, a Material Adverse Effect; (ii) violate any
provision of the charter or bylaws of Lessee; (iii) result in a breach of or
constitute a default under any indenture, loan or credit agreement, or any other
agreement or instrument to which Lessee is a party or by which Lessee or its
properties may be bound or affected, which breaches or default would have,
individually or in the aggregate, a Material Adverse Effect; or (iv) result in,
or require, the creation or imposition of any Lien of any nature upon or with
respect to any of the properties now owned or hereafter acquired by Lessee
(other than the security interest contemplated by the Lease); and Lessee is not
in default under or in violation of its charter or by-laws.
(g) BINDING EFFECT. Each of the Operative Agreements to which Lessee is or
will be a party constitutes the legal, valid and binding obligation of Lessee,
enforceable against Lessee, in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, arrangement, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
(h) ABSENCE OF LITIGATION, ETC. There is no litigation (including, without
limitation, derivative actions), arbitration or governmental proceedings pending
or, to the knowledge of Lessee, threatened against Lessee in which there is a
reasonable possibility of an adverse decision which, if adversely determined,
would have a Material Adverse Effect.
(i) CONSENTS, ETC. No authorization, consent, approval, license or formal
exemption from, nor any filing, declaration or registration with, any
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<PAGE> 15
Authority, including, without limitation, the Securities and Exchange
Commission, or with any securities exchange, is or will be required in
connection with the execution and delivery by Lessee of the Operative Agreements
to which it is or will be a party, the performance by Lessee of its obligations
under such Operative Agreements or the ownership, operation and maintenance of
the Vehicles as contemplated by the Operative Agreements, except as described in
Section 5.1(b).
(j) LOCATION OF OFFICES. The principal place of business and chief
executive office (as such term is used in Article 9 of the UCC) of Lessee is
located at 1077 Gorge Boulevard, Akron, Ohio 44310.
(k) ERISA. Relying upon the accuracy of the representations in Section
5.2(a) hereof, the execution and delivery of the Operative Agreements by Lessee
will not involve any prohibited transaction within the meaning of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended.
(l) TAXES. Lessee has filed or caused to be filed all United States Federal
and all other material tax returns that are required to be filed by Lessee, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessment received by Lessee to the extent that such taxes
have become due and payable except to the extent that taxes due, but unpaid, are
being contested in good faith by Lessee by appropriate action or proceeding and
has established or caused to be established reserves that are adequate for the
payment thereof in accordance with GAAP.
(m) COMPLIANCE WITH LAWS. The Vehicles, the properties from which they are
operated and serviced and the current operation thereof and thereon do not
violate any laws, rules, regulations, or orders of any Authorities that are
applicable thereto, including, without limitation, any thereof relating to
matters of occupational safety and health or Environmental Laws, or motor
vehicles or the titling or registration thereof, except for such violations as
would not have, individually or in the aggregate, a Material Adverse Effect.
(n) DISCLOSURE. Neither this Participation Agreement, nor any offering
materials, nor the other Operative Agreements to which Lessee is or will be a
party nor the other documents and certificates furnished pursuant to this
Participation Agreement to Agent, or the Lessors, in connection with the
transactions contemplated by this Participation Agreement, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in the light of the
circumstances under which they were made, not misleading as of the time
furnished.
(o) IMPOSITIONS. No sales, use, excise, transfer or other tax, fee or
imposition shall result from the manufacture, remanufacture, titling,
registration or delivery of a Vehicle on or before any Delivery Date, except
such taxes, fees or impositions that have been paid in full on or prior to the
applicable Delivery Date. The cost of remanufacturing each Vehicle is 75% or
less of the price of a comparable new vehicle, and the transactions contemplated
by the Operative Agreements are not subject to the U.S. federal excise tax
imposed by Section 4051(a) of the Code.
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<PAGE> 16
(p) CERTAIN VEHICLE MATTERS.
(i) Each Vehicle accepted by the Lessors on a Delivery Date which is
to be used in interstate commerce will be properly registered pursuant to the
International Registration Plan as in effect in the state in which such
Vehicle is titled on such Delivery Date.
(ii) Each Vehicle has a gross weight rating of more than 16,000
pounds.
(iii) Lessee is not in the business of selling vehicles and the
Vehicles do not constitute "inventory" under any applicable UCC.
(iv) In connection with the submission of each application to have the
Lien of Agent, for the benefit of the Lessors, listed on each Certificate of
Title, Lessee has submitted sufficient evidence of ownership of the applicable
Vehicle to the relevant motor vehicle titling Authority.
(q) REGISTRATION OF VEHICLES USED IN INTRASTATE OR INTERSTATE COMMERCE.
Each Vehicle accepted by the Lessors on a Delivery Date will be, when Lessee
takes possession thereof and at all times thereafter, either (i) used in
interstate commerce, titled in a State with respect to which Agent has received
an opinion in the form of Exhibit C-1 and registered in a State which is a party
to the International Registration Plan or (ii) used in intrastate commerce,
registered in the State in which it is so used and titled in a State with
respect to which Agent and Lessors have received an opinion in the form of
Exhibit C-1.
(r) HOLDING COMPANY. Lessee is not subject to regulation as a "holding
company," an "affiliate" of a "holding company", or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(s) INVESTMENT COMPANY ACT. Lessee is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(t) INTELLECTUAL PROPERTY. To Lessee's knowledge or as represented in
writing by a vendor of the Vehicles which writing has been provided to Agent,
there are no patents, patent rights, trademarks, service marks, trade names,
copyrights, licenses or other intellectual property rights with respect to the
Vehicles, or proprietary, patented or patentable modifications or Parts used in
connection with the Vehicles, the unavailability of which would have a material
adverse effect on the current Fair Market Value of the Vehicles.
(u) SUBJECTION TO REGULATION. Neither Agent nor any Lessor will, solely by
reason of entering into the Operative Agreements or the consummation and
performance of the transactions contemplated thereby (other than upon the
exercise of remedies under the Lease) (i) be required to qualify to do business
in any jurisdiction, (ii) become subject to ongoing regulation by any Authority
as a company engaged in the business of Lessee in any jurisdiction or (iii)
become subject to any other ongoing regulation of its operations by any
Authority (other than any taxing Authority).
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<PAGE> 17
(v) USE OF PROCEEDS. The use of the proceeds from the transaction
contemplated by the Operative Agreements will not violate or result in any
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System.
(w) ABSENCE OF DEFAULTS. No Incipient Default or Event of Default has
occurred and is continuing, and since December 31, 1995 there has occurred no
Material Adverse Effect.
(x) ABSENCE OF CASUALTY. No Casualty has occurred with respect to the
Vehicles being delivered on such Delivery Date.
(y) INSURANCE. All insurance coverages required by Section 7.1 of the Lease
are in full force and effect and there are no past due premiums in respect of
any such insurance.
(z) FINANCIAL REPORTS. The financial statements delivered by Lessee to
Agent pursuant to Section 3.6 will fairly present the financial condition of
Lessee and its consolidated Subsidiaries at the dates thereof and the
consolidated results of their operations for the periods covered thereby.
(aa) PRIVATE OFFERING. Neither Lessee, nor anyone acting on behalf of it,
has taken or will take any action which will subject the issue and sale of any
interest being acquired by Agent or the Lessors under the Operative Agreements
to the requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), and, assuming the truth and accuracy of the representations
set forth in Section 5.2(b), the issuance, sale and delivery of such interests
under the circumstances contemplated by this Agreement do not require the
registration of such interests under the Securities Act or the qualification of
any of the Operative Agreements under the Trust Indenture Act of 1939, as
amended.
(bb) BROKERS, ETC. Lessee has not engaged or authorized any broker, finder,
investment banker or other third party to act on its behalf, directly or
indirectly, as a broker, finder, investment banker, agent or in any other like
capacity in connection with any of the Operative Agreements or the transactions
contemplated thereby. Lessee shall be responsible for, and shall indemnify,
defend and hold Agent and each Lessor harmless from and against any and all
claims, liabilities or demands by any Person for broker's, finder's, investment
banker's or agent's fees, commissions or other entitlements with respect the
Operative Agreements and the transactions contemplated thereby (except to the
extent arising from a breach of Sections 5.2(c) or 5.3(f)).
V.2 REPRESENTATIONS AND WARRANTIES OF LESSORS. Each of Lessors hereby
represents and warrants severally but not jointly to the other Participants as
set forth in this Section 5.2.
(a) ERISA. Such Lessor is not and will not be funding any of its Commitment
or performing any of its obligations under the Operative Agreements with the
assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which
is subject to Title I of ERISA, or a "plan" (as defined in Section 4975(e)(1) of
the Code.
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<PAGE> 18
(b) INVESTMENT. The interest being acquired by such Lessor under the
Operative Agreements is being acquired for its own account, without any view to
the distribution thereof or any interest therein, provided that such Lessor
shall be entitled to assign, transfer or convey its interest in accordance with
Section 11.8.
(c) BROKERS, ETC. Such Lessor has not engaged or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker, finder, investment banker, agent or in any other like
capacity in connection with any of the Operative Agreements or the transactions
contemplated thereby.
V.3 REPRESENTATIONS AND WARRANTIES OF AGENT. ABN AMRO Bank N.V., in its
individual capacity, hereby represents and warrants to the other Participants as
set forth in this Section 5.2.
(a) ORGANIZATION AND AUTHORITY. Agent is a corporation duly organized and
validly existing in good standing under the laws of the Netherlands and has the
corporate power and authority to enter into and perform its obligations under
the Operative Agreements.
(b) AUTHORIZATION; BINDING EFFECT. The Operative Agreements to which Agent
is or will be a party have been or will be, on the date required to be delivered
hereby, duly authorized, executed and delivered by Agent, and this Participation
Agreement is, and such other Operative Agreements are, or, when so executed and
delivered by Agent will be, valid, legal and binding agreements of Agent,
enforceable against Agent in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(c) NON-CONTRAVENTION. Neither the execution and delivery by Agent of the
Operative Agreements to which it is or will be a party, either in its individual
capacity, as Agent, or both, nor compliance with the terms and provisions
thereof, conflicts with, results in a breach of, constitutes a default under
(with or without the giving of notice or lapse of time or both), or violates any
of the terms, conditions or provisions of: (i) the charter or governing
documents of Agent; (ii) any bond, debenture, note, mortgage, indenture,
agreement, lease or other instrument to which Agent, either in its individual
capacity, as Agent or both, is now a party or by which it or its property,
either in its individual capacity, as Agent or both, is bound or affected, where
such conflict, breach, default or violation would be reasonably likely to
materially and adversely affect the ability of Agent, either in its individual
capacity, as Agent or both, to perform its obligations under any Operative
Agreement to which it is or will be a party, either in its individual capacity,
as Agent or both; or (iii) any of the terms, conditions or provisions of any
law, rule, regulation, order, injunction or decree of any Authority applicable
to it in its individual capacity, as Agent or both, where such conflict, breach,
default or violation would be reasonably likely to materially and adversely
affect the ability of Agent, either in its individual capacity, as Agent or
both, to perform its obligations under any Operative Agreement to which it is or
will be a party.
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<PAGE> 19
(d) ABSENCE OF LITIGATION, ETC. There is no litigation, arbitration or
governmental proceedings pending or, to the best knowledge of Agent, threatened
against it which would be reasonably likely to materially and adversely affect
Agent's ability to perform its obligations under the Operative Agreements to
which it is party.
(e) CONSENTS, ETC. No authorization, consent, approval, license or formal
exemption from, nor any filing, declaration or registration with, any Authority,
is or will be required in connection with the execution and delivery by Agent of
the Operative Agreements to which it is party or the performance by Agent of its
obligations under such Operative Agreements.
(f) BROKERS, ETC. Agent has not engaged or authorized any broker, finder,
investment banker or other third party (other than ABN AMRO North America, Inc.)
to act on its behalf, directly or indirectly, as a broker, finder, investment
banker, agent or in any other like capacity in connection with any of the
Operative Agreements or the transactions contemplated thereby.
VI
--
Covenants
---------
VI.1 COVENANTS OF LESSEE. Lessee, covenants and agrees with the Lessors and
Agent that during the Lease Term, and, if Lessee has not purchased the Vehicles
pursuant to the Lease, for 90 days thereafter, Lessee shall comply with each of
the following provisions of this Section 6.1.
(a) CORPORATE EXISTENCE, ETC. Subject to Section 6.1(c) and any merger
permitted thereby pursuant to which Lessee ceases to exist (in which case this
subsection (a) shall apply to the surviving corporation of such merger), Lessee
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and powers and franchises and
its power and authority to perform its obligations under the Operative
Agreements, including, without limitation, any necessary qualification or
licensing in any foreign jurisdiction, except where the failure to be so
qualified would not have a Material Adverse Effect.
(b) COMPLIANCE WITH LAWS. Lessee shall comply with all applicable statutes,
regulations, franchises, and orders of, and all applicable restrictions imposed
by, any Authority, in respect of the conduct of its business and the ownership
of its properties (including, without limitation, applicable statutes, rules,
ordinances, regulations and orders relating to Environmental Laws), except for
such instances of non-compliance which would not have, individually or in the
aggregate, a Material Adverse Effect. Without limiting the foregoing, Lessee
shall at all times be responsible for, and shall comply with, all provisions of
any Authority with respect to the titling and registration of Vehicles.
(c) MERGERS, CONSOLIDATIONS, DISPOSITIONS. Lessee shall not consolidate
with or merge into any other Person, or convey, transfer or lease all or
substantially all of its assets to any other Person, unless:
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(i) the Person resulting from such consolidation or merger (if other than
Lessee), or the Person which acquires all or substantially all of Lessee's
assets (the "Surviving Corporation"), is a corporation organized under the laws
of the United States of America or any State thereof, and executes and delivers
to Agent and each Lessor an Assumption Agreement substantially in the form of
Exhibit E hereto (the "Assumption Agreement"), pursuant to which the Surviving
Corporation shall succeed to and assume all of the obligations of Lessee with
which it is so merged or whose assets it so acquires under the Operative
Agreements and for all purposes thereafter be deemed to be such Lessee
thereunder;
(ii) such Surviving Corporation meets the following credit standards: (A)
after giving effect to such transaction, the Surviving Corporation shall be in
compliance with the financial tests set forth in paragraphs (ii) and (iii) of
Section 6.1(i) hereof as of the end of, or for the period ending on, the last
day of its most recently ended fiscal quarter, as the case may be; and
thereafter, the Surviving Corporation shall be required to meet such tests as
Lessee hereunder; (B) after giving effect to such transaction, the Surviving
Corporation shall have a Consolidated Tangible Net Worth equal to the greater of
(1) eighty-five percent (85%) of its Consolidated Tangible Net Worth as of the
end of its most recently ended fiscal quarter (the "Measurement Date"), and (2)
the Consolidated Tangible Net Worth of Lessee as of the end of its most recently
ended fiscal quarter (such amount, the "Minimum Net Worth"), and (C) thereafter,
the Surviving Corporation shall maintain a minimum Consolidated Tangible Net
Worth equal to the greater of (1) sum of (i) eighty-five percent (85%) of its
Consolidated Tangible Net Worth as of the Measurement Date plus (ii) fifty
percent (50%) of its Consolidated Net Income from the Measurement Date, with no
reduction for losses, and (2) the Minimum Net Worth, such amount to be
calculated at the end of each fiscal quarter;
(iii) at the time of, and immediately after giving effect to, such
transaction, there shall exist no Incipient Default, Event of Default or any
violation of any covenant or agreement under any of the Operative Agreements;
(iv) promptly upon the consummation of such transaction, such Surviving
Corporation (if other than Lessee) shall cause the Certificate of Title for each
Vehicle acquired by it pursuant to such transaction to be reissued with such
Surviving Corporation listed as the holder of title to each such Vehicle (unless
it has provided to Agent and each Lessor, prior to the consummation of such
transaction, an opinion of counsel acceptable to Agent to the effect that such
re-titling is not required under applicable law), with the interests of Agent
and Lessors as lienholder duly noted thereon, and such Surviving Person shall
comply with the provisions of Sections 6.1(f) and (g) in connection therewith,
for such purposes treating the date of consummation of such transaction as a
"Delivery Date"; and
(v) promptly upon the consummation of such transaction, each Lessor and
Agent shall have received an opinion of counsel to such Surviving Corporation
with respect to the validity of such transaction and as to the enforceability of
the Assumption Agreement and the other Operative Agreements against such
Surviving Corporation.
(d) LIENS. Lessee shall not incur or suffer to exist any Lien on any of the
Collateral other than Permitted Liens. Without limiting the
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foregoing, Lessee shall not assign or pledge any of its rights under any
Sublease to any Person other than Agent.
(e) CHANGE OF NAME OR LOCATION. Lessee shall furnish to Agent
notice on or before the 30th day prior to any relocation of its chief executive
office or principal place of business, or change of its name.
(f) PERFECTION OF MAINTENANCE OF SECURITY INTEREST.
(i) Lessee, at its expense, shall cause, as soon as possible,
but in any event no later than the 10th day after any request, financing
statements (and continuation statements with respect thereto) and all other
documents necessary or reasonably requested by Agent in connection with the
establishment and perfection of the interest of Agent in the Collateral, to be
recorded or filed at the locations contemplated by Section 3.7, and in such
manner, and, at its expense, shall take, or shall cause to be taken, all such
other action as may be necessary or reasonably requested by Agent or the
Required Lessors in order to establish, preserve, protect and perfect the
rights, titles and interests of Agent, on behalf of the Lessors, to the
Collateral.
(ii) All Certificates of Title relating to Vehicles delivered
on any Delivery Date shall indicate the address of Agent set forth in Section
11.4 as the address of the lienholder thereon, for the benefit of the Lessors.
(iii) Lessee shall, no later than seventy-five (75) days
following each Delivery Date, have delivered to Agent and each Lessor an
Officer's Certificate certifying that each such Certificate of Title is in the
possession of Lessee, shows Lessee as owner of record, and names Agent, on
behalf of the Lessors (and Lessors to the extent permitted under applicable law
and procedure to be so named), on the face of such Certificates of Title as
having a perfected first security interest in such Vehicles, and reflecting no
other Liens other than Permitted Liens. All Certificates of Title so held by
Lessee shall be available for inspection by Agent during normal business hours,
and Lessee shall deliver possession of such Certificates of Title to Agent
immediately upon Agent's request therefor.
(iv) Notwithstanding the foregoing, if naming Agent (and, if
permitted as aforesaid, Lessors) as a secured party on such Certificate or
Certificates of Title as hereinabove contemplated is not adequate to perfect the
first priority security interest of Agent, for the benefit of the Lessors, then
Lessee shall, upon receipt of Agent's request therefor, within the applicable
time period specified above, deliver to Agent, in addition to the original
Certificates of Title, all such other documents or filings as reasonably
required by Agent or the Required Lessors to ensure that Agent, on behalf of the
Lessors, has a perfected first priority security interest in such Vehicles.
Without limiting the foregoing, in the event that any application for
registration of such Lien on the Certificate of Title to any Vehicle shall be
rejected by the applicable Authority, Lessee shall make such corrections as may
be necessary in order that such registration shall be re-submitted to the
applicable Authority not more than fifteen (15) days following the initial
rejection thereof, and duly completed not more than sixty (60) days
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following such re-submission. Following receipt by Lessee of any Certificate of
Title as contemplated by clause (iv) hereof, Lessee shall not, without the prior
written approval of Agent, change the State of title or the Certificate of Title
of any Vehicle, apply for an additional Certificate of Title for any Vehicle, or
otherwise modify such Certificate of Title. Agent shall grant such written
approval upon Lessee's satisfaction of the provisions of this Section 6.1(f)
with respect to the perfection of Agent's security interest, on behalf of the
Lessors, in such Vehicle (or any Replacement Vehicle) and upon receipt by Agent
and each Lessor of an opinion of counsel substantially to the effect of the
matters set forth in Exhibit C-2 with respect to the jurisdiction in which such
Vehicle is to be titled or registered (to the extent that Agent and Lessors have
not previously received such an opinion of counsel with respect to such
jurisdiction). The security interest of Agent, on behalf of the Lessors, on any
Certificate of Title shall not be removed therefrom, nor shall any other
security interest be noted thereon, unless and until such Vehicle is to be
released from the Lien created by the Lease in accordance with the applicable
provisions of the Operative Agreements. Lessee shall not, without the prior
written approval of Agent, register any Vehicle in any manner that would render
Section 5.1(q) untrue with respect to such Vehicle as of any date of
determination.
It is expressly understood that to the extent that any Certificate of
Title is in the possession of Lessee, such possession shall be strictly for the
benefit of Agent and solely in accordance with the provisions of the Operative
Agreements.
(g) MANDATORY PURCHASE FOLLOWING A DELIVERY DATE. If Lessee
shall upon the expiration of the applicable time period set forth in Section
6.1(f) fail to deliver the Officer's Certificate described in Section
6.1(f)(iii) with respect to any Vehicle evidencing no other Liens other than
that of Agent, for the benefit of the Lessors, then Lessee shall, on the Payment
Date immediately following the expiration of such time period, purchase each of
the Vehicles for which Lessee has failed to satisfy any such requirement and pay
to Agent, for the benefit of the Lessors, on such Payment Date a portion of the
Lease Balance equal to the Casualty Amount for each such Vehicle. Upon Lessors'
receipt of the payments described in the preceding sentence and all Rent then
due and payable under the Lease and each of the Lease Supplements, Agent shall
transfer its interest in such Vehicle or Vehicles to Lessee in accordance with
the last two sentences of Section 12.1 of the Lease. Notwithstanding the
foregoing, if the amount of the Lease Balance repaid from the Initial Delivery
Date to any date of determination pursuant to this Section 6.1(g) and the last
sentence of Article X of the Lease exceeds $3,000,000 in the aggregate, Lessee
shall be required to repay the entire outstanding Lease Balance, together with
the applicable Agency Fee and all accrued but unpaid Variable Rent to the date
of such repayment.
(h) PERIODIC REPORTING. Lessee shall deliver to Agent:
(i) promptly following but in no event more than 60 days
following the end of each fiscal quarter Lessee's quarterly unaudited
consolidated financial statements and no more than 90 days following the end of
each fiscal year Lessee's annual audited consolidated financial statements and
prepared in accordance with GAAP, applied on a consistent basis throughout the
periods covered thereby and on a basis consistent with
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<PAGE> 23
prior periods (except as otherwise disclosed), together with, (A) in the case of
such unaudited consolidated financial statements, a certification as to accuracy
and adherence to GAAP by the Chief Financial Officer or Chief Accounting Officer
of Lessee, and (B) in the case of such annual financial statements, the report
thereon of Lessee's independent certified public accountants;
(ii) concurrently with each delivery pursuant to the foregoing
paragraph (i), but in any event not later than the 60th day after the end of
each fiscal quarter in each fiscal year of Lessee, an Officer's Certificate of
Lessee containing a calculation establishing compliance with the financial tests
set forth in subparagraph (i) of this Section 6.1 and stating that such officer
has reviewed the activities of Lessee during such period and that, to the best
of such officer's knowledge, during such period Lessee has performed and
fulfilled each and every covenant, obligation and condition contained in the
Operative Agreements, and no Incipient Default or Event of Default exists under
any of the Operative Agreements, or if such condition shall exist, specifying
the nature and status thereof; and
(iii) promptly after the filing thereof, if applicable, copies
of all registration statements and all reports on Forms 10-K, 10-Q and 8K (or
their equivalents) which Lessee shall have filed with the Securities and
Exchange Commission under the Securities Act or the Securities Exchange Act of
1934, as amended.
(i) FINANCIAL TESTS. Lessee shall:
(i) maintain a minimum Consolidated Tangible Net Worth equal
to the sum of one hundred seventy-five million dollars ($175,000,000) plus fifty
percent (50%) of Consolidated Net Income from January 1, 1996, with no reduction
for losses, to be calculated at the end of each fiscal quarter;
(ii)maintain a ratio of Consolidated Debt to Consolidated
EBITDA of not more than 3 to 1 at the end of each fiscal quarter; and
(iii) maintain a ratio of Consolidated EBITDAR divided by
Consolidated Interest Expense plus Consolidated Rental Expense of at least 1.75
to 1 at the end of each fiscal quarter, calculated on a four quarter rolling
average basis.
(j) DEFAULT AND ACCELERATION OF MATERIAL DEBT. Lessee agrees that if an
Incipient Default or an Event of Default shall occur, or if an event or
condition shall occur that results in the acceleration of the maturity of Debt
of Lessee in amounts exceeding ten million dollars ($10,000,000), or in the
event that such acceleration should occur with respect to Debt of any Affiliates
of Lessee, Lessee shall promptly notify Agent thereof and upon Agent's request,
Lessee shall immediately deliver to Agent, Certificates of Title for all of the
Vehicles, duly endorsed by Lessee in blank.
(k) SALE OF ASSETS; MAINTENANCE OF BUSINESS. Lessee will not sell, lease or
otherwise transfer any of its assets to any other Person, except for the sale,
lease or other transfer of any asset of the Lessee (i) in the ordinary course of
business; provided, that (A) the closure and sale of terminals and related real
property by Lessee shall be considered to be sales in the ordinary course of
business; and (B) the aggregate book value of all assets so sold, leased or
transferred in the ordinary course of
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<PAGE> 24
business other than pursuant to clause (A) in any period of twelve consecutive
months shall not exceed ten percent (10%) of consolidated total assets of Lessee
and its Subsidiaries as at the beginning of such twelve month period; or (ii) in
accordance with the provisions of Section 6.1(c). Lessee shall at all times
remain in the nationwide less than truckload trucking business.
(l) ERISA EVENTS. Promptly upon Lessee's becoming aware of the occurrence
of any matter or matters referred to in the following clauses (i), (ii) and
(iii) involving liability that may reasonably be expected to exceed,
individually or in the aggregate, $5,000,000, Lessee shall notify Agent and each
of the Lessors in writing specifying the nature thereof, what action Lessee is
taking or proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service with respect thereto: (i) a "Reportable
Event" as such term is defined in Section 4043 of ERISA, (ii) an "Accumulated
Funding Deficiency" as such term is defined in Section 302 of ERISA, or (iii) a
"Prohibited Transaction", as such term is defined in Section 4975 of the Code or
described in Section 406 of ERISA, in connection with any Pension Plan (or any
trust created thereunder).
(m) NOTICE OF DEFAULTS. Promptly upon, but in no event later than five (5)
days after Lessee shall have obtained Actual Knowledge thereof, Lessee shall
notify Agent and each Lessor in writing of the existence of an Incipient
Default, Event of Default, or any other matter which has resulted in or could
reasonably be expected to have a Material Adverse Effect, which notice shall
describe the nature of such Incipient Default, Event of Default or other matter
and the action Lessee is taking with respect thereto.
(n) NOTICE OF PROCEEDINGS. Promptly upon Lessee's becoming aware of any
threatened or pending investigation or court or administrative proceeding
involving Lessee or any of its Subsidiaries which could reasonably be expected
to result in a Material Adverse Effect, Lessee shall notify Agent and each of
the Lessors specifying its nature and the action Lessee is taking with respect
thereto.
(o) ADDITIONAL INFORMATION. Promptly upon receipt of a written request from
Agent or any Lessor, Lessee shall deliver to such requesting party such other
data and information as from time to time may be reasonably requested.
(p) REPORTS TO LESSORS. Lessee shall, concurrently with any notice,
delivery or other communication required to be delivered to Agent pursuant to
any Operative Agreement, deliver a copy of such notice, delivery or other
communication to each Lessor at such Lessor's current address.
VI.2 COVENANTS OF AGENT AND LESSORS. Agent, in its individual capacity, and
each of the Lessors, covenants and agrees with each of the other parties that:
(a) it will not directly or indirectly create, incur, assume or suffer to exist
any Lessor Liens arising by, through or under it on the Collateral, other than
Permitted Lessor Liens; (b) it will, at its own cost and expense, promptly take
such action in its individual capacity as may be necessary to discharge fully
such Lessor Liens created by it on the Collateral, other than Permitted Lessor
Liens; (c) it will not, except in compliance with the Operative Agreements,
sell, transfer or otherwise dispose of all or any part of the Vehicles or the
other Collateral; and
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(d) it will not claim any depreciation with respect to the Vehicles during the
term of the Lease.
VII
---
General Indemnities
-------------------
VII.1 INDEMNITY. Whether or not the transactions contemplated hereby are
consummated, to the fullest extent permitted by applicable law, Lessee waives
and releases any claims now or hereafter existing against Indemnitees on account
of, and shall indemnify, reimburse and hold the Indemnitees harmless on an
after-tax basis from, any and all claims by third parties (including, but not
limited to, claims relating to trademark or patent infringement and claims based
upon negligence, strict liability in tort, violation of laws, including, without
limitation, Environmental Laws, statutes, rules, codes or orders or claims
arising out of any loss or damage to any property or death or injury to any
Person), any losses, damages or obligations owing to third parties, any
penalties, liabilities, demands, suits, judgments or causes of action, and all
legal proceedings (either administrative or judicial), in each case whether or
not the Indemnitee is a party thereto, and any costs or expenses in connection
therewith (including costs incurred in connection with discovery) or in
connection with the enforcement of this indemnity (including reasonable
attorneys' fees and expenses, and fees and expenses of internal counsel,
incurred by the Indemnitees), including, in each case, matters based on or
arising from the negligence of Indemnitees (subject to the proviso below), which
may be imposed on, incurred by or asserted against the Indemnitees by Persons
other than Lessee (except to the extent arising by or through a claim of a third
party) in any way relating to or arising in any manner out of:
(a) the registration, purchase, manufacture, remanufacture, taking or
foreclosure of a security interest in, ownership, delivery, condition, lease,
sublease, assignment, storage, transportation, possession, use, operation,
return or other disposition of any of the Vehicles, or any defect in any such
Vehicle, arising from the material or any article used therein or from the
design, testing or use thereof, or from any maintenance, service, repair,
overhaul or testing of any such Vehicle regardless of when such defect shall be
discovered, whether or not such Vehicle is in the possession of Lessee and no
matter where it is located; or
(b) this Participation Agreement, any other Operative Agreement or any
document or certificate delivered in connection therewith, the enforcement
hereof or thereof or the consummation of the transactions contemplated hereby or
thereby;
provided that Lessee shall not be obligated to indemnify an Indemnitee for any
such claim, loss, damage, liability, obligation, penalty, demand or suit to the
extent the same results directly from:
(i) the willful misconduct or gross negligence of such Indemnitee;
(ii) the creation or existence of a Lessor Lien attributable to such
Indemnitee;
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(iii) a disposition by such Indemnitee of any Vehicle following the
purchase of such Vehicle by such Indemnitee from Agent in a foreclosure sale or
any use or operation of such Vehicle following such disposition (other than use
or operation by Lessee or Sublessee or an Affiliate, agent or representative of
Lessee); or
(iv) any Impositions described in Section 8.1 except any amount
necessary under this Section 7.1 to hold the Indemnitee harmless (subject to
Section 8.3) from all Impositions required to be paid by such Indemnitee with
respect to the receipt or accrual of such indemnity under the laws of any
Authority in the United States;
provided, however, that nothing in the preceding proviso shall be deemed to
exclude or limit any claim that any Indemnitee may have under any Operative
Agreement or applicable laws from Lessee for breach of its representations,
warranties or covenants.
VII.2 EXCESSIVE USE INDEMNITY. In the event that at the end of the Lease
Term: (a) Lessee elects the Sale Option; and (b) after paying to Agent any
amounts due under Section 11.3 of the Lease, Agent does not have sufficient
funds to reduce the Lease Balance to zero, then Lessee shall promptly pay over
to Agent the shortfall unless Lessee delivers a report from the Appraiser in
form and substance satisfactory to the Required Lessors which establishes that
the decline in value in each Vehicle which was sold pursuant to the Sale Option
from that amount anticipated for such date in the Appraiser's report delivered
with respect to such Vehicle on the applicable Delivery Date was not due to
extraordinary use, failure to maintain or replace, failure to use, workmanship
or method of installation or removal or any other cause or condition within the
power of Lessee to control or effect (each an "Excessive Use").
VII.3 INCREASED CAPITAL COSTS. If any change in, or the introduction,
adoption, effectiveness, interpretation, reinterpretation or phase-in of, any
law or regulation, directive, guideline, decision or request (whether or not
having the force of law) of any court, central bank regulator or other Authority
("Change in Law") affects or would affect the amount of capital required or
expected to be maintained by any Lessor directly or by its parent company
(including, without limitation, any reserve requirements specified under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System and then applicable to assets or liabilities consisting of and
including "Eurocurrency Liabilities" as defined in Regulation D of such Board of
Governors) and such Lessor determines (in its sole and absolute discretion) that
the rate of return on it or its parent's capital as a consequence of the Funding
made by such Lessor hereunder to pay its share of the Purchase Price is reduced
to a level below that which such Lessor or its parent could have achieved but
for the occurrence of any such circumstances, then, in any such case, upon
written notification from time to time by Lessor to Lessee, Lessee shall, within
five (5) Business Days following receipt of the statement referred to in the
next sentence, pay directly to such Lessor additional amounts sufficient to
compensate Lessor or its parent for such reduction in rate of return (subject to
Section 8.3). A statement of a Lessor as to any such additional amount or
amounts (including calculations thereof in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on Lessee. In determining
such amount, each Lessor shall use any method of
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averaging or attribution that it (in its reasonable discretion) shall deem
applicable.
VII.4 LIBO RATE UNLAWFUL. If any Lessor shall determine in good faith
(which determination shall, upon notice thereof to Lessee, be conclusive and
binding on Lessee) that a Change in Law makes it unlawful, or the central bank
or other Authority asserts that it is unlawful, for such Lessor to make,
continue or maintain any amount of such Lessor's Funding on a LIBO Rate basis,
the obligations of such Lessor to make, continue or maintain any such Funding
shall, upon such determination, forthwith be suspended until such Lessor shall
notify Lessee that the circumstances causing such suspension no longer exist,
and all Variable Rent allocable to such Lessor, commencing with the Rent Period
in which such notice is given, shall automatically be determined on a CD Rate
basis beginning on the next immediately succeeding Payment Date with respect
thereto or sooner, if required by such law or assertion.
VII.5 FUNDING LOSSES. Lessee agrees to reimburse each Lessor for any loss
or expense incurred (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lessor
to make, continue or maintain any portion of its Outstanding Investment as a
LIBO Rate financing) as a result of (i) the failure of any Delivery Date Closing
to occur on the Delivery Date specified in the applicable Delivery Date Notice
or (ii) any payment of all or any portion of the Lease Balance for any reason on
a date other than a Payment Date with respect to the applicable Lease
Supplement. Each Lessor shall promptly notify Lessee in writing of the amount of
any claim under this Section 7.5, the reason or reasons therefor and the
additional amount required fully to compensate such Lessor for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
Lessee.
VII.6 ACTIONS OF AFFECTED LESSORS. Each Lessor shall use reasonable efforts
(including reasonable efforts to change the booking office for this transaction)
to avoid or minimize any amounts which might otherwise be payable pursuant to
Section 7.3; provided, however, that such efforts shall not be deemed by such
Lessor, in its sole discretion, to be disadvantageous to it. In the event that
such reasonable efforts are insufficient to avoid or minimize such amounts that
might be payable pursuant to Section 7.3, then such Lessor (the "Affected
Lessor") shall use its reasonable efforts to transfer to any other Lessor
approved by Lessee (which itself is not then an Affected Lessor) its rights and
obligations hereunder; provided, however, that such transfer shall not be deemed
by such Affected Lessor, in its sole discretion, to be disadvantageous to it
(other than the economic disadvantage of ceasing to be a Lessor). In the event
that the Affected Lessor is unable, or otherwise is unwilling, so to transfer
its rights and obligations, Lessee may designate an alternate financial
institution to purchase the Affected Lessor's rights and obligations hereunder,
at the amount of such Lessor's Outstanding Investment plus accrued Variable
Rent, indemnities, and other amounts owing to such Lessor and, subject to the
provisions of Sections 7.5 and 11.8, the Affected Lessor shall transfer its
rights and obligations to such alternate financial institution and such
alternate financial institution shall become a Lessor hereunder.
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<PAGE> 28
VIII
----
General Tax Indemnity
---------------------
VIII.1 GENERAL TAX INDEMNITY. Lessee agrees to pay or reimburse Indemnitees
for, and to indemnify and hold Indemnitees harmless on an after tax basis from,
all Impositions arising at, or relating to, any time prior to or during the
Interim Periods, the Base Periods or the Renewal Terms, or upon any termination
of the Lease or prior to, or upon the return of, the Vehicles to Agent, and
levied or imposed upon Indemnitees or the Vehicles or other Collateral directly
or otherwise, by any Federal, state or local government or taxing authority in
the United States or by any foreign country or foreign or international taxing
authority upon or with respect to: (a) the Vehicles or any other Collateral; (b)
the exportation, importation, manufacture, remanufacture, registration,
purchase, ownership, delivery, condition, lease, sublease, assignment, storage,
transportation, possession, use, operation, maintenance, repair, return, sale
(including to Agent or any Lessee pursuant to the Operative Agreements),
transfer of title or other disposition thereof; (c) the rentals, receipts, or
earnings arising from any of the Vehicles; or (d) the Lease, this Participation
Agreement or any payment made thereunder; provided that this Section 8.1 shall
not apply to: (i) Impositions which are based upon or measured by the
Indemnitee's net income, except any such Imposition imposed upon the Indemnitee
by a state or foreign government or taxing authority by reason of the presence
of Vehicles or any other Collateral therein; (ii) Impositions characterized
under local law as franchise, net worth, or shareholder's capital (excluding,
however, any value added, license, property or similar Impositions and any such
Imposition imposed upon an Indemnitee by a State or foreign government or taxing
authority by reason of the presence of Vehicles or any other Collateral
therein); and (iii) Impositions based upon the voluntary transfer, assignment or
disposition by Agent or any Lessor of any interest in any of the Vehicles (other
than a transfer pursuant to the exercise of remedies under the Operative
Agreements, transfers pursuant to the exercise of the Lessee Purchase Option or
Sale Option, a transfer to Lessee or otherwise pursuant to the Lease).
Notwithstanding the foregoing provisions of this Section 8.1, Lessee shall pay
or reimburse, and indemnify and hold harmless, any Lessor which has complied
with Section 8.5, from any deduction or withholding of any United States Federal
income or other tax.
VIII.2 CONTEST. Lessee shall pay on or before the time or times prescribed
by law any Impositions (except any Impositions excluded by Section 8.1);
provided, however, that Lessee shall be under no obligation to pay any such
Imposition so long as the payment of such Imposition is not delinquent or is
being contested by a Permitted Contest. If any claim or claims is or are made
against any Indemnitee for any Imposition which is subject to indemnification as
provided in Section 8.1, Indemnitee shall as soon as practicable notify Lessee
and if, in the reasonable opinion of tax counsel acceptable to the Indemnitee
there exists a reasonable basis to contest such Imposition and if the provisos
of the definition of "Permitted Contest" continue to be satisfied and so long as
no Event of Default exists and no income tax or unindemnified claim is also
involved, and the Lessee admits in writing its duty to indemnify for such claim,
Lessee at its expense may, to the extent permitted by applicable law to pursue
such claim in its own name, contest such imposition, and subsequently may appeal
any adverse determination, in the appropriate administrative and legal forums.
If the above described conditions are satisfied but the claim involves
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<PAGE> 29
income tax or an unindemnified claim or must be pursued in the name of the
Indemnitee, and the amount at issue exceeds $100,000, then upon the request of
Lessee to such Indemnitee, the Indemnitee, at Lessee's expense, shall contest
any such Imposition through applicable administrative forums. Lessee shall pay
all expenses incurred by the Indemnitee in contesting any such Imposition
including, without limitation, all reasonable attorneys' and accountants' fees,
including the allocated costs of internal counsel, upon demand by the
Indemnitee. Lessee shall have the right to consult with respect to the conduct
of any proceedings controlled by the Indemnitee but such consultation shall not
interfere with the Indemnitee's control of such contest. Lessee shall in all
events be kept informed, to the extent practicable, of material developments
relative to such proceedings. The Indemnitee shall have the right to participate
in the conduct of any proceedings controlled by Lessee and the Indemnitee shall
in all events be kept informed, to the extent practicable, of material
developments relative to such proceedings. The Indemnitees agree that a
contested claim for which Lessee would be required to make a reimbursement
payment hereunder will not be settled or compromised without Lessee's prior
written consent (which consent shall neither be unreasonably delayed nor
withheld other than in good faith), unless the provisos of the definition of
"Permitted Contest" would not continue to be satisfied, an Event of Default
occurs or the Indemnitee waives its right to indemnification with respect
thereto. The failure of an Indemnitee to timely contest a claim against it for
any Imposition which is subject to indemnification under Section 8.1 and for
which it has an obligation to Lessee to contest under this Section 8.2 in the
manner required by applicable law or regulations where Lessee has timely
requested that such Indemnitee contest such claim shall relieve Lessee of their
obligations to such Indemnitee under Section 8.1 with respect to such claim only
to the extent such failure precludes contest. If applicable law requires the
payment of a contested Imposition as a condition to, or regardless of, its being
contested, and Lessee chooses to contest such Imposition or to direct the
Indemnitee to contest such Imposition in accordance with this Section, then
Lessee shall provide the Indemnitee with the funds to pay such Imposition, such
provision of funds to be deemed a non-interest bearing loan by Lessee to the
Indemnitee to be repaid by any recovery of such Imposition from such contest and
any remaining unpaid amount not recovered to offset Lessee's obligation to
indemnify the Indemnitee for such Imposition. In the event that the Indemnitee
receives a refund (or like adjustment) in respect of any Imposition for which
the Indemnitee has been reimbursed by Lessee, the Indemnitee shall immediately
remit the amount of such refund (or like adjustment) to Lessee, net of all costs
and expenses incurred by such Indemnitee.
VII.3 GROSS UP. If an Indemnitee shall not be entitled to an immediate
corresponding and equal deduction with respect to any payment or Imposition
which Lessee is required to pay or reimburse under Article VII, Section 8.1 or
Section 8.2 (each such payment or reimbursement under Article VII, Section 8.1
or Section 8.2, an "original payment") and which original payment constitutes
income to such Indemnitee, then Lessee shall pay to such Indemnitee on demand
the amount of such original payment on a gross-up basis such that, after
subtracting all Impositions imposed on such Indemnitee with respect to such
original payment by Lessee (including any Impositions otherwise excluded by
Section 8.1 and assuming for this purpose that such Indemnitee was subject to
taxation at the maximum marginal Federal, state and local tax rates applicable
to such Indemnitee for the year in which such income is taxable), such payments
shall be equal to the original payment to
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<PAGE> 30
be received (net of any credits, deductions or other tax benefits then actually
recognized that arise from the payment by such Indemnitee of any amount,
including taxes, for which the payment to be received is made).
VIII.4 TAX RETURNS. Except as otherwise provided in the third sentence
below, Lessee shall prepare and file (whether or not it is a legal obligation of
an Indemnitee) all tax returns or reports that may be required with respect to
any Impositions assessed, charged or imposed on the Vehicles or the Lease,
including, but not limited to sales and use taxes, property taxes (ad valorem
and real property) and any other tax or charge based upon the ownership,
leasing, subleasing, rental, sale, purchase, possession, use, operation,
delivery, return or other disposition of any of the Vehicles or upon the rentals
or the receipts therefrom (excluding, however, any tax based upon the net income
of an Indemnitee). Lessee may notify in writing all applicable Authorities
having jurisdiction with respect to personal property taxes that Lessee is the
appropriate party for receiving notices of (or copies of, if such Authority is
required by law to notify Agent) assessment, appeal and payment with respect to
the Vehicles. If an Indemnitee is obligated by law to file any such reports or
returns, then Lessee shall at least 20 days before the same are due, prepare the
same and forward them to the Indemnitee, as appropriate, with detailed
instructions as to how to comply with all applicable filing requirements,
together with funds in the amount of any payment required pursuant thereto.
Indemnitee shall forward to Lessee at its address listed in Section 11.4 copies
of all assessment and valuation notices it receives as soon as practicable;
provided that Indemnitee's failure to deliver such notices on a timely basis
shall not relieve Lessee of any obligations hereunder. The Participants agree
that neither they nor any corporation controlled by them, or under common
control with them, directly or indirectly will at any time take any action or
with respect to the filing of any income tax return, including an amended income
tax return, inconsistent with the intention of the parties expressed in Section
4.1(b) and (d) hereof.
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VIII.5 WITHHOLDING TAX EXEMPTIONS. At least five (5) Business Days prior to
the first date on which any Rent is payable hereunder or under any other
Operative Agreement for the account of any Lessor not incorporated under the
laws of the United States or a state thereof, such Lessor agrees that it will
have delivered to Lessee and Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lessor is entitled to receive payments under this Agreement and the other
Operative Agreements without deduction or withholding of any United States
Federal income taxes. Each Lessor which so delivers a Form 1001 or 4224 further
undertakes to deliver to Lessee and Agent two additional copies of such form (or
a successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by Lessee or Agent, in each case
certifying that such Lessor is entitled to receive payments under this Agreement
and the other Operative Agreements without deduction or withholding of any
United States Federal income taxes, unless prior to the date on which any such
delivery would otherwise be required any change in treaty, law or regulation or
in the interpretation thereof by the applicable taxing Authority occurring after
such Lessor became a Lessor hereunder has rendered all such forms inapplicable
or has prevented such Lessor from duly completing and delivering any such form
with respect to it and such Lessor advises Lessee and Agent that, as a result of
such change in treaty, law, regulation or interpretation, it is not capable of
receiving payments without any withholding of United States Federal income tax.
IX
--
Agent
-----
IX.1 APPOINTMENT OF AGENT; POWERS AND AUTHORIZATION TO TAKE CERTAIN ACTIONS.
(a) Each Lessor irrevocably appoints and authorizes ABN AMRO Bank N.V. to
act as its agent hereunder, with such powers as are specifically delegated to
Agent by the terms hereof, together with such other powers as are reasonably
incidental thereto. Each Lessor authorizes and directs Agent to, and Agent
agrees for the benefit of the Lessors that it will, on the Initial Delivery Date
and each other Delivery Date, accept the documents described in Article III of
this Participation Agreement. Agent accepts the agency hereby created applicable
to it and agrees to receive all payments and proceeds pursuant to the Operative
Agreements and disburse such payments or proceeds in accordance with the
Operative Agreements. Agent shall have no duties or responsibilities except
those expressly set forth in the Lease and this Participation Agreement. Agent
shall not be responsible to any Lessor (or to any other Person) (i) for any
recitals, statements, representations or warranties of any party contained in
the Lease, this Participation Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, the Operative
Agreements, other than the representations and warranties made by Agent in
Section 5.3, or (ii) for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of the Collateral or the title thereto (subject to
Agent's obligations under Section 6.3) or of the Lease or any other document
referred to or provided for therein or (iii) for any failure
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by Lessee, any Lessor or any other third party (other than Agent) to perform any
of its obligations under any Operative Agreement. Agent may employ agents,
trustees or attorneys-in-fact, may vest any of them with any property, title,
right or power deemed necessary for the purposes of such appointment and shall
not be responsible for the negligence or misconduct of any of them selected by
it. Neither Agent nor any of its directors, officers, employees or agents shall
be liable or responsible for any action taken or omitted to be taken by it or
them hereunder, or in connection herewith, except for its or their own gross
negligence or willful misconduct.
(b) Agent shall not have any duty or obligation to manage, control, use,
operate, store, lease, sell, dispose of or otherwise deal with any Vehicle, any
other Collateral or the Lease, or to otherwise take or refrain from taking any
action under, or in connection with, this Agreement, the Lease or any related
document to which Agent is a party, except as expressly provided by the terms
hereof, and no implied duties of any kind shall be read into any Operative
Agreement against Agent. The permissive right of Agent to take actions
enumerated in this Agreement and the Lease shall never be construed as a duty,
unless Agent is instructed or directed to exercise, perform or enforce one or
more rights by the Required Lessors (provided that Agent has received
indemnification reasonably satisfactory to it). No provision of the Operative
Agreements shall require Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its obligations under
the Operative Agreements, or in the exercise of any of its rights or powers
thereunder. It is understood and agreed that the duties of Agent are ministerial
in nature.
(c) Except as specifically provided herein, Agent is acting hereunder
solely as agent and is not responsible to any party hereto in its individual
capacity, except with respect to any claim arising from Agent's gross negligence
or willful misconduct or any breach of a representation or covenant made in its
individual capacity.
(d) Agent may accept deposits from, lend money to and otherwise deal with
Lessee or any of its Affiliates with the same rights as it would have if it were
not the named Agent hereunder.
IX.2 RELIANCE. Agent may rely upon, and shall not be bound or obligated to
make any investigation into the facts or matters stated in, any certificate,
notice or other communication (including any communication by telephone,
telecopy, telex, telegram or cable) reasonably believed by it to be genuine and
correct and to have been made, signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent (including any expert selected
by Agent to aid Agent in any calculations required in connection with its duties
under the Operative Agreements).
IX.3 ACTION UPON INSTRUCTIONS GENERALLY. Subject to Sections 9.4 and 9.6,
upon written instructions of the Required Lessors, Agent shall, on behalf of the
Lessors, give such notice or direction, exercise such right, remedy or power
hereunder or in respect of any Vehicle, and give such consent or enter into such
amendment to any document to which it is a party as Agent as may be specified in
such instructions. Agent shall deliver to each Lessor a copy of each notice,
report and certificate received by Agent pursuant to the Operative Agreements.
Agent shall have no obligation to
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investigate or determine whether there has been an Event of Default or an
Incipient Default. Agent shall not be deemed to have notice or knowledge of an
Event of Default or Incipient Default unless a Responsible Officer of Agent is
notified in writing of such Event of Default or Incipient Default. If Agent
receives notice of an Event of Default, Agent shall give prompt notice thereof,
at Lessee's expense, to each Lessor. Subject to Sections 9.4 and 9.6 and Article
X, Agent shall take action or refrain from taking action with respect to such
Event of Default as directed by the Required Lessors; provided that, unless and
until Agent receives such directions, Agent may refrain from taking any action,
or may act in its discretion, with respect to such Event of Default. Prior to
the date the Lease Balance shall have become due and payable by acceleration
pursuant to Section 8.2 of the Lease, Required Lessors may deliver written
instructions to Agent to waive, and Agent shall waive pursuant thereto, any
Event of Default and its consequences; provided that in the absence of written
instructions from all Lessors, Agent shall not waive any (i) Payment Default or
(ii) covenant or provision which, under Section 10.1, cannot be modified or
amended without the consent of all Lessors. As to any matters not expressly
provided for by this Agreement, Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Required Lessors and such instructions of the Required Lessors and
any action taken or failure to act pursuant thereto shall be binding on each
Lessor.
IX.4 INDEMNIFICATION. Each Lessor shall reimburse and hold Agent harmless,
ratably in accordance with its Outstanding Investment at the time the
indemnification is required to be given (but only to the extent that any such
indemnified amounts have not in fact been paid to Agent by, or on behalf of,
Lessee in accordance with Section 7.1), from any and all claims, losses,
damages, obligations, penalties, liabilities, demands, suits, judgments, or
causes of action, and all legal proceedings, and any reasonable costs or
expenses in connection therewith, including allocated charges, costs and
expenses of internal counsel of Agent and all other reasonable attorneys' fees
and expenses incurred by Agent, in any way relating to or arising in any manner
out of (i) any Operative Agreement, the enforcement hereof or thereof or the
consummation of the transactions contemplated thereby, or (ii) instructions from
the Required Lessors (including, without limitation, the costs and expenses that
Lessee is obligated to and does not pay hereunder), provided that no Lessor
shall be liable for any of the foregoing to the extent they arise from (a) the
gross negligence or willful misconduct of Agent, (b) the inaccuracy of any
representation or warranty or breach of any covenant given by Agent in Section
5.3 or Section 6.3 hereof or in the Lease, (c) in the case of Agent's handling
of funds, the failure to act with the same care as Agent uses in handling its
own funds or (d) any taxes, fees or other charges payable by Agent based on or
measured by any fees, commissions or compensation received by it for acting as
Agent in connection with the transactions contemplated by the Operative
Agreements.
IX.5 INDEPENDENT CREDIT INVESTIGATION. Each Lessor by entering into this
Agreement agrees that it has, independently and without reliance on Agent or any
other Lessor and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Lessee and its own decision to
enter into this Agreement and each of the other Operative Agreements to which it
is a party and that it will, independently and without reliance upon Agent or
any other Lessor, and based on such documents
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<PAGE> 34
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking action under this Agreement and any related
documents to which it is a party. Agent shall not be required to keep itself
informed as to the performance or observance by Lessee of any other document
referred to (directly or indirectly) or provided for herein or to inspect the
properties or books of Lessee. Except for notices or statements which Agent is
expressly required to give under this Agreement and for notices, reports and
other documents and information expressly required to be furnished to Agent
alone (and not also to each Lessor, it being understood that Agent shall forward
copies of same to each Lessor) hereunder or under any other Operative Agreement,
Agent shall not have any duty or responsibility to provide any Lessor with
copies of notices or with any credit or other information concerning the
affairs, financial condition or business of Lessee (or any of its affiliates)
that may come into the possession of Agent or any of its Affiliates.
IX.6 REFUSAL TO ACT. Except for notices and actions expressly required of
Agent hereunder and except for the performance of its covenants in Section 6.3,
Agent shall in all cases be fully justified in failing or refusing to act unless
(a) it is indemnified to its reasonable satisfaction by the Lessors against any
and all liability and reasonable expense which may be incurred by it by reason
of taking or continuing to take any such action (provided that such indemnity
shall not be required to extend to liability or expense arising from any matter
described in clauses (a) through (d) of Section 9.4, it being understood that no
action taken by Agent in accordance with the instructions of the Required
Lessors shall be deemed to constitute any such matter) and (b) it is reasonably
satisfied that such action is not contrary to any Operative Agreement or to any
applicable law.
IX.7 RESIGNATION OR REMOVAL OF AGENT; APPOINTMENT OF SUCCESSOR. Subject to
the appointment and acceptance of a successor Agent as provided below, Agent may
resign at any time by giving notice thereof to each Lessor and Lessee or may be
removed at any time by written notice from the Required Lessors. Upon any such
resignation or removal, the Required Lessors at the time of the resignation or
removal shall have the right (with the reasonable, prompt approval of Lessee
unless an Event of Default shall be continuing) to appoint a successor Agent
which shall be a financial institution having a combined capital and surplus of
not less than $100,000,000. If, within 30 calendar days after the retiring
Agent's giving of notice of resignation or receipt of a written notice of
removal, a successor Agent is not so appointed and does not accept such
appointment, then the retiring or removed Agent may appoint a successor Agent
and transfer to such successor Agent all rights and obligations of the retiring
Agent. Such successor Agent shall be a financial institution having combined
capital and surplus of not less than $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Agent and the retiring or removed Agent
shall be discharged from duties and obligations as Agent thereafter arising
hereunder and under any related document. If the retiring Agent does not appoint
a successor, any Lessor shall be entitled to apply to a court of competent
jurisdiction for such appointment, and such court may thereupon appoint a
successor to act until such time, if any, as a successor shall have been
appointed as above provided.
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<PAGE> 35
IX.8 SEPARATE AGENT. The Required Lessors may, and if they fail to do so at
any time when they are so required, Agent may, for the purpose of meeting any
legal requirements of any jurisdiction in which any Vehicle or Collateral may be
located, appoint one or more individuals or corporations either to act as
co-agent jointly with Agent or to act as separate agent of all or any part of
the Vehicles or Collateral or the Lease, and vest in such individuals or
corporations, in such capacity, such title to the Vehicles or Collateral or the
Lease or any part thereof, and such rights or duties as Agent may consider
necessary or desirable. Agent shall not be required to qualify to do business in
any jurisdiction where it is not now so qualified. Agent shall execute,
acknowledge and deliver all such instruments as may be required by any such
co-agent or separate agent more fully confirming such title, rights or duties to
such co-agent or separate agent. Upon the acceptance in writing of such
appointment by any such co-agent or separate agent, it, she or he shall be
vested with such interest in the Vehicles or Collateral and the Lease or any
part thereof, and with such rights and duties, not inconsistent with the
provisions of the Operative Agreements, as shall be specified in the instrument
of appointment, jointly with Agent (except insofar as local law makes it
necessary for any such co-agent or separate agent to act alone), subject to all
terms of the Operative Agreements. Any co-agent or separate agent, to the
fullest extent permitted by legal requirements of the relevant jurisdiction, at
any time, by an instrument in writing, shall constitute Agent its
attorney-in-fact and agent, with full power and authority to do all acts and
things and to exercise all discretion on its behalf and in its name. If any
co-agent or separate agent shall die, become incapable of acting, resign or be
removed, the interest in the Vehicles or Collateral and the Lease and all rights
and duties of such co-agent or separate agent shall, so far as permitted by law,
vest in and be exercised by Agent, without the appointment of a successor to
such co-agent or separate agent.
IX.9 TERMINATION OF AGENCY. The agency created hereby shall terminate upon
the final disposition by Agent of all Collateral at any time subject hereto and
the final distribution by Agent of all moneys or other property or proceeds
received pursuant to the Lease in accordance with its terms, provided that at
such time Lessee shall have complied fully with all the terms hereof.
IX.10 COMPENSATION OF AGENCY. As compensation for the performance of
Agent's obligations hereunder, Lessee shall pay to Agent, on the Initial
Delivery Date and on each anniversary of the Initial Delivery Date occurring
during the Lease Term, a fee (the "Agency Fee") in the amount of $15,000.
IX.11 LIMITATIONS. It is expressly understood and agreed by and among the
parties hereto that, except as otherwise provided herein or in the other
Operative Agreements: (a) this Participation Agreement and the other Operative
Agreements to which Agent is a party are executed by Agent, not in its
individual capacity (except with respect to the representations and covenants of
Agent in Sections 5.3 and 6.3), but solely as Agent under the Operative
Agreements in the exercise of the power and authority conferred and vested in it
as such Agent; (b) each and all of the undertakings and agreements herein made
on the part of Agent are each and every one of them made and intended not as
personal undertakings and agreements by Agent, or for the purpose or with the
intention of binding Agent personally, but are made and intended for the purpose
of binding only the Collateral unless
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expressly provided otherwise; (c) actions to be taken by Agent pursuant to its
obligations under the Operative Agreements may, in certain circumstances, be
taken by Agent only upon specific authority of the Lessors; (d) nothing
contained in the Operative Agreements shall be construed as creating any
liability on Agent, individually or personally, or any incorporator or any past,
present or future subscriber to the capital stock of, or stockholder, officer or
director, employee or agent of, Agent to perform any covenants either express or
implied contained herein, all such liability, if any, being expressly waived by
the other parties hereto and by any Person claiming by, through or under them;
and (e) so far as Agent, individually or personally, is concerned, the other
parties hereto and any Person claiming by, through or under them shall look
solely to the Collateral and Lessee for the performance of any obligation under
any of the instruments referred to herein; provided, however, that nothing in
this Section 9.11 shall be construed to limit in scope or substance the general
corporate liability of Agent in respect of its gross negligence or willful
misconduct or those representations, warranties and covenants of Agent in its
individual capacity set forth herein or in any of the other agreements
contemplated hereby.
X
-
Amendments to Operative Agreements
----------------------------------
X.1 AMENDMENTS TO OPERATIVE AGREEMENTS WITH CONSENT OF LESSORS. This
Participation Agreement and each of the other Operative Agreements shall be
changed, waived, discharged or terminated with respect to Lessee and each Lessor
upon the ratification in writing of such change, waiver, discharge or
termination by Lessee and the Required Lessors, in which case such change,
waiver, discharge or termination shall be effective as to each Lessor and
Lessee; provided no such change, waiver, discharge or termination shall, without
the written ratification of each Lessor:
(i) modify any of the provisions of this Section 10.1 or
Article III, change the definitions of "Commitment", "Commitment Percentage",
"Total Commitment" or "Required Lessors" or modify or waive any provision of an
Operative Agreement requiring action by the foregoing, or release any Collateral
(except as otherwise specifically provided in any Operative Agreement);
(ii) modify, amend, waive or supplement any of the provisions
of Articles III, VII, VIII (except as otherwise expressly provided in Section
9.3 hereof), X or XI, Sections 13.9 or 13.10 of the Lease or Section 11.3
hereof, provided that the Required Lessors may waive an Event of Default other
than a Payment Default;
(iii) reduce, modify, amend or waive any indemnities in favor
of any Participant, whether pursuant to Articles VII or VIII or otherwise
(except that any Person may consent to any reduction, modification, amendment or
waiver of any indemnity payable to it);
(iv) modify, postpone, reduce or forgive, in whole or in part,
any Rent payment (other than pursuant to the terms of any Operative Agreement),
Lease Balance, Termination Value, Lessor Risk Amount, Lessee Risk Amount,
interest or, subject to clause (iii) above, any other amount
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payable under the Lease or Participation Agreement, or modify the definition or
method of calculation of any Rent payment (other than pursuant to the terms of
any Operative Agreement), Lease Balance, Termination Value, Lessor Risk Amount,
Lessee Risk Amount or other amount payable hereunder;
(v) consent to any assignment of the Lease releasing any
Lessee from its obligations in respect of the payments due pursuant to the
Operative Agreements or changing the absolute and unconditional character of
such obligations; or
(vi) permit the creation of any Lien on the Collateral or any
part thereof except as contemplated in the Operative Agreements, or deprive any
Lessor of the benefit of the security interest in the Collateral granted by
Lessee.
X.2 AMENDMENTS TO OPERATIVE AGREEMENTS AFFECTING AGENT. Without the prior
written consent of Agent, no amendment of, supplement to, or waiver or
modification of, any Operative Agreement shall adversely affect Agent's rights
or immunities or modify or increase the duties or obligations of Agent with
respect to any Operative Agreement.
XI
--
Miscellaneous
-------------
XI.1 SURVIVAL OF COVENANTS. All claims pertaining to the representations,
warranties, covenants or indemnities of the Participants shall survive the
termination of the Lease to the extent such claims arose out of events occurring
or conditions existing prior to any such termination. Without limiting the
foregoing, the provisions of Article VII and Article VIII hereof shall survive
the termination of the Lease.
XI.2 APPLICABLE LAW. THIS PARTICIPATION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE CHOICE
OF LAW PROVISIONS THEREOF.
XI.3 DISTRIBUTION AND APPLICATION OF RENT AND OTHER PAYMENTS. Except as
otherwise specifically provided for in the Lease or in Articles VII and VIII
hereof, all amounts of money received or realized by Agent pursuant to the Lease
which are to be distributed to the Lessors (after payment of accrued but unpaid
fees and expenses and indemnification payments payable to Agent in its capacity
as Agent that remain unpaid for 30 days or more) shall be distributed to each
Lessor pro rata, in accordance with each Lessor's Outstanding Investment and
without preference or priority of any Lessor over another; provided, however,
that in the case such moneys are insufficient to pay in full the whole amount
due, owing and unpaid, then application shall be made in the manner set forth in
Section 8.4 of the Lease. All payments to the Lessors shall be made in
accordance with Section 3.2 of the Lease.
IX.4 NOTICES. All notices, demands, declarations, consents, directions,
approvals, instructions, requests and other communications required or permitted
by the terms hereof shall be in writing and shall be deemed to have been duly
given when delivered personally, by facsimile (and confirmed, which confirmation
may be mechanical), nationally recognized
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<PAGE> 38
overnight courier or otherwise actually received or 5 Business Days after being
deposited in the United States mail certified, postage prepaid, addressed as
follows:
If to Lessee:
Roadway Express, Inc.
1077 Gorge Boulevard
Akron, Ohio 44310
Attn: Gregory S. Greenfelder
Fax: 330-258-6230
With a copy to:
Roadway Express, Inc.
1077 Gorge Boulevard
Akron, Ohio 44310
Attn: John M. Glenn
Fax: 330-258-6082
If to Agent:
ABN AMRO Bank N.V.
Syndications
335 Madison Avenue
New York, NY 10017
Attn: Andrew P. Helene
Fax: 212-682-0364
With a copy to:
ABN AMRO Bank N.V.
c/o ABN AMRO North America, Inc.
One PPG Place, Suite 2950
Pittsburgh, PA 15222-5400
Attn: Dennis F. Lennon
Fax: 412-566-2266
and
ABN AMRO North America, Inc.
Surface Transportation Group
135 So. La Salle St., Suite 760
Chicago, IL 60603
Attn: David Thomas
Fax: 312-904-2849
If to the Lessors, to their respective addresses set forth on Schedule I
hereto or at such other place as any such party may designate by notice given in
accordance with this Section 11.4.
XI.5 TRANSACTION COSTS; OTHER EXPENSES. Lessee shall pay all Transaction
Costs whether or not the transactions contemplated hereby close. In addition,
Lessee shall pay or reimburse Agent and the Lessors for all other out-of-pocket
costs and expenses (including allocated fees of internal counsel) reasonably
incurred in connection with: (a) entering into, or the
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<PAGE> 39
giving or (in the case of any amendments, supplements, waivers or consents
proposed by Lessee) withholding of, any future amendments, supplements, waivers
or consents with respect to the Operative Agreements (including without
limitation any legal services rendered in connection with or arising under
Section 6.1 hereof), it being understood that Lessee shall only be required to
pay for one firm of legal counsel to Agent and Lessors in respect of any
transaction under this clause (a); (b) any Casualty or termination of the Lease
or any other Operative Agreement; (c) the negotiation and documentation of any
restructuring or "workout," whether or not consummated, of any Operative
Agreement; (d) the enforcement of the rights or remedies under the Operative
Agreements; (e) further assurances requested pursuant to Section 11.13 hereof or
any similar provision in other Operative Agreements; (f) any and all
out-of-pocket expenses of Agent in connection with the Sale Option described in
Section 11.3 of the Lease; (g) any transfer by Agent or a Lessor of any interest
in the Operative Agreements during the continuance of an Event of Default; and
(h) the Agency Fee.
XI.6 COUNTERPARTS. This Participation Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each executed counterpart constituting an original but all together one
agreement.
XI.7 SEVERABILITY. Whenever possible, each provision of this Participation
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law; but if any provision of this Participation Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Participation Agreement.
XI.8 SUCCESSORS AND ASSIGNS; TRANSFERS. This Participation Agreement shall
be binding upon the parties hereto and their respective successors and assigns,
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Lessee may not assign any of its rights and
obligations under any Operative Agreement except as expressly provided in the
Operative Agreements.
No Lessor shall assign, convey or otherwise transfer (including pursuant to
a participation) all or any portion of its right, title or interest in, to or
under any of the Operative Agreements, any Collateral and its interest in the
Vehicles, except that without the prior written consent of Agent or Lessee (x)
any bank or similar financial or commercial lending institution may pledge its
interest in the ordinary course of its business without the consent of Lessee or
Agent, provided, that no transfer upon a foreclosure pursuant to such a pledge
may occur unless the other provisions of this Section are complied with, (y) any
Lessor may transfer all or any portion of its interest to any other existing
Lessor and (z) any Lessor may transfer any or all of such right, title and
interest upon the satisfaction of each of the following conditions:
(a) REQUIRED NOTICE AND EFFECTIVE DATE. Any Lessor desiring to effect a
transfer of its interest hereunder shall give written notice of each such
proposed transfer to Lessee and Agent at least ten (10) days prior to such
proposed transfer, setting forth the name of such proposed transferee, the
percentage or interest to be retained by such Lessor, if
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<PAGE> 40
any, and the date on which such transfer is proposed to become effective. All
reasonable out-of-pocket costs incurred by Agent in connection with any such
disposition by a Lessor under this Section 11.8 shall be borne by such Lessor,
unless such transfer is being made pursuant to Section 7.6, in which case such
costs shall be borne by Lessee. In the event of a transfer under this Section
11.8, any expenses incurred by the transferee in connection with its review of
the Operative Agreements and its investigation of the transactions contemplated
thereby shall be borne by such transferee or the relevant Lessor, as they may
determine, but shall not be considered costs and expenses which Lessee is
obligated to pay or reimburse under Section 11.5, unless such transfer is being
made pursuant to Section 7.6.
(b) ASSUMPTION OF OBLIGATIONS. Any transferee pursuant to this Section 11.8
shall have executed and delivered to Agent a letter substantially in the form of
the Investor's Letter attached hereto as Exhibit F, and thereupon the
obligations of the transferring Lessor under the Operative Agreements shall be
proportionately released and reduced to the extent of such transfer. Upon any
such transfer as above provided, the transferee shall be deemed to be bound by
all obligations (whether or not yet accrued) under, and to have become a party
to, all Operative Agreements to which its transferor was a party, shall be
deemed the pertinent "Lessor" for all purposes of the Operative Agreements and
shall be deemed to have made that portion of the payments pursuant to the
Participation Agreement previously made or deemed to have been made by the
transferor represented by the interest being conveyed; and each reference herein
and in the other Operative Agreements to the pertinent "Lessor" shall thereafter
be deemed a reference to the transferee, to the extent of such transfer, for all
purposes. Upon any such transfer, Agent shall deliver to each Lessor and Lessee
a new Schedule I to this Participation Agreement, revised to reflect the
relevant information for such new Lessor and the Commitment of such new Lessor
(and the revised Commitment of the transferor Lessor if it shall not have
transferred its entire interest).
(c) EMPLOYEE BENEFIT PLANS. No Lessor may make any such assignment,
conveyance or transfer to or in connection with any arrangement or understanding
in any way involving any employee benefit plan (or its related trust), as
defined in Section 3(3) of ERISA, or with the assets of any such plan (or its
related trust), as defined in Section 4975(e)(1) of the Code (other than a
governmental plan, as defined in Section 3(32) of ERISA), with respect to which
Lessee or such Lessor or any of their Affiliates is a party in interest within
the meaning of ERISA or a "disqualified person" within the meaning of the Code.
(d) AMOUNT OF COMMITMENT. Unless Lessee shall consent otherwise, no Lessor
may make any such assignment, conveyance or transfer if, as a consequence
thereof, the transferor (if such Lessor retains any part of its Commitment) or
transferee Lessor would have a combined Commitment and Outstanding Investment of
less than $5,000,000.
(e) REPRESENTATIONS AND WARRANTIES. Notwithstanding anything to the
contrary set forth above, no Lessor may assign, convey or transfer its interest
to any Person, unless such Person shall have delivered to Agent and Lessee a
certificate confirming the accuracy of the representations and warranties set
forth in Section 5.2 with respect to such Person (other than as such
representation or warranty relates to the execution and delivery of Operative
Agreements).
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<PAGE> 41
(f) FINANCIAL CONDITION. Any transferee pursuant to this Section 11.8 shall
be a financial institution having combined capital and surplus of at least
$100,000,000.
Each transferee of a Lessor pursuant to this Section 11.8 shall be entitled
to the benefits of Articles VII and VIII; provided that no such transferee shall
be entitled to receive any greater amount pursuant to such Sections than the
transferor Lessor would have been entitled to receive in respect of the amount
of the Commitment transferred by such transferor Lessor to such transferee if
such transfer had not occurred.
XI.9 JURY TRIAL. LESSEE WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS PARTICIPATION
AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS PARTICIPATION AGREEMENT OR ANY OPERATIVE AGREEMENT AND
AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
XI.10 CAPTIONS; TABLE OF CONTENTS. Section captions and the table of
contents used in this Participation Agreement (including the exhibits and
schedules) are for convenience of reference only and shall not affect the
construction of this Participation Agreement.
XI.11 FINAL AGREEMENT. THIS PARTICIPATION AGREEMENT, TOGETHER WITH THE
OTHER OPERATIVE AGREEMENTS, REPRESENT THE ENTIRE FINAL AGREEMENT BETWEEN THE
PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AND IN THE OTHER
OPERATIVE AGREEMENTS. THIS PARTICIPATION AGREEMENT CANNOT BE MODIFIED,
SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
XI.12 NO THIRD-PARTY BENEFICIARIES. Nothing in this Participation Agreement
or the other Operative Agreements shall be deemed to create any right in any
Person not a party hereto or thereto (other than as set forth in Section 13.8 of
the Lease and the permitted successors and assigns of Lessors, Agent and
Lessee), and such agreements shall not be construed in any respect to be a
contract in whole or in part for the benefit of any third party except as
aforesaid.
X.13 FURTHER ASSURANCES. Lessee, at its expense, will promptly and duly
execute and deliver all such documents and take such further action as may be
necessary or appropriate in order to effect the intent or purpose of this
Participation Agreement and the other Operative Agreements and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessors and Agent for the benefit of the Lessors, including, without
limitation, if requested by Required Lessors at the expense of Lessee, the
recording or filing of any Operative Agreement or any other document in
accordance with the laws of the appropriate jurisdictions.
IX.14 REPRODUCTION OF DOCUMENTS. This Participation Agreement, all
documents constituting Schedules or Exhibits hereto, and all documents relating
hereto received by a party hereto, including, without limitation:
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<PAGE> 42
(a) consents, waivers and modifications that may hereafter be executed; (b) the
Certificates of Title and all other documents received by the Lessors or Agent
in connection with the receipt and/or acquisition of the Vehicles; and (c)
financial statements, certificates, and other information previously or
hereafter furnished to Agent or any Lessor may be reproduced by the party
receiving the same by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process. Each of the Participants agrees
and stipulates that, to the extent permitted by law, any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by such party in the regular course of
business) and that, to the extent permitted by law, any enlargement, facsimile,
or further reproduction of such reproduction shall likewise be admissible in
evidence.
XI.15 CONSIDERATION FOR CONSENTS TO WAIVERS AND AMENDMENTS. Lessee hereby
agrees that it will not, and that it will not permit any of its Affiliates to,
offer or give any consideration or benefit of any kind whatsoever to any Lessor
in connection with, in exchange for, or as an inducement to, such Lessor's
consent to any waiver in respect of, any modification or amendment of, any
supplement to, or any other consent or approval under, any Operative Agreement
unless such consideration or benefit is offered ratably to all Lessors.
XI.16 SUBMISSION TO JURISDICTION. Any suit by Agent or any Lessor to
enforce any claim arising out of the Operative Agreements may be brought in any
state or Federal court located in Chicago, Illinois having subject matter
jurisdiction, and with respect to any such claim, each Participant hereby
irrevocably: (a) submits to the jurisdiction of such courts; and (b) consents to
the service of process out of said courts by mailing a copy thereof, by
registered mail, postage prepaid, to such Participant at its address specified
in this Participation Agreement, and agrees that such service, to the fullest
extent permitted by law: (i) shall be deemed in every respect effective service
of process upon it in any such suit, action or proceeding; and (ii) shall be
taken and held to be valid personal service upon and personal delivery to it.
Lessee irrevocably waives, to the fullest extent permitted by law: (A) any
claim, or any objection, that it now or hereafter may have, that venue is not
proper with respect to any such suit, action or proceeding brought in such a
court located in Chicago, Illinois including, without limitation, any claim that
any such suit, action or proceeding brought in such court has been brought in an
inconvenient forum; and (B) any claim that Lessee is not subject to personal
jurisdiction or service of process in such forum. Lessee agrees that any suit to
enforce any claim arising out of the Operative Agreements or any course of
conduct or dealing of Agent or any Lessor shall be brought and maintained
exclusively in any state or Federal court located in Chicago, Illinois. Nothing
in this Section 11.16 shall affect the right of Agent or any Lessor to bring any
action or proceeding against Lessee or any Vehicle or other Collateral in the
courts of any other jurisdiction. Lessee agrees that a final judgment in any
action or proceeding in a state or Federal court within the United States may be
enforced in any other jurisdiction by suit on the judgment or in any other
manner provided by law.
[Remainder of page intentionally left blank.]
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered as of the date first above written.
ROADWAY EXPRESS, INC.,as Lessee
By /s/ M. W. Wickham
------------------------------
Name Printed: M. W. Wickham
-------------------
Title: President and CEO
-------------------------
ABN AMRO BANK N.V., Pittsburgh Branch
not individually, but solely as Agent for the Lessors
By ABN AMRO North America, Inc., as
agent
By /s/ David J. Thomas
----------------------------
Name Printed: David J. Thomas
------------------
Title: Vice President
------------------------
By /s/ Kathleen L. Ross
----------------------------
Name Printed: Kathleen L. Ross
-----------------
Title: Group Vice President
------------------------
LESSORS:
ABN AMRO BANK N.V., Pittsburgh Branch
By ABN AMRO North America, Inc., as
agent
By /s/ David J. Thomas
----------------------------
Name Printed: David J. Thomas
-----------------
Title: Vice President
------------------------
By /s/ Kathleen L. Ross
----------------------------
Name Printed: Kathleen L. Ross
------------------
Title: Group Vice President
------------------------
<PAGE> 44
SCHEDULE I
TO
PARTICIPATION AGREEMENT
AGENT AND LESSOR ADDRESSES; LESSOR COMMITMENTS
AGENT: ABN AMRO BANK N.V. (address set forth in Section 11.4)
- - -----
LESSORS:
- - -------
1. ABN AMRO BANK N.V.
Commitment: $25,000,000 Commitment Percentage: 100%
Address for Notices and Payment Instructions
--------------------------------------------
ABN AMRO Bank N.V.
355 Madison Avenue
New York, NY 10017
ABA Routing #026009580
Account #651001063441
Contact: Linda Boardman
(212) 370-8509
<PAGE> 45
EXHIBIT 10.18, PART 2
MARCH 12, 1996
MASTER LEASE INTENDED AS SECURITY
Dated as of March 15, 1996
between
ROADWAY EXPRESS, INC.,
as Lessee
and
ABN AMRO BANK N.V.,
not individually, but solely
as Agent for the Lessors from
time to time under the
Participation Agreement
<PAGE> 46
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I...........................................................2
Transfer..........................................................2
Acceptance Procedure..............................................2
Lease Term..........................................................2
Interim and Base Periods..........................................2
Lease Commencement Dates..........................................2
Lease Renewal.....................................................2
Rent; Other Economic Provisions.....................................3
Rent Payments.....................................................3
Place and Manner of Payment.......................................4
Net Lease.........................................................4
Warranties..........................................................5
Warranty Disclaimer...............................................5
Quiet Enjoyment...................................................5
Possession, Assignment, Use and Maintenance of Vehicles.............6
Restriction on Lessee's Possession and Use........................6
Subleases.........................................................6
Maintenance.......................................................7
Repair, Replacement and Substitution..............................8
Alterations, Modifications and Additions; Removable Parts.........9
Inspection of Collateral.........................................10
Risk of Loss; Replacement; Waiver and Indemnity....................10
Casualty.........................................................10
Casualty Proceeds................................................10
Insurance..........................................................11
Required Coverages...............................................11
Delivery of Insurance Certificates...............................12
Default............................................................12
Events of Default................................................12
Remedies.........................................................14
Additional Remedies..............................................15
Proceeds of Sale; Deficiency.....................................16
Right to Perform Lessee's Agreements.............................17
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<PAGE> 47
Return of Vehicles...............................................17
Early Termination................................................18
Early Termination as to all Vehicles...........................18
Early Termination as to a Vehicle..............................18
Lease Termination................................................18
Options........................................................18
Lessee Purchase Option.........................................19
Sale Option....................................................20
Ownership, Grant of Security.....................................22
Grant of Security Interest.....................................22
Retention of Proceeds in the Case of Default...................23
Attorney-in-Fact...............................................23
Release of Liens...............................................23
Miscellaneous....................................................23
No Waiver......................................................23
Survival of Covenants..........................................24
APPLICABLE LAW.................................................24
Effect and Modification of Lease...............................24
Notices........................................................24
Counterparts...................................................24
Severability...................................................24
Successors and Assigns: Benefit of Agreement..................24
Assignment by Agent............................................25
Assignment by Lessee...........................................25
Jury Trial.....................................................25
Section Headings; Table of Contents............................25
Final Agreement................................................25
Timeliness of Performance......................................25
-ii-
* SCHEDULE I EQUIPMENT LIST
* EXHIBIT A FORM OF LEASE SUPPLEMENT
* Not filed as an exhibit to Form 10-Q
<PAGE> 48
MASTER LEASE INTENDED AS SECURITY
---------------------------------
THIS MASTER LEASE INTENDED AS SECURITY (as amended, modified, restated
or supplemented from time to time, this "Lease") dated as of March 15, 1996 is
between ROADWAY EXPRESS, INC., a Delaware corporation, as Lessee ("Lessee"),
with its principal office at 1077 Gorge Boulevard, Akron, Ohio 44310, and ABN
AMRO BANK N.V., a bank organized under the laws of the Netherlands, not in its
individual capacity, but solely in its capacity as agent ("Agent") for the
benefit of the Lessors.
WHEREAS, pursuant to the terms and conditions set forth herein and in
that certain Participation Agreement, dated as of March 15, 1996 (the
"Participation Agreement"), by and among Lessee, Agent and the Lessors named
therein, the Participants have agreed that Agent, on behalf of the Lessors, will
lease to Lessee and Lessee will lease from Agent, on behalf of the Lessors,
certain personal property described in Schedule I hereto and replacements
thereto;
WHEREAS, capitalized terms used but not otherwise defined herein
(including those used in the foregoing recitals) shall have the meanings
specified in Schedule X to the Participation Agreement, unless the context
otherwise requires;
WHEREAS, Lessee may from time to time enter into a Lease Supplement
with Agent, on behalf of the Lessors, covering certain of the Vehicles
identified on Schedule I hereto;
WHEREAS, each Lease Supplement executed from time to time by Agent, on
behalf of the Lessors, and Lessee shall be incorporated herein by reference;
WHEREAS, to secure Lessee's obligations under this Lease and the other
Operative Agreements, Lessee will grant to Agent, on behalf of the Lessors, a
security interest in the Collateral.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
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<PAGE> 49
ARTICLE I
Delivery and Acceptance
-----------------------
I.1 TRANSFER, ACCEPTANCE AND LEASE OF VEHICLES. On each Delivery Date,
subject to the satisfaction or waiver of the conditions set forth in Article III
of the Participation Agreement, (a) Lessee hereby grants, assigns, transfers and
sets over unto Agent, on behalf of the Lessors, an interest in the Vehicles to
be delivered on such Delivery Date and covered by the Delivery Date Notice
delivered by Lessee with respect thereto and the Lease Supplement to be
delivered with respect thereto pursuant to Article III of the Participation
Agreement, (b) Agent hereby agrees to accept delivery on such Delivery Date of
the interest in the Vehicles to be so delivered pursuant to the terms of the
Participation Agreement and simultaneously to lease such Vehicles to Lessee
under this Lease and the applicable Lease Supplement, and (c) Lessee hereby
agrees, expressly for the direct benefit of Agent and the Lessors, to lease from
Agent hereunder, for the Lease Term, such Vehicles to be delivered on such
Delivery Date.
V.2 ACCEPTANCE PROCEDURE. Agent hereby authorizes one or more employees of
Lessee, as the authorized representative or representatives of Agent, to accept
delivery of the Vehicles identified on the Delivery Date Notice executed by
Lessee in connection with each Delivery Date. Lessee hereby agrees that such
acceptance of delivery by such authorized representative or representatives on
each Delivery Date shall, without further act, constitute the irrevocable
acceptance by Lessee of the Vehicles which are the subject of such Delivery Date
Notice for all purposes of this Lease and the other Operative Agreements on the
terms set forth therein and herein.
II
Lease Term
----------
II.1 INTERIM AND BASE PERIODS. Unless earlier terminated, the term of this
Lease shall consist of(a) two interim periods, the first of which shall commence
on the Initial Delivery Date and end on (but not include) the First Lease
Commencement Date, and the second of which shall commence on the First Lease
Commencement Date and end on (but not include) the Second Lease Commencement
Date (each, an "Interim Period"), (b) two base periods, the first commencing on
the First Lease Commencement Date and ending on the second anniversary thereof
and the second commencing on the Second Lease Commencement Date and ending on
the second anniversary thereof (each, a "Base Period") and (c) any Renewal Terms
(collectively, the "Lease Term").
II.2 LEASE COMMENCEMENT DATES. The first lease commencement date shall be
October 5, 1996 (the "First Lease Commencement Date"). The second lease
commencement date shall be the last Delivery Date under the Participation
Agreement (the "Second Lease Commencement Date").
II.3 LEASE RENEWAL. Lessee may elect to renew this Lease for up to three
successive one-year renewal terms with respect to all, but not less
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<PAGE> 50
than all, of the Vehicles subject to all then-existing Lease Supplements
(each, a "Renewal Term") as provided in Article XI.
II
Rent; Other Economic Provisions
-------------------------------
III.1 RENT PAYMENTS. Lessee shall pay to Agent, for the benefit of the
Lessors, the amounts of Interim Rent, Basic Rent or Renewal Rent, as applicable,
determined in accordance with this Section 3.1 and each Lease Supplement.
Scheduled installments of Basic Rent and Renewal Rent may be adjusted pursuant
to Section 6.1. All computations of interest pursuant to the Operative
Agreements shall be made on the basis of actual number of days elapsed in a
360-day year.
RENT DURING INTERIM PERIODS. With respect to each Interim Period for
the Lease, Lessee shall pay to Agent, for the benefit of the Lessors, the
amount of Interest Only Rent set forth on Schedule II to the Lease Supplement
to which Lessee is a party applicable to such Interim Period. Interest Only
Rent under each Lease Supplement during the Interim Period with respect to such
Lease Supplement shall consist of interest accrued on the Supplement Balance of
such Lease Supplement at the Interest Rate for the Interim Period of such Lease
Supplement and shall be payable on each Payment Date during such Interim Period
and on the Lease Commencement Date for the Base Period following such Interim
Period.
BASIC RENT. On each Payment Date during a Base Period, Lessee shall
pay to Agent, for the benefit of the Lessors, Basic Rent under each Lease
Supplement to which Lessee is a party, consisting of the amount of Fixed Rent
set forth opposite the applicable Payment Date on Schedule II to each such
Lease Supplement and Variable Rent accrued on the Supplement Balance of each
such Lease Supplement during the Rent Period ended on such Payment Date.
RENEWAL RENT. On each Payment Date during any Renewal Term in effect,
Lessee shall pay to Agent, for the benefit of the Lessors, Renewal Rent under
each Lease Supplement to which Lessee is a party, consisting of the amount of
Fixed Rent set forth opposite the applicable Payment Date on Schedule II to
each such Lease Supplement and Variable Rent accrued on the Supplement Balance
of each such Lease Supplement during the Rent Period ended on such Payment
Date; provided, that Lessors may revise the amount of Fixed Rent based upon the
results of the Appraisal required to be delivered under Section 11.1(a) in
connection with Lessee's exercise of its Renewal Option.
(d) SELECTION OF RENTAL PERIODS. During either Base Period or any
Renewal Term, if any, Lessee shall notify Agent not less than three Business
Days prior to the expiration of a Rental Period of its selection of one or more
Rental Periods to follow such expiring Rental Period and the amount of the Lease
Balance applicable to each such Rental Period so selected. Each such
notification shall be irrevocable.
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<PAGE> 51
III.2 PLACE AND MANNER OF PAYMENT. Rent and all other sums due to Agent or
any Lessor hereunder shall be paid in immediately available funds and if payable
to Agent, at the Agent's Corporate Office, and if payable to a Lessor at the
office of Lessor as it may from time to time specify to Lessee in a notice
pursuant to this Lease. All such payments shall be received by Agent or Lessor,
as applicable, not later than 11:00 a.m., Eastern time, on the date due; funds
received after such time shall for all purposes under the Operative Agreements
be deemed to have been received by Lessor on the next succeeding Business Day.
Any payments received by Agent not later than 11:00 a.m. Eastern time, shall be
paid by Agent to the Lessors in immediately available funds no later than 1:00
p.m. Eastern time on the same day and any payments received by Agent from or on
behalf of Lessee after 11:00 a.m. Eastern time, shall be paid to Lessors as soon
after receipt as practicable, but not later than 1:00 p.m. Eastern time on the
next succeeding Business Day. Lessee shall pay to Agent, for the benefit of the
Lessors, or to a Lessor in the case of payments to a Lessor, on demand, interest
at the rate per annum which is 2% above the Interest Rate in effect from time to
time on any overdue amount of Rent, or any other payment due under this Lease
and (to the extent permitted by applicable law) interest from the date due (not
taking into account any grace period) until payment is made.
III.3 NET LEASE. This Lease is a net lease and Lessee's obligation to pay
all Rent, indemnities and other amounts payable hereunder shall be absolute and
unconditional under any and all circumstances and, without limiting the
generality of the foregoing, Lessee shall not be entitled to any abatement or
reduction of Rent or any setoff against Rent, indemnity or other amount, whether
arising by reason of any past, present or future claims of any nature by Lessee
against Agent or any Lessor, or otherwise. Except as otherwise expressly
provided herein, this Lease shall not terminate, nor shall the obligations of
Lessee be otherwise affected: (a) by reason of any defect in, damage to, or loss
of possession or use, obsolescence or destruction, of any or all of the
Vehicles, however caused; or (b) by the taking or requisitioning of any or all
of the Vehicles by condemnation or otherwise; or (c) by the invalidity or
unenforceability or lack of due authorization by Agent, any Lessor or Lessee or
other infirmity of this Lease; or (d) by lack of power or authority of Agent or
any Lessor to enter into this Lease or any other Operative Agreement; or (e) by
the attachment of any Lien of any third party to any Vehicle; or (f) by any
prohibition or restriction of or interference with Lessee's use of any or all of
the Vehicles by any Person; or (g) by the insolvency of or the commencement by
or against Agent, any Lessor or Lessee of any bankruptcy, reorganization or
similar proceeding; or (h) by any other cause, whether similar or dissimilar to
the foregoing, any present or future law to the contrary notwithstanding. It is
the intention of the parties that all Rent, indemnities and other amounts
payable by Lessee hereunder shall be payable in all events in the manner and at
the times herein provided unless Lessee's obligations in respect thereof have
been terminated or modified pursuant to the express provisions of this Lease. To
the extent permitted by applicable law, Lessee hereby waives any and all rights
which it may now have or which may at any time be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease, in whole or in
part, except strictly in accordance with the express terms hereof. Each rental,
indemnity or other payment made by Lessee hereunder shall be final, and
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<PAGE> 52
Lessee shall not seek to recover all or any part of such payment from Lessor for
any reason whatsoever. Without affecting Lessee's obligation to pay Rent, or
other amounts payable hereunder, Lessee may seek damages for a breach by Agent
or any Lessor of its obligations under this Lease or the Participation
Agreement.
IV
Warranties
----------
IV.1 WARRANTY DISCLAIMER. LESSEE ACKNOWLEDGES AND AGREES THAT: (a) EACH OF
THE VEHICLES IS LEASED AS-IS AND WHERE-IS; (b) EACH OF THE VEHICLES LEASED BY IT
IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY LESSEE; (c) LESSEE IS
SATISFIED THAT THE SAME IS SUITABLE FOR ITS PURPOSES; (d) LESSOR IS NOT A
MANUFACTURER THEREOF OR A DEALER IN PROPERTY OF SUCH KIND; AND (e) LESSOR HAS
NOT MADE NOR SHALL IT BE DEEMED TO HAVE MADE: (i) ANY REPRESENTATION OR WARRANTY
OR COVENANT WITH RESPECT TO THE TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, CONDITION, QUALITY, DESCRIPTION, DURABILITY OR SUITABILITY OF ANY
VEHICLE IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF
LESSEE; OR (ii) ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY VEHICLE.
IV.2 QUIET ENJOYMENT. In the absence of an Event of Default, neither any
Lessor nor the Agent nor any Person acting by, through or under any of such
Persons, shall take any actions to interfere with Lessee's quiet enjoyment of
the Vehicles during the Lease Term.
-5-
<PAGE> 53
V
Possession, Assignment, Use and Maintenance of Vehicles
-------------------------------------------------------
V.I RESTRICTION ON LESSEE'S POSSESSION AND USE. Lessee shall not nor shall
Lessee permit any Sublessee to: (a) use, operate, maintain or store any Vehicle
or any portion thereof: (i) except in accordance with Section 5.3; or (ii) in
violation of any applicable insurance policy or law or regulation of any
Authority; (b) except as permitted by Section 6.1, abandon any Vehicle; (c)
except as permitted by Section 5.2, sublease or assign, without the prior
written consent of Agent, any Vehicle or permit the operation thereof by anyone
other than Lessee; (d) except as set forth in Section 5.2, sell, assign or
transfer any of its rights hereunder or in any Vehicle, or directly or
indirectly create, incur or suffer to exist any Lien, on any of its rights
hereunder or in any Vehicle, except for Permitted Liens; (e) permit any Vehicle
to be titled in any jurisdiction other than the jurisdiction in which it was
titled on its Delivery Date, except as permitted under Section 6.1(f) of the
Participation Agreement; and (f) use, operate, maintain or store any Vehicle or
any portion thereof outside of the United States except that Lessee may (and may
permit any Sublessee to) use, maintain and operate any Vehicle outside of the
United States on trips to and from a point of embarkation located within the
United States. Lessee will defend the transfer of the Vehicles by Lessee to
Agent, for the benefit of the Lessors or Agent against the claims or demands of
all Persons (other than Lessor Liens).
V.2 SUBLEASES. So long as no Event of Default shall have occurred and be
continuing, Lessee may sublease one or more Vehicles (i) to a wholly-owned
Subsidiary of Lessee without the prior written consent of Lessors and (ii) to
any other corporation organized under the laws of the United States or any State
thereof with the prior written consent of each of the Lessors, which consent
shall not be unreasonably withheld; provided, that any Sublease entered into
pursuant to this Section 5.2 shall satisfy each of the following conditions:
such Sublease shall automatically expire upon the termination
of the Lease Supplement governing the Vehicle subleased under such Sublease and
shall be expressly subordinate and subject to this Lease and the Liens created
hereunder, and to the applicable Lease Supplement;
such Sublease shall be in writing and shall expressly
prohibit any further assignment,sublease or transfer;
such Sublease shall not contain a purchase option in favor of
the Sublessee or any other provision pursuant to which the Sublessee may obtain
record or beneficial title to the Vehicle leased thereunder from Lessee of such
Vehicle;
such Sublease shall prohibit the Sublessee from making any
alterations or modifications to the Vehicle that would violate this Lease;
such Sublease shall require the Sublessee to maintain the
Vehicle in accordance with Section 5.3;
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on or before execution and delivery of such Sublease, Lessee
shall execute and deliver to Agent a security agreement, in a form approved by
Agent, whereby Lessee grants to Agent, for the benefit of the Lessors, a
security interest in all of Lessee's rights, title and interest in, to and under
such Sublease, as Collateral for Lessee's obligations under the Operative
Agreements. Such Sublease shall provide that such sublessee shall make all
payments under such Sublease directly to Agent, at an account specified by
Agent, upon the occurrence of any of the events specified in Section 6.1(j) of
the Participation Agreement. In connection therewith, Lessee shall deliver to
Agent an executed original counterpart of such Sublease upon the execution and
delivery thereof, marked as the sole original execution counterpart for Uniform
Commercial Code purposes, and Lessee shall, at its own cost and expense, do any
further act and execute, acknowledge, deliver, file, register and record any
further documents which Agent may reasonably request in order to create,
perfect, preserve and protect Agent's and Lessor's security interest in such
Sublease. Any payments received by Agent from Sublessee pursuant to this Section
shall be credited to those amounts owing by Lessee under the Lease;
Lessee shall not, without Agent's prior written consent,
permit or consent to any renewal or extension of a Sublease at any time when an
Event of Default has occurred and is continuing;
Lessee shall notify Agent and each Lessor in writing not less
than 30 days prior to entering into any Sublease, which notice shall include (i)
a description of the Vehicle or Vehicles to be leased thereunder, and (ii) the
street address, city, county and State where such Vehicle or Vehicles will be
located during the term of such Sublease, and Lessee shall provide copies of
each Sublease to Agent upon request, provided that if such Sublease will require
that the Vehicle be titled or registered in a different jurisdiction, then
Lessee must comply with Section 6.1(f) of the Participation Agreement in
connection with such titling and registration.
The liability of Lessee with respect to this Lease, the Lease Supplements and
each of the other Operative Agreements shall not be altered or affected in any
way by the existence of any Sublease.
V.3 MAINTENANCE. At all times during the term of this Lease, Lessee shall
at its expense or shall cause each Sublessee to: (a) maintain, manage and
monitor the Vehicles in compliance in all material respects with all applicable
requirements of law, and any Authority and in compliance with all insurance
policies; (b) maintain the Vehicles (or cause the Vehicles to be maintained) in
as good operating order, repair and condition as they were on the date such
Vehicles became subject to this Lease (assuming that, as of such date, each such
Vehicle was in good operating order, repair and condition), ordinary wear and
tear excepted; (c) maintain, manage and monitor the Vehicles in accordance with
the terms of all applicable contracts (including, without limitation, service
contracts and insurance contracts) in a manner consistent with Lessee's
customary practices; and (d) conduct all scheduled maintenance of the Vehicles
in conformity with Lessee's maintenance procedures then in effect for similar
equipment owned or leased by Lessee, and applicable warranty guidelines. Lessee
shall in any event maintain the Vehicles (or cause the Vehicles to be
maintained) in at
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least as good a condition as comparable equipment owned or leased by Lessee or
any of its Subsidiaries. Lessee will maintain or cause to be maintained, and
shall permit Agent and Lessors to inspect, any records, logs and other materials
required by any Authority having jurisdiction to be maintained or filed in
respect of any Vehicle.
V.4 REPAIR, REPLACEMENT AND SUBSTITUTION.
As soon as practicable after a Partial Casualty to a Vehicle,
Lessee shall repair and rebuild the affected portions of such Vehicle (or cause
such affected portions to be repaired and rebuilt) to the condition required to
be maintained by Section 5.3. In the event that any Part which may from time to
time be incorporated or installed in or attached to any Vehicle becomes at any
time worn out, damaged or permanently rendered unfit for use for any reason
whatsoever (unless such event constitutes a Casualty, in which event the
provisions of Section 6.1 hereof shall apply), Lessee, at its own cost and
expense, will promptly replace, or cause to be replaced, such Part with a
replacement Part (a "Replacement Part") in accordance with Lessee's customary
practices, but in any event subject to Section 5.3. In addition, Lessee may, at
its own cost and expense, remove in the ordinary course of maintenance, service,
repair, overhaul or testing, any Part, whether or not worn out, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use; provided, that Lessee will, at its own cost and expense, replace such Part
with a Replacement Part as promptly as is commercially reasonable. All
Replacement Parts shall be free and clear of all Liens (other than Permitted
Liens) and shall be in as good operating condition as, and shall have a value
and utility at least equal to, the Parts replaced, assuming such replaced Parts
and the Vehicles were in the condition and repair required to be maintained by
the terms of Section 5.3. Any Part at any time removed from any Vehicle shall
remain the property of Agent, for the benefit of the Lessors (subject to this
Lease), no matter where located, until such time as such Part shall be replaced
by a Part which has been incorporated or installed in or attached to such
Vehicle and which meets the requirements for a Replacement Part specified above.
Immediately upon any Replacement Part becoming incorporated or installed in or
attached to any such Vehicle as above provided, without further act: (i) title
to the replaced Part (the "Replaced Part") shall thereupon vest in Lessee of
such Vehicle, free and clear of all rights of Agent, for the benefit of the
Lessors, and shall no longer be deemed a Part hereunder; (ii) such Replacement
Part shall thereupon vest in Lessor, as provided in Section 12.1 (in the same
manner as the underlying Vehicle); and (iii) such Replacement Part shall become
subject to this Lease, the security interest created hereunder, and the
applicable Lease Supplement, and shall be deemed part of such Vehicle for all
purposes hereof to the same extent as the Parts incorporated or installed in or
attached to such Vehicle on the date such Vehicle became subject to this Lease.
Upon the satisfaction of the conditions specified in Section
5.4(a), and the Replacement Part becoming subject to this Lease and the security
interest created hereunder, Agent, on behalf of the Lessors, shall execute and
deliver to Lessee such documents as may be reasonably necessary to release the
Replaced Part from the terms and scope of this Lease (but without
representations or warranties, except that the Replaced Part is free and clear
of all Lessor Liens), in such form as may be
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reasonably requested by Lessee and are in form and substance satisfactory to the
Required Lessors, all at the expense of Lessee.
V.5 ALTERATIONS, MODIFICATIONS AND ADDITIONS; REMOVABLE PARTS.
Except as provided in Sections 5.3 and 5.4, Lessee shall not
remove, replace or alter any Vehicle or affix or place any accessory, equipment
or device on any Vehicle (such actions shall be hereafter referred to
collectively as "alter") if such removal, replacement, alteration or addition
would materially impair the originally intended function or use or materially
reduce the value or useful life of such Vehicle; provided, that Lessee, at its
own expense, will make, or cause to be made, any alteration, improvement,
modification or addition to or in respect of any Vehicle that may be necessary,
from time to time, to comply in all material respects with any applicable law,
governmental rule or regulation or to comply with any provision of any insurance
policy required to be maintained under Section 7.1 (any Parts being used to
comply with this provision shall be hereafter referred to as "Mandatory Parts").
All Parts affixed to or installed as a part of any Vehicle, excluding temporary
replacements, shall thereupon become subject to the security interest under this
Lease. If no Event of Default shall exist, Lessee may remove, at its expense,
any Part at any time during the term of this Lease (such Part, a "Removable
Part"): (i) which is in addition to, and not in replacement of or substitution
for, any Part originally incorporated or installed in or attached to a Vehicle
on the date such item became subject to this Lease or any Part in replacement of
or substitution for any such Part originally incorporated or installed or
attached to such Vehicle; (ii) which is not a Mandatory Part; and (iii) which
can be removed from any Vehicle without causing damage to such Vehicle or
diminishing or impairing the value, utility or condition which such Vehicle
would have had at such time had such addition not occurred; provided, that: (x)
such removal will not materially impair the value, use or useful life which the
Vehicle would have had at such time had such Part not been affixed or placed to
or on such Vehicle; and (y) such Part is not necessary for the continued normal
use of such Vehicle. Lessee shall repair all damage to any Vehicle resulting
from any alteration so as to restore such Vehicle to the condition in which it
existed prior to such alteration (ordinary wear and tear excepted). Neither
Agent nor any Lessor shall have any obligation to pay for or to reimburse Lessee
for any alteration required or permitted by this Section 5.5.
As provided in Section 4.1 of the Participation Agreement and
Section 12.1 of this Lease, all Parts incorporated or installed in or attached
or added to any Vehicle as the result of alterations, modifications or additions
under this Section 5.5, except Removable Parts, shall, without further act, vest
in Agent, for the benefit of the Lessors, to secure Lessee's performance of its
obligations under the Operative Agreements, in the manner provided in clause
(ii) of Section 5.4(a) and the other applicable provisions of Section 5.4 shall
apply with respect to such Parts. Upon the removal by Lessee of any Removable
Part as provided herein, such Removable Part shall no longer be deemed part of
the Vehicle from which it was removed. Any Removable Part not removed by Lessee
as provided herein prior to the end of the Lease Term shall become the property
of Lessor at such time.
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V.6 INSPECTION OF COLLATERAL. Agent, the Lessors and each of their agents
and representatives shall have the right at all reasonable times, upon
reasonable notice, to inspect any Collateral, including without limitation any
Certificate of Title or documentation related to the Collateral. Lessee shall
maintain: any Certificate of Title, microfiche containing Vehicle registration
documents and executed blank powers of attorney enabling the Agent to reregister
the Vehicles, each of them to be maintained in Lessee's records in a separate
file entitled "ABN AMRO Documentation."
VI
Risk of Loss; Replacement; Waiver and Indemnity
-----------------------------------------------
VI.1 CASUALTY. Upon a Casualty, Lessee shall give prompt written notice
thereof (a "Casualty Notice") to Agent, which notice shall specify whether
Lessee will:
repay a portion of the Lease Balance equal to the Casualty
Amount together with all Variable Rent accrued on such portion of the Lease
Balance to the date of payment, which repayment shall be made no later than the
next scheduled Payment Date occurring after such Casualty or, if such Casualty
occurs during the last 5 Business Days of a Rent Period, then no later than the
second Payment Date occurring after such Casualty, provided that in any event
such repayment shall be made no later than the last day of the Lease Term (the
"Casualty Settlement Date"); or
replace the Vehicle with respect to which the Casualty has
occurred pursuant to the provisions of Section 5.4 (treating such Vehicle, for
these purposes, in the same manner as a Part), provided that upon the occurrence
and during the continuance of an Event of Default or an Incipient Default,
Lessee shall be obligated, at the option of the Required Lessors, to make the
payments referred to in clause (a) above and shall not be entitled to exercise
any right or election of replacement as set forth in this clause (b).
If Lessee has elected, or is required, to pay the Casualty Amount
pursuant to clause (a) above, Lessee shall continue to make all payments of Rent
due under the applicable Lease Supplement until and including the Casualty
Settlement Date. Upon payment of the Casualty Amount in respect of any Vehicle
suffering a Casualty on such Casualty Settlement Date, the remaining scheduled
payments of Fixed Rent, if any, shall each be reduced by an amount equal to the
product of the scheduled amount of such Fixed Rent prior to the receipt of such
payment by Agent multiplied by the Allocation Fraction under such Lease
Supplement of the Vehicle suffering such Casualty.
VI.2 CASUALTY PROCEEDS. All proceeds of any casualty insurance or
condemnation proceeds ("Casualty Proceeds") paid or payable to Lessee or any
Affiliate of Lessee by reason of a Casualty or Partial Casualty to a Vehicle
shall be deposited into a deposit account established by Agent, for the benefit
of the Lessors (the "Deposit Account"), unless Lessee shall have already
complied with the applicable provisions of Section 5.4 or 6.1 with respect to
such Casualty or Partial Casualty. Any Casualty Proceeds paid to
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Agent with respect to a Vehicle suffering a Casualty or a Partial Casualty shall
also be deposited in the Deposit Account. Any moneys in the Deposit Account
attributable to a Casualty or Partial Casualty shall be remitted promptly to
Lessee after Lessee's full compliance with Section 6.1 or Section 5.4, as
applicable. Notwithstanding the foregoing provisions of this Section 6.2, and
provided that no Incipient Default consisting of an event described in Section
8.1 (a) or (g) or an Event of Default shall exist, if the aggregate amount of
Casualty Proceeds at any one time outstanding is [$250,000] or less, then Lessee
may receive such Casualty Proceeds directly, without delivery to Agent;
provided, that such Casualty Proceeds are applied in accordance with the
requirements of Section 6.1 or Section 5.4, as applicable. Notwithstanding any
Casualty, all of Lessee's obligations under this Lease and each Lease Supplement
(including its obligation to make all payments of Rent as they become due) shall
continue unabated and in full force and effect as provided in this Lease.
Without limiting the foregoing, Lessee's obligations under Section 5.4 shall not
be affected by the amount of any Casualty Proceeds received by Lessee.
VII
Insurance
---------
VII.1 REQUIRED COVERAGES. At its own expense, Lessee will maintain the
following insurance coverages:
primary automobile and general liability insurance of not less
than $3,000,000 per occurrence, with excess coverages of not less than
$5,000,000 per occurrence and $95,000,000 in the aggregate, in each case naming
Agent and Lessors as additional insureds; and
insurance against all risks of loss or physical damage to the
Vehicles in a primary amount of not less than $250,000 per occurrence and excess
"all risk" coverage on the Vehicles in a blanket amount of not less than
$100,000,000, which insurance shall name Agent and Lessors as the sole loss
payees.
In the absence of an Event of Default or an Incipient Default, Lessee may
provide the insurance coverage required under paragraphs (a) and (b) through its
self-insurance program, which retained liability amounts, in both such cases,
shall not exceed $3 million per occurrence and shall be in amounts not greater
than amounts customary for similarly situated companies operating comparable
equipment in the same industry as Lessee. Lessee shall obtain its excess
insurance from financially responsible companies selected by Lessee and having
an A.M. Best rating of "A" or better or otherwise acceptable to the Required
Lessors.
Such insurance shall (i) name Agent and Lessors as additional insured
parties thereunder as specified above (without any representation or warranty
by, or obligation upon, Agent or any Lessor) as their respective interests may
appear, (ii) contain the agreement by the Insurer that any loss thereunder shall
be payable to Agent and Lessors notwithstanding any action, inaction or breach
of representation or warranty by Lessee or any other Person having an interest
in any Vehicle (including, without
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limitation, Agent or any Lessor), (iii) provide that there shall be no recourse
against Agent or any Lessor for payment of premiums or other amounts with
respect thereto, (iv) provide that Insurer shall give Agent and each Lessor at
least 30 days' prior written notice of cancellation, lapse or reduction of
limits, (v) be primary with respect to any other insurance carried by or
available to Agent and the Lessors, (vi) provide that the insurer shall waive
any right of subrogation, setoff, counterclaim, or other deduction, whether by
attachment or otherwise, against Agent or any Lessor, and (vii) contain a
cross-liability clause providing for coverage of Agent and each Lessor as if
separate policies had been issued to each of them, provided, however, that such
provision shall not increase the total limits of liability over those specified
herein. Lessee will notify Agent and Lessors promptly of any policy
cancellation, reduction in policy limits, modification or amendment.
VII.2 DELIVERY OF INSURANCE CERTIFICATES. On or before the Initial Delivery
Date and thereafter on each Subsequent Delivery Date, Lessee shall deliver to
Agent certificates of insurance satisfactory to Agent and Lessors evidencing the
existence of all insurance required to be maintained hereunder and setting forth
the respective coverages, limits of liability, carrier, policy number and period
of coverage. Thereafter, throughout the Lease Term, at the time each of Lessee's
insurance policies is renewed (but in no event less frequently than once each
year), Lessee shall deliver to Agent and each Lessor certificates of insurance
evidencing that all insurance required by Section 7.1 to be maintained by Lessee
with respect to the Vehicles is in effect.
VIII
Default
-------
VIII.1 EVENTS OF DEFAULT. The following shall constitute events of default
(each an "Event of Default") hereunder and under each Lease Supplement then in
effect (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
Authority):
(i) any payment of Rent, or any other payment payable by
Lessee hereunder or by Lessee under any other Operative Agreement (including
without limitation, any amount payable pursuant to Article VII or VIII of the
Participation Agreement) other than a payment due on the Termination Date shall
not be paid when due, and such payment shall be overdue for a period of three
Business Days or (ii) any payment due on the Termination Date shall not be paid
when due;
any representation or warranty made by or on behalf of Lessee
contained in any Operative Agreement or in any certificate, letter or other
writing or instrument furnished or delivered to Agent or Lessors pursuant
thereto shall at any time prove to have been incorrect in any material respect
when made, deemed made or reaffirmed, as the case may be;
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Lessee shall default in the performance or observance of any
term, covenant, condition or agreement on its part to be performed or observed
under Article X or XI or Section 13.10 of this Lease or under Section 6.1(a),
(c), (f), (g) or (i) of the Participation Agreement (except to the extent that
Section 13.10 incorporates Section 5.2, in which case clause (e) of this Section
8.1 shall apply);
Lessee shall default in the performance or observance of any
term, covenant, condition or agreement on its part to be performed or observed
under Section 7.1;
Lessee shall default in the performance or observance of any
other term, covenant, condition or agreement on its part to be performed or
observed hereunder or under any other Operative Agreement (and not constituting
an Event of Default under any other clause of this Section 8.1), and such
default shall continue unremedied for a period of 30 days after the earlier to
occur of (i) written notice thereof by Agent or any Lessor to Lessee or (ii)
Lessee has Actual Knowledge thereof;
Lessee shall generally fail to pay, or admit in writing its inability
to pay, its debts as they become due, or shall voluntarily commence any case or
proceeding or file any petition under any bankruptcy, insolvency or similar law
or seeking dissolution, liquidation or reorganization or the appointment of a
receiver, agent, custodian or liquidator for itself or a substantial portion of
its property, assets or business or to effect a plan or other arrangement with
its creditors, or shall file any answer admitting the jurisdiction of the court
and the material allegations of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding, or shall be adjudicated
bankrupt, or shall make a general assignment for the benefit of creditors, or
shall consent to, or acquiesce in the appointment of, a receiver, agent,
custodian or liquidator for itself or a substantial portion of its property,
assets or business; or (ii) corporate action shall be taken by Lessee for the
purpose of effectuating any of the foregoing;
involuntary proceedings or an involuntary petition shall be
commenced or filed against Lessee under any bankruptcy, insolvency or similar
law or seeking the dissolution, liquidation or reorganization of Lessee or the
appointment of a receiver, agent, custodian or liquidator for Lessee or of a
substantial part of the property, assets or business of Lessee, or any writ,
judgment, warrant of attachment, execution or similar process shall be issued or
levied against a substantial part of the property, assets or business of Lessee,
and such proceedings or petition shall not be dismissed or stayed, or such writ,
judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 60 days after commencement, filing or
levy, as the case may be;
any one or more of the following shall occur and the liability
of Lessee and its Subsidiaries on a consolidated basis shall exceed,
individually or in the aggregate, $5,000,000: (i) a contribution failure occurs
with respect to any Pension Plan (other than a Multi-employer Plan) sufficient
to give rise to a lien under Section 302(f) of ERISA or Section 412(n) of the
Code with respect to any Pension Plan (other than a
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Multi-employer Plan) as to which Lessee or any Related Person to Lessee may have
any liability, (ii) there shall exist an unfunded current liability (as defined
in 302(d)(8) of ERISA) with respect to any Pension Plan, (iii) steps are
undertaken to terminate any Pension Plan, (iv) any Reportable Event occurs with
respect to a Pension Plan for which notice to the PBGC has not been waived, (v)
any action is taken with respect to a Pension Plan which could result in the
requirement that Lessee or any Related Person to Lessee furnish a bond or other
security to the PBGC or such Pension Plan, (vi) the occurrence of any event
which could cause Lessee or any Related Person to Lessee to incur any liability,
fine or penalty with respect to any Pension Plan or any increase in liability
with respect to any Pension Plan, or (vii) the occurrence of any event that
could result in any increase in the liability (or contingent liability) of
Lessee or any Related Person to Lessee with respect to post-retirement benefits
under any Welfare Plan;
any Operative Agreement or the security interest granted under
this Lease shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of Lessee or any Affiliate; or Lessee or any Affiliate,
directly or indirectly, shall contest in any manner in any court the
effectiveness, validity, binding nature or enforceability thereof; or the
security interest securing Lessee's obligations under the Operative Agreements
shall, in whole or in part, cease to be a perfected first priority security
interest;
there shall have occurred any event of default (after giving
effect to any applicable grace or cure period) in the performance or observance
of any obligation or condition with respect to any Debt owing by or guaranteed
by Lessee having an aggregate principal amount in excess of $10,000,000;
provided that should such event of default be subsequently cured or waived, it
shall no longer constitute an Event of Default hereunder; or
a final judgment or final judgments for the payment of money
are entered by a court or courts of competent jurisdiction against Lessee, and
such judgment or judgments remain undischarged or unstayed for a period (during
which execution shall not be effectively stayed) of 30 days; provided, that the
aggregate of all such judgments exceeds $10,000,000.
VIII.2 REMEDIES. If any Event of Default has occurred and is continuing,
Agent may exercise in any order one or more or all of the remedies set forth in
this Section 8.2 (it being understood that no remedy herein conferred is
intended to be exclusive of any other remedy or remedies, but each and every
remedy shall be cumulative and shall be in addition to every other remedy given
herein or now or hereafter existing at law or in equity or by statute):
Agent may proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
Agent may by notice in writing to Lessee terminate this Lease,
but Lessee shall remain liable as hereinafter provided; and Agent may, at its
option, do any one or more of the following: (i) declare the Lease
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Balance, all accrued Variable Rent, all other amounts then payable by Lessee
under this Lease and the other Operative Agreements to be immediately due and
payable, and recover any other damages and expenses (including the costs and
expenses described in Article VII and Section 11.5 of the Participation
Agreement) in addition thereto which Agent or any Lessor shall have sustained by
reason of such Event of Default; (ii) enforce the security interest given
hereunder pursuant to the Uniform Commercial Code or any other law; (iii) enter
upon the premises where any Vehicle may be and either remove such Vehicle, with
any damage to the improvements on such premises to be borne by Lessee (except to
the extent such damage is due to the willful misconduct or gross negligence of
Agent or its representatives), or take possession of such Vehicle; and (iv)
require Lessee to return the Vehicles as provided in Article IX; or
Agent may require Lessee immediately to purchase the Vehicles
for an aggregate purchase price equal to the applicable Termination Value as of
the most recent Payment Date. Lessee shall also pay to Agent (i) all accrued
unpaid Rent payable on or prior to such Payment Date; (ii) the pro rata Variable
Rent from the most recent Payment Date to the date of such purchase; and (iii)
all other fees and expenses and other amounts then due and payable pursuant to
this Lease and the other Operative Agreements.
Notwithstanding the foregoing, upon the occurrence of any Event of
Default described in subsections (a) through (e) and (h) through (k) of Section
8.1, and upon notice by the Agent to Lessee that the Agent seeks to pursue any
of the remedies described in Section 8.2, Lessee may, within one (1) Business
Day from the receipt of such notice, elect to purchase all of the Vehicles for
an amount equal to the applicable Termination Value as of the most recent
Payment Date. Lessee shall also pay to Agent (i) all accrued unpaid Rent payable
on or prior to such Payment Date; (ii) the pro rata Variable Rent from the most
recent Payment Date to the date of such purchase; and (iii) all other fees and
expenses and other amounts then due and payable pursuant to this Lease and the
other Operative Agreements. The purchase of all Vehicles by Lessee pursuant to
the preceding two sentences shall be in immediately available funds within three
(3) Business Days from the date of Lessee's election to purchase the Vehicles.
Notwithstanding the foregoing, upon the occurrence of any Event of
Default described in subsection (f) or (g) of Section 8.1, Lessee shall
automatically and immediately be required to purchase all of the Vehicles for an
amount equal to the applicable Termination Value as of the most recent Payment
Date. Lessee shall also pay to Agent (i) all accrued unpaid Rent payable on or
prior to such Payment Date; (ii) the pro rata Variable Rent from the most recent
Payment Date to the date of such purchase; and (iii) all other fees and expenses
and other amounts then due and payable pursuant to this Lease and the other
Operative Agreements.
Except for notices expressly otherwise provided for in the Operative
Agreements, Lessee hereby waives presentment, demand, protest and notice of any
kind including, without limitation, notices of default, notice of acceleration
and notice of intent to accelerate.
VIII.3 ADDITIONAL REMEDIES. In addition to the remedies set forth in
Section 8.2, if any Event of Default shall occur, the Agent (at the
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direction of the Required Lessors) may, but is not required to, sell the
Collateral in one or more sales. The Agent, on behalf of Lessors, may purchase
all or any part of the Collateral at such sale. Lessee acknowledges that sales
for cash or on credit to a wholesaler, retailer or user of such Collateral, at a
public or private auction, are all commercially reasonable. Any notice required
by law of intended disposition by the Agent shall be deemed reasonable and
properly given if given at least 10 days before such disposition.
VIII.4 PROCEEDS OF SALE; DEFICIENCY. All payments received and amounts held
or realized by the Agent at any time when an Event of Default shall have
occurred and be continuing and after, pursuant to Section 8.2, the Lease Balance
shall have been accelerated or Lessee is required to purchase the Vehicles, as
well as all payments or amounts then held or thereafter received by the Agent
shall be distributed forthwith upon receipt by the Agent in the following order
of priority:
FIRST: (i) so much of such payments or amounts as shall be
required to reimburse first the Agent and then any Lessor for any tax (other
than any income tax payable on interest not required to be indemnified by Lessee
under Article VIII of the Participation Agreement and on fees and other
compensation of the Agent), expense or other amount owed to the Agent or any
Lessor in connection with the collection or distribution of such payments or
amounts to the extent not previously reimbursed by Lessee (including, without
limitation, the expenses of any sale, taking or other proceeding, expenses in
connection with realizing on any of the Collateral, reasonable attorneys' fees
and expenses (including the allocated costs of internal counsel), court costs
and any other reasonable expenditures incurred or reasonable expenditures or
advances made by the Agent or any Lessor in the protection, exercise or
enforcement of any right, power or remedy upon such Event of Default whether
pursuant to Section 8.2 or otherwise) shall be so applied by the Agent first to
itself and then to such Lessors; and (ii) so much of such payments or amounts as
shall be required to pay the reasonable fees and compensation of the Agent in
connection with acting as Agent not previously paid by Lessee, shall be
distributed to the Agent;
SECOND: so much of such payments or amounts except those
specified in clause third below, which under the terms of this Lease and the
other Operative Agreements have accrued, including, without limitation, such
amounts as shall be required to reimburse the then existing or prior Lessors for
payments made by them to Agent pursuant to Section 9.4 of the Participation
Agreement (to the extent not previously reimbursed);
THIRD: so much of such payments or amounts remaining as shall
be required to pay in full, in the following order of application, (a) all
accrued unpaid Variable Rent (including, to the extent permitted by applicable
law, interest on interest) and (b) the aggregate unpaid Lease Balance, and in
case the aggregate amount so to be distributed shall be insufficient to pay any
of the foregoing in full all as aforesaid then, ratably to the Lessors in
accordance with their respective Commitment Percentages; and
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<PAGE> 64
FOURTH: so much of such payments or amounts as shall remain
shall be distributed to Lessee.
VIII.5 RIGHT TO PERFORM LESSEE'S AGREEMENTS. If Lessee fails to perform any
of its agreements contained herein or in any other Operative Agreement within
the time period specified therefor, whether or not an Event of Default has
occurred and is continuing, Agent, upon written instructions from Required
Lessors and receipt by Agent of indemnification satisfactory to it, and, upon 3
Business Days' prior notice to Lessee, may perform such agreement and the fees
and expenses incurred by Agent (or one or more Lessors) in connection with such
performance together with interest thereon shall be payable by Lessee upon
demand. Interest on fees and expenses so incurred by Agent (or one or more
Lessors) shall accrue at the rate provided in Section 3.2 for overdue payments.
IX
Return of Vehicles
------------------
If Agent has terminated this Lease pursuant to Section 8.2, and Lessee
has not elected to purchase the Vehicles pursuant to Section 8.2 or Articles X
or XI, Lessee shall (a) maintain (or cause to be maintained) the Vehicles in the
condition required by Section 5.3, store the Vehicles without cost to Agent or
any Lessor and keep all of the Vehicles insured in accordance with Article VII,
and (b) upon such termination forthwith package and deliver exclusive possession
of such Vehicles to Agent, for the benefit of the Lessors, at a location
designated by Agent, together with a copy of an inventory list of the Vehicles
then subject to the Lease, all then current plans, specifications and operating,
maintenance and repair manuals relating to the Vehicles that have been received
or prepared by Lessee, appropriately protected and in the condition required by
Section 5.3 (and in any event in condition to be placed in immediate service),
to Agent. This Article IX shall survive termination of this Lease.
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<PAGE> 65
X
Early Termination
-----------------
X.1 EARLY TERMINATION AS TO ALL VEHICLES. On any scheduled Payment Date
after the Second Lease Commencement Date Lessee may, at its option, upon at
least 30 days' advance written notice from Lessee to Agent and the Lessors,
purchase all, but not less than all, of the Vehicles subject to all Lease
Supplements then in effect in immediately available funds in an amount equal to
the applicable Termination Value as of such Payment Date. Lessee shall also pay
to Agent (i) all accrued unpaid Rent payable on or prior to such Payment Date
and (ii) all other fees and expenses and other amounts then due and payable
pursuant to this Lease and the other Operative Agreements. Upon the indefeasible
payment of such sums by Lessee in accordance with the provisions of the
preceding sentence, the obligation of Lessee to pay Rent hereunder shall cease,
the term of this Lease shall end on the date of such payment and Agent, on
behalf of Lessors, shall execute and deliver to Lessee such documents as may be
reasonably required to release the Vehicles from the terms and scope of this
Lease (without representations or warranties, except that the Vehicles are free
and clear of Lessor Liens), in such form as may be reasonably requested by
Lessee, all at Lessee's sole cost and expense.
X.2 EARLY TERMINATION AS TO A VEHICLE. Lessee may, at its option, at any
time after the Second Lease Commencement Date and from time to time, purchase
any Vehicle for an amount equal to the Casualty Amount of such Vehicle, together
with all accrued but unpaid Variable Rent on the portion of the Lease Balance
represented by such Casualty Amount, whereupon Agent shall transfer its interest
in such Vehicle to Lessee in accordance with the last two sentences of Section
12.1; provided, however, that Lessee shall not have such option to purchase a
Vehicle pursuant to this Section 10.2, if as a result of such purchase, all
Vehicles theretofore purchased under this Section 10.2 together with the Vehicle
to be purchased would have an aggregate Purchase Price in excess of $3,000,000.
XI
Lease Termination
-----------------
XI.1 OPTIONS. Not later than 120 days prior to the last day of the Base
Period commencing on the First Lease Commencement Date or any Renewal Term with
respect to such Base Period then in effect, Lessee shall, by delivery of written
notice to Agent (except in the case of clause (a)), exercise one of the
following options:
unless Lessee delivers written notice to the contrary, except
in the case of the last such Renewal Term, renew this Lease with respect to all,
but not less than all, of the Vehicles then subject hereto for an additional one
year Renewal Term (the "Renewal Option") with respect to each Base Period or
Renewal Term then in effect, with each such Renewal Term commencing on the last
day of the applicable Base Period or Renewal Term then in effect, on the terms
and conditions set forth herein and in the
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<PAGE> 66
other Operative Agreements; provided, that (i) such option shall be exercised
only with respect to both Base Periods or Renewal Terms then in effect and (ii)
in connection with the exercise of the Renewal Option Lessee shall provide
Lessors with an Appraisal of all of the Vehicles subject to this Lease together
with its notice of exercise, which Appraisal shall set forth the Appraisal
Values of the Vehicles as of the commencement of each Renewal Term and as of the
end of each Renewal Term and shall be satisfactory to Required Lessors; or
purchase in immediately available funds in an amount equal to
the applicable Termination Value all, but not less than all, of the Vehicles
then subject to this Lease on the last day of the Base Term or Renewal Term
applicable to such Vehicles with respect to which such option is exercised, on
the terms and conditions set forth in Section 11.2. (the "Lessee Purchase
Option"); provided, that such option shall be exercised only with respect to all
Vehicles then subject to this Lease; or
sell on behalf of the Lessors to a purchaser or purchasers not
in any way affiliated with Lessee all, but not less than all, of the Vehicles
then subject to this Lease on the last day of the Base Period or of any Renewal
Term then in effect with respect to which such option is exercised, on the terms
and conditions set forth in Section 11.3 (the "Sale Option"); provided, that
such option shall be exercised only with respect to all Vehicles then subject to
this Lease.
Lessee's election of the Lessee Purchase Option will be irrevocable at the time
made, but if Lessee fails to make a timely election, Lessee will be deemed, in
the case of the Lease Term and each Renewal Term then in effect (other than the
last Renewal Term) to have irrevocably elected the Renewal Option and, in the
case of the last Renewal Term, Lessee will be deemed to have irrevocably elected
the Lessee Purchase Option. In addition, the Sale Option shall automatically be
revoked if there exists an Incipient Default or Event of Default at anytime
after the Sale Option is properly elected and Agent shall be entitled to
exercise all rights and remedies provided in Article VIII. Lessee may not elect
the Sale Option if there exists on the date the election is made an Event of
Default or an Incipient Default.
XI.2 LESSEE PURCHASE OPTION. If Lessee elects the Lessee Purchase Option,
then on the Termination Date applicable to each Lease Supplement, Lessee shall
purchase all (but not less than all) of the Vehicles covered by such Lease
Supplement for an amount equal to the applicable Termination Value. Lessee shall
also pay to Agent all accrued unpaid Rent and all other amounts, if any then due
and owing hereunder. Upon the indefeasible payment of such sums by Lessee in
accordance with the provisions of the preceding sentence, the obligation of
Lessee to pay Rent hereunder with respect to such Vehicles shall cease, the term
of this Lease with respect to such Vehicles shall end on the date of such
payment and Agent, on behalf of Lessors, shall execute and deliver to Lessee
such documents as may be reasonably required to release such Vehicles from the
terms and scope of this Lease (without representations or warranties, except
that such Vehicles are free and clear of Lessor Liens), in such form as may be
reasonably requested by Lessee, all at Lessee's sole cost and expense.
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<PAGE> 67
XI.3 SALE OPTION. If Lessee elects the Sale Option, then during the period
prior to the Termination Date applicable to each Lease Supplement, Lessee, as
agent for Agent and Lessors and at no expense to Agent and Lessors, shall use
its commercial best efforts to obtain bids for the purchase in immediately
available funds on such Termination Date of the Vehicles from prospective
purchasers which are unaffiliated with Lessee and are financially capable of
purchasing the Vehicles ("Qualified Purchasers"). The Agent may also, if it so
desires, seek to obtain such bids. All bids received by Lessee or Agent, within
five Business Days after receipt thereof, shall be certified to the other in
writing setting forth the name and address of the party submitting each such bid
and the amount and terms thereof.
If any bid is received from a Qualified Purchaser for an amount in
excess of the Lease Supplement Lessor Risk Amount with respect to such Lease
Supplement, or if Agent agrees in its sole and absolute discretion to accept a
bid for less than the Lease Supplement Lessor Risk Amount, then on such
Termination Date (i) the Vehicles shall be sold on an "as-is," "where-is" basis
(without recourse to or warranty from Agent and Lessors, except that the
Vehicles are free of Lessor Liens), to the bidder, which is a Qualified
Purchaser, selected by Lessee after consultation with Agent (the "Purchaser"),
provided, however, that Agent may not reject the highest bidder if the next
highest bid is not at least equal to such Lease Supplement Lessor Risk Amount;
(ii) Lessee shall make the Vehicles available to the Purchaser in the same
manner and in the same condition and otherwise in accordance with this Lease as
if delivery were made to Agent pursuant to Article IX, (iii) such Purchaser
shall pay the sale proceeds in immediately available funds to Agent for the
benefit of Lessors, (iv) Lessee shall pay to Agent, for the benefit of Lessors,
in immediately available funds (x) all accrued unpaid Rent and all other
amounts, if any then due and owing under this Lease, and (y) an amount equal to
the excess, if any, of (A) the Termination Value as of the Termination Date over
(B) the sale proceeds (but in no event shall such amount payable by Lessee under
this clause (y) exceed the applicable Lessee Risk Amount), (v) title to such
Vehicles shall be transferred to such Purchaser free, and clear of Lessor Liens,
and (vi) Agent, on behalf of Lessors, shall execute and deliver to Purchaser
such documents as may be reasonably required to release such Vehicles from the
terms and scope of this Lease (without representations or warranties, except
that such Vehicles are free and clear of Lessor Liens), in such form as may be
reasonably requested by Purchaser.
If (x) Agent does not receive any bid in excess of the applicable Lease
Supplement Lessor Risk Amount from a Qualified Purchaser or Agent does not
accept any bids received for less than the Lease Supplement Lessor Risk Amount
prior to the applicable Termination Date Lessee shall have the option to, or (y)
the proposed sale to the Purchaser is not consummated prior to the applicable
Termination Date, Lessee be required to, purchase such Vehicles by paying to
Agent within ten (10) Business Days of the Termination Date, in immediately
available funds an amount equal to the applicable Termination Value as of the
applicable Termination Date. In the event Lessee exercises such option or is so
required to purchase such Vehicles, Lessee shall also pay to Agent (i) all
accrued unpaid Rent payable on such Termination Date; (ii) the pro rata Variable
Rent from the Termination Date to the date of such purchase; and (iii) all other
fees and expenses and
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<PAGE> 68
other amounts then due and payable pursuant to this Lease and the other
Operative Agreements. If Lessee has the option to, but does not so elect to,
purchase such Vehicles pursuant to the immediately preceding sentence, Lessee
shall pay to Agent an amount equal to (i) the applicable Lease Supplement Lessee
Risk Amount plus (ii) the indemnity for Excessive Use set forth in Section 7.2
of the Participation Agreement, Agent shall retain title to such Vehicles (or,
if at such time Lessee holds title to such Vehicles, Lessee shall transfer title
to such Vehicles to Agent, without recourse, representations or warranties,
except that such Vehicles are free and clear of Lessor Liens) and Lessee shall
return such Vehicles to Agent in accordance with Article IX.
-21-
<PAGE> 69
XII
Ownership, Grant of Security Interest to Lessor and Further Assurances
-----------------------------------------------------------------------
XII.1 GRANT OF SECURITY INTEREST. Lessee hereby assigns, grants and pledges
to Agent, for the benefit of the Lessors, a security interest in all of Lessee's
right, title and interest, whether now or hereafter existing or acquired, in the
Collateral, to secure the payment and performance of all obligations of Lessee
now or hereafter existing under this Lease or any other Operative Agreement.
Lessee shall, at its expense, do any further act and execute, acknowledge,
deliver, file, register and record any further documents which Agent or any
Lessor may reasonably request in order to protect its title to and perfected
security interest in the Collateral, subject to no Liens other than Permitted
Liens, and Agent's rights and benefits under this Lease. Lessee shall promptly
and duly execute and deliver to Agent such documents and assurances and take
such further action as Agent or any Lessor may from time to time reasonably
request in order to carry out more effectively the intent and purpose of this
Lease and the other Operative Agreements, to establish and protect the rights
and remedies created or intended to be created in favor of Agent hereunder and
thereunder, and to establish, perfect and maintain the right, title and interest
of Agent, for the benefit of the Lessors, in and to the Vehicles, subject to no
Lien other than Permitted Liens, or of such financing statements or fixture
filings or other documents with respect hereto as Agent or any Lessor may from
time to time reasonably request, and Lessee agrees to execute and deliver
promptly such of the foregoing financing statements and fixture filings or other
documents as may require execution by Lessee. Without limiting the foregoing, on
and after the date Lessee elects or is deemed to have elected the Lessee
Purchase Option or the Sale Option, Agent shall have the unconditional right to
demand the execution and delivery by Lessee of bills of sale with respect to the
Vehicles leased by Lessee or such documentation as may be necessary to cause
title to the Vehicles to be recorded in the name of Agent, for the benefit of
the Lessors. To the extent permitted by applicable laws, Lessee hereby
authorizes any such financing statements and other documents to be filed without
the necessity of the signature of Lessee, if Lessee has failed to sign any such
instrument within 10 days after request therefor by Agent or any Lessor. Upon
Lessee's request, Agent shall at such time as all of the obligations of Lessee
under this Lease or any other Operative Agreements have been indefeasibly paid
or performed in full (other than Lessee's contingent obligations, if any, under
Articles VII and VIII of the Participation Agreement), execute and deliver
termination statements and other appropriate documentation reasonably requested
by Lessee, all at Lessee's expense, to evidence Agent's release of its security
interest in the Collateral. At such time, Agent shall execute and deliver to
Lessee such documents as may be reasonably necessary (without representations or
warranties, except that the Vehicles are free and clear of Lessor Liens) to
release Agent's security interest in the Vehicles. Any such sale of the Vehicles
to either Lessee or a third party shall be on an AS-IS, WHERE-IS basis (without
representations or warranties, except that the Vehicles are free and clear of
Lessor Liens).
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<PAGE> 70
XII.2 RETENTION OF PROCEEDS IN THE CASE OF DEFAULT. If Lessee would be
entitled to any amount (including any Casualty Proceeds or Partial Casualty
Proceeds) but for the existence of any Event of Default or Incipient Default,
Agent shall hold such amount as part of the Collateral and shall be entitled to
apply such amounts against any amounts due hereunder; provided, that Agent shall
distribute such amount or transfer such Vehicle in accordance with the other
terms of this Lease if and when no Event of Default or Incipient Default exists.
XII.3 ATTORNEY-IN-FACT. Lessee hereby irrevocably appoints Agent as
Lessee's attorney-in-fact, with full authority in the place and stead of Lessee
and in the name of Lessee or otherwise, from time to time in Agent's discretion,
upon the occurrence and during the continuance of an Event of Default, to take
any action (including any action that Lessee is entitled to take) and to execute
any instrument which Agent or the Required Lessors may deem necessary or
advisable to accomplish the purposes of this Lease (subject to any limitations
set forth in the Operative Agreements), including, without limitation:
to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for money due and to become due under or in
connection with the Collateral;
to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with the foregoing clause
(a);
to file any claim or take any action or institute any
proceedings which Agent may deem to be necessary or advisable for the collection
thereof or to enforce compliance with the terms and conditions of any
Collateral; and
to perform any affirmative obligations of Lessee hereunder.
Lessee hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 12.3 is irrevocable and coupled with an
interest.
XII.4 RELEASE OF LIENS. Upon the replacement or substitution of any Vehicle
or Part or Sublease, or the payment of all amounts required pursuant to Section
6.1 in connection with a Casualty, in each case in compliance with the
applicable provisions of the Lease, such Vehicle or Part or Sublease shall be
released from the security interest created hereunder as provided in Section
5.4(b).
XIII
Miscellaneous
-------------
XIII.1 NO WAIVER. No delay or omission in the exercise of any right, power
or remedy accruing to Agent and/or the Lessors upon any breach or default of
Lessee hereunder shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein or of or in any similar breach or default thereafter
-23-
<PAGE> 71
occurring, nor shall any single or partial exercise of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of Agent or the Lessors of any breach or default under this Lease must
be specifically set forth in writing and must satisfy the requirements set forth
in Article X of the Participation Agreement with respect to approval by Agent or
the Lessors.
XIII.2 SURVIVAL OF COVENANTS. All claims pertaining to the representations,
warranties and covenants of Lessee under Articles II, III, IV, V, VI, VII, X, XI
and XIII shall survive the termination of this Lease to the extent such claims
arose out of events occurring or conditions existing prior to any such
termination.
XIII.3 APPLICABLE LAW. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED UNDER
THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF.
XIII.4 EFFECT AND MODIFICATION OF LEASE. No variation, modification,
amendment or waiver of this Lease, including any schedules or exhibits hereto,
or any other Operative Agreement to which Agent or any Lessor is a party shall
be valid unless the same shall have been entered into in accordance with Article
X of the Participation Agreement.
XIII.5 NOTICES. All notices, demands, requests, consents, approvals and
other instruments hereunder shall be in writing and shall be deemed to have been
properly given if given as provided for in Section 11.4 of the Participation
Agreement.
XIII.6 COUNTERPARTS. This Lease has been executed in several counterparts.
One counterpart has been prominently marked "Agent's Copy." Only the counterpart
marked "Agent's Copy" shall evidence a monetary obligation of or shall be deemed
to be an original or to be chattel paper for purposes of the Uniform Commercial
Code, and such copy shall be held by Agent.
XIII.7 SEVERABILITY. Whenever possible, each provision of this Lease shall
be interpreted in such manner as to be effective and valid under applicable law;
but if any provision of this Lease shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Lease.
XIII.8 SUCCESSORS AND ASSIGNS: BENEFIT OF AGREEMENT. This Lease shall be
binding upon each of the parties hereto and, subject to Sections 13.9 and 13.10
hereof, its respective successors and assigns, and shall inure to the benefit of
each of the parties hereto and its respective successors and permitted assigns.
It is expressly understood and agreed that Agent is entering into this
Lease for the benefit of the Lessors, who are third party beneficiaries of this
Lease and each Lease Supplement.
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<PAGE> 72
XIII.9 ASSIGNMENT BY AGENT. Agent shall not sell, assign, transfer or
otherwise dispose of its rights or delegate its obligations under this Lease to
any other Person except as permitted or required by the Participation Agreement.
XIII.10 ASSIGNMENT BY LESSEE. Lessee shall not sell, assign, transfer or
otherwise dispose of its rights or delegate its obligations under this Lease to
any other Person, except as permitted or required by Section 5.2 hereof or the
Participation Agreement.
XIII.11 JURY TRIAL. LESSEE WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY
RELATED DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
LEASE OR ANY RELATED DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
XIII.12 SECTION HEADINGS; TABLE OF CONTENTS. Section headings and the table
of contents used in this Lease (including the schedule) are for convenience of
reference only and shall not affect the construction of this Lease.
XIII.13 FINAL AGREEMENT. THIS LEASE, TOGETHER WITH THE OTHER OPERATIVE
AGREEMENTS, REPRESENTS THE ENTIRE FINAL AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THE LEASE AND THE OTHER OPERATIVE
AGREEMENTS. THIS LEASE CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED OR
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO
IN ACCORDANCE WITH THE TERMS OF THE PARTICIPATION AGREEMENT. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
XIII.14 TIMELINESS OF PERFORMANCE. The provisions of Articles VIII and XI
pertaining to the delivery of notice and the performance of certain events on
dates required by Articles VIII and XI are to be strictly adhered to by the
parties hereto.
[Remainder of page intentionally left blank.]
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<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed and delivered as of the date first above written.
ROADWAY EXPRESS, INC., as Lessee
By /S/ M. W. Wickham
------------------------------
Name Printed: M. W. Wickham
--------------------
Title: President and CEO
---------------------------
ABN AMRO BANK N.V., Pittsburgh Branch,
not individually but solely as Agent
for the Lessors
By: ABN AMRO North America, Inc., as agent
By /s/ Dennis F. Lennon
------------------------------
Name Printed: Dennis F. Lennon
-------------------
Title: Vice President
--------------------------
By /s/ Kathleen L. Ross
------------------------------
Name Printed: Kathleen L. Ross
-------------------
Title: Group Vice President
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY
EXPRESS, INC. AND SUBSIDIARIES FOR THE SECOND QUARTER OF 1996 (UNAUDITED) ENDED
JUNE 15, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-15-1996
<CASH> 22,657
<SECURITIES> 0
<RECEIVABLES> 232,839
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 279,646
<PP&E> 1,423,862
<DEPRECIATION> 1,019,750
<TOTAL-ASSETS> 702,491
<CURRENT-LIABILITIES> 292,354
<BONDS> 0
<COMMON> 206
0
0
<OTHER-SE> 211,089
<TOTAL-LIABILITY-AND-EQUITY> 702,491
<SALES> 0
<TOTAL-REVENUES> 1,049,712
<CGS> 0
<TOTAL-COSTS> 1,037,447
<OTHER-EXPENSES> 510
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,755
<INCOME-TAX> 5,079
<INCOME-CONTINUING> 6,676
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,676
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
