MASTER LEASE AGREEMENT
dated as of April 15, 2003 ("Agreement")
THIS AGREEMENT is between TRANSPORT INTERNATIONAL POOL, INC., a
Pennsylvania corporation with offices at 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx,
Xxxxxxxxxxxx 00000 (as Lessor hereunder together with its successors and
assigns, if any, "Lessor") and COVENANT TRANSPORT, INC., Tennessee corporation
with offices at 000 Xxxxxxxxxx Xxxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 ("Lessee").
This Agreement contains the general terms that apply to the leasing of Vehicles
from Lessor to Lessee. Additional Terms that apply to the Vehicles (term, rent,
options, etc.) shall be contained on one or more schedules executed by Lessor
and Lessee (each schedule being, individually, a "Schedule" and, collectively,
the "Schedules") Each Schedule shall incorporate by reference the terms and
conditions of this Agreement, Each Schedule, incorporating by reference the
Terms and conditions of this Agreement, shall constitute a separate instrument
of lease.
1. LEASING.
(a) This Agreement shall be effective from and after the date of execution
hereof. Subject to the Terms and conditions set forth below, Lessor agrees to
lease to Lessee, and Lessee agrees to lease from Lessor, the Vehicles
("Vehicles") described in any Schedule signed by both parties.
(b) The obligation of Lessor to purchase Vehicles from the manufacturer or
supplier thereof ("Supplier") and to lease the same to Lessee under any Schedule
shall be subject to receipt by Lessor, prior to the Lease Commencement Date
(with respect to such Vehicles), of each of the following documents in form and
substance satisfactory to Lessor: (i) a Schedule relating to the Vehicles then
to be leased hereunder, (ii) a Purchase Order Assignment and Consent in the form
of Annex B to the applicable Schedule, unless Lessor shall have delivered its
purchase order for such Vehicles, (iii) evidence of insurance which complies
with the requirements of Section 9, (iv) a Corporate Guaranty (the "Guaranty")
in form and substance satisfactory to Lessor, executed by Covenant Transport
Inc., a Nevada Corporation ("Guarantor"), and (v) such other documents as Lessor
reasonably may request. As a further condition to such obligations of Lessor,
Lessee shall, upon delivery of such Vehicles (but not later than the Last
Delivery Date specified in the applicable Schedule) execute and deliver to
Lessor a Certificate of Acceptance (in the form of Annex C to the applicable
Schedule) covering such Vehicles. Lessor hereby appoints Lessee its agent for
inspection and acceptance of the Vehicles from the Supplier. Upon execution by
Lessee of any Certificate of Acceptance, the Vehicles described thereon shall be
deemed to have been delivered to, and irrevocably accepted by, Lessee for lease
hereunder.
2.TERM, RENT AND PAYMENT.
(a) The rent payable hereunder (the "Rent") for the Vehicles, and Lessee's right
to use the Vehicles, shall begin on the date of delivery of the Vehicles to
Lessee as evidenced by the execution by Lessee of the Certificate of Acceptance
for such Vehicles ("Lease Commencement Date"). The Term of this Agreement shall
be the period specified in the applicable Schedule. The word "Term" shall
include the Basic Term and any renewal terms, if applicable.
(b) Lessee shall pay Rent to Lessor at Lessor's address specified above, until
otherwise directed by Lessor. Rent payments shall be payable in the amount set
forth in, and due by 12 noon on the dates as stated in, the applicable Schedule.
If any Advance Rent (as stated in the Schedule) is payable, it shall be due when
the Lessee signs the Schedule. Advance Rent shall be applied to the first rent
payment and the balance, if any, to the final rent payment(s) under such
Schedule. In no event shall any Advance Rent or any other Rent payments be
refunded to Lessee.
(c) Lessor shall not disturb Lessee's quiet enjoyment of the Vehicles during the
Term of the Agreement unless a default has occurred and is continuing under this
Agreement or Lessor has terminated this Agreement upon an event of default.
0.XXXX ADJUSTMENT.
(a) If, solely as a result of Congressional enactment of any law [including,
without Imitation, any modification of, or amendment or addition to, the
Internal Revenue Code of 1986, as amended ("Code")], the maximum effective
corporate income tax rate (exclusive of any minimum tax rate) for calendar-year
taxpayers ("Effective Rate") is higher than thirty-five percent (35%) for any
year during the lease term, then Lessor shall have the right to increase such
rent payments by requiring payment of a single additional sum. The additional
sum shall be equal to the product of (i) the Effective Rate (expressed as a
decimal) for such year less .35 (or, in the event that any adjustment has been
made hereunder for any previous year, the Effective Rate (expressed as a
decimal) used in calculating the next previous adjustment) times (ii) the
adjusted Termination Value (defined below), divided by (iii) the difference
between the new Effective Tax Rate (expressed as a decimal and one (1). The
adjusted Termination Value shall be the Termination Value (calculated as of the
first day of the year for which such adjustment is being made and all future
years of the lease term). The Termination Values and Tax Benefits are defined on
the Schedule. Lessee shall pay to Lessor the full amount of the additional rent
payment on the later of (i) receipt of notice or (ii) the first day of the year
for which such adjustment is being made.
(b) Lessee's obligations under this Section 3 shall survive any expiration or
termination of this Agreement.
4.TAXES. Lessee shall indemnify and hold Lessor harmless from and against, and
shall reimburse Lessor within ten (10) business days of receipt of invoice for
all taxes, fees and assessments due, imposed, assessed or levied against any
Vehicles (or purchase, ownership, delivery, leasing, possession, use or
operation thereof), this Agreement (or any Rents or receipts hereunder) and any
Schedule, Lessor or Lessee, by any governmental entity or taxing authority
during or related to the Term of this Agreement, including, without limitation
all sales, use, personal property, excise, gross receipts, franchise, stamp or
other taxes, imposts, duties and charges, together with any penalties, fines or
interest thereon (collectively "Taxes"), or provide proper exemption
documentation therefrom. The foregoing notwithstanding, (a) Lessee shall be
responsible for filing and paying on behalf of Lessor, all personal property
taxes directly to the appropriate taxing authority;(b) Lessee shall have no
liability for Taxes imposed by the United States of America or any state or
political subdivision thereof, or any other domestic or foreign jurisdiction
which are on or measured by the net income, gross income, gross receipts, net
worth, or alternative minimum taxable income of Lessor except as provided in
Section 14(c) and (c) Lessor shall bear any Taxes relating to its ownership or
disposal of the Vehicles arising after the termination of the Agreement. Lessee
shall promptly reimburse Lessor for any Taxes charged to or assessed against
Lessor. Lessee shall show Lessor as the owner of the Vehicles on all tax reports
or returns, and send Lessor a copy of each report or return and evidence of
Lessee's payment of Taxes upon request.
5. REPORTS.
(a) If any tax or other lien shall attach to any Vehicles, Lessee shall notify
Lessor in writing, within ten (10) days after Lessee becomes aware of the tax or
lien. The notice shall include the full particulars of the tax or lien and the
location of such Vehicles on the date of the notice.
(b) Lessee shall deliver to Lessor, complete financial statements, prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"), of Lessee and Guarantor,
certified by a recognized firm of certified public accountants within one
hundred twenty (120) days of the close of each fiscal year of such parties.
Lessee shall deliver to Lessor copies of the quarterly financial reports of
Lessee and of Guarantor, certified by the chief financial or accounting officer
of such party, as applicable, within ninety (90) days of the close of each
fiscal quarter of such parties.
(c) Lessor may inspect any Vehicles and all maintenance records with respect
thereto during normal business hours after giving Lessee reasonable prior
notice.
(d) Tennessee is the designated location for reporting Personal Property Tax.
Lessee shall promptly notify Lessor in writing of any changes in this location.
(e) If any Vehicle is lost or damaged (where the estimated repair costs would
exceed Ten Thousand Dollars ($10,000)), or is otherwise involved in an accident
causing personal injury or property damage, Lessee shall promptly and fully
report the event to Lessor in writing.
(f) If any Vehicle is lost or damaged beyond economic repair, Lessee shall
promptly report the event to Lessor in writing.
(g) Lessee shall furnish to Lessor each calendar quarter a certificate of an
authorized officer of Lessee stating that he has reviewed the activities of
Lessee and that, to the best of his knowledge, there exists no default or event
which with notice or lapse of time (or both) would become such a default under
this Agreement.
0.XXXXXXXX, USE AND OPERATION.
(a) The parties acknowledge Lessor is not the manufacturer of the Vehicles and
that such Vehicles are accepted by Lessee for lease hereunder "AS-IS, WHERE-IS."
(b) Lessee agrees that the Vehicles shall be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable laws,
regulations and insurance policies and Lessee shall not discontinue use of the
Vehicles.
(c) Lessee shall keep the Vehicles free and clear of all liens and encumbrances
other than those which result from acts of Lessor.
(d) Lessee warrants that the Vehicles shall be used only in the Continental
United States, Mexico and Canada and that no more than ten percent (10%) of the
Vehicles shall be used outside of the Continental United States at any given
time.
(e) Lessee warrants that the Vehicles shall not be operated by any person other
than agents, employees or customers of Lessee, each warranted to the knowledge
of the Lessee to be a careful, dependable operator not operating under the
influence of alcohol or drugs, with a valid license to operate such Vehicles.
(f) Lessee shall comply with all current and future statutes, regulations,
rules, ordinances and orders of any governmental or quasi-governmental entity,
including without limitation environmental statutes, regulations, rules,
ordinances and orders, and safety regulations, affecting the use, operation or
maintenance of the Vehicles (collectively "Applicable Laws").
(g) Lessee shall comply with the Vehicle manufacturer's loading limitations,
load Vehicles only in accordance with acceptable industry practices and avoid
abusive handling and concentrated or excessive loads.
(h) Lessee shall provide Lessor with any Vehicle operation data as may be
required by any governmental agency and such data shall be true and accurate.
7.MAINTENANCE.
(a) Lessee shall, at its sole expense, maintain each Vehicle in good operating
order and repair, condition and appearance, normal wear and tear excepted.
Lessee shall also maintain the Vehicles in accordance with manufacturers'
recommendations. Lessee shall make all alterations or modifications required to
comply with any applicable law, rule or regulation during the Term of this
Agreement. Upon Lessor's request, Lessee shall affix plates, tags or other
identifying labels showing ownership thereof by Lessor and maintain each in good
manner and appearance. The tags or labels shall be placed in a prominent
position on each Vehicle., as mutually agreed between the parties.
(b) Lessee will be solely responsible for ensuring that each Vehicle is in
compliance with all Applicable Laws. Any alterations or modifications to the
Vehicles that may, at any time during the Term of this Agreement, be required to
comply with any Applicable Law shall be made at the expense of Lessee. Lessee
shall perform and pay for all required safety inspections and shall maintain
proper documentation evidencing said inspections.
(c) Lessee shall not attach or install anything on any Vehicle that shall impair
the originally intended function or use of such Vehicles without the prior
consent of Lessor. All additions, parts, supplies, accessories, and equipment
("Additions") furnished or attached to any Vehicles that are not readily
removable shall become the property of Lessor. All Additions shall be made only
in compliance with Applicable Laws. Lessor hereby consents to the attachment of
trailer tracking devices to the vehicles, and acknowledges and agrees that such
devices are readily removable and shall remain the property of the Lessee.
(d) Lessee shall inspect, lubricate, and provide maintenance for normal wear and
tear as reasonably required to maintain each Vehicle in good repair, mechanical
condition, and running order.
(e) Lessee shall replace tires and brakes on each Vehicle in accordance with
Federal and state vehicle safety regulations.
(f) Lessee shall provide and maintain proper axle lubricant levels, tire
inflation and repair, brake operation and lighting, including bulbs and lens
replacement.
(g) Lessee shall maintain each Vehicle in the same condition as on the Lease
Commencement Date, excepting normal wear and tear, making all necessary repairs
and replacements in compliance with Lessee manufacturer's standard operating
practices relating thereto, using only new parts.
(h) Lessee shall not make any structural repairs, including without limitation
rail welds, without Lessor's prior written consent. At Lessee's request, Lessor
may, but shall not be required to, from time to time, provide maintenance and
repair services for which Lessee is responsible under this Agreement, Lessee
shall pay for such services in accordance with this Agreement.
(i)Lessee shall permit Lessor, upon 30 days written notice to Lessee, to visit
the location where the Vehicles are stored so that Lessor may inspect the
Equipment. So long as no Event of Default shall exist
and be continuing under this Lease, Lessor's right to inspect shall be limited
to one time per calendar year and shall not unreasonably conflict or interfere
with the day to day business of the Lessee. If, upon such inspection, Lessor
reasonably determines that any Vehicle has not been maintained in a manner
consistent with the maintenance standards set forth herein, Lessor may require
(at the election of Lessee) either (i) that Lessee diligently and promptly
repair such Vehicle, or (ii) that Lessee purchase such Vehicle for the greater
of the then Stipulated Loss Value or the Fair Market Value (as such terms are
hereinafter defined) of such Vehicle. Upon payment of such sum, the Term of this
Agreement as to such Vehicle shall terminate and Lessor shall deliver to Lessee
a xxxx of sale transferring and assigning to Lessee all of Lessor's right, title
and interest in and to the applicable Vehicles. Any transfer of the Vehicles
from Lessor to Lessee pursuant to this Agreement shall be "AS IS, WHERE IS" AND
WITHOUT ANY REPRESENTATION OR WARRANTY AS TO ITS CONDITION OR ANY OTHER MATTER
WHATSOEVER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR PURPOSE, EXCEPT THAT LESSOR'S RIGHT, TITLE AND INTEREST IS CONVEYED
FREE OF ANY LIENS ARISING FROM, BY OR THROUGH LESSOR OR ITS ACTS OR OMISSIONS.
8.STIPULATED LOSS VALUE. If for any reason any Vehicle becomes worn out, lost,
stolen, destroyed, irreparably damaged or unusable ("Casualty Occurrences"),
Lessee shall promptly notify Lessor in writing of such Casualty Occurrence,
including such information as reasonably may be required by Lessor with respect
to the specifics of such Casualty Occurrence. Lessee shall pay Lessor the sum of
(x) the Stipulated Loss Value of the affected Vehicle determined in accordance
with Annex D of the applicable Schedule (the "Stipulated Loss Value") as of the
Rent Payment Date next preceding the Casualty Occurrence; and (y) all Rent and
other amounts which are then due under this Agreement on the Payment Date for
the affected Vehicle ("Casualty Value"). The "Payment Date" shall be the Rent
Payment Date next preceding after the Casualty Occurrence. There will be no
abatement of Rent with respect to any affected Vehicles until Lessor is
compensated as provided in this Section. Upon payment of all sums then due
hereunder with respect to the affected Vehicles, the Term of this Agreement as
to such Vehicles shall terminate and (except in the case of the loss, theft or
complete destruction of such Vehicles) Lessor shall be entitled to recover
possession of such Vehicles.
9. INSURANCE.
(a) Lessee hereby assumes and shall bear the entire risk of any loss, theft,
damage to, or destruction of, any Vehicle from any cause whatsoever from the
Lease Commencement Date.
(b) Lessee shall at its sole cost and expense procure, and keep in full force
and effect from the Lease Commencement Date until the return of all Vehicles,
valid Business Auto Liability insurance and Business Auto Physical Damage or its
equivalent satisfactory to Lessor with coverage for: (i) hired autos (trailers)
for bodily injury and property damage liability, with a minimum combined single
limit of One Million Dollars ($1,000,000) per occurrence or, if any Vehicle is
used to haul or store acceptable hazardous materials, a minimum combined single
limit of Five Million Dollars ($5,000,000) per occurrence and either an
Environmental Impairment Liability or Broadened Pollution Liability endorsement
equal to the combined single limit per occurrence or a separate policy for
Environmental Impairment Liability or Broadened Pollution Liability with a
minimum combined single limit of Five Million Dollars ($5,000,000) per
occurrence; (ii) hired autos (trailers) for physical damage providing collision
and comprehensive coverage with limits equal to the greater of the Stipulated
Loss Value or the Fair Market Value of the Vehicles, with Lessor as loss payee;
and (iii) Commercial General Liability for contractual liability coverage for
hold harmless agreements, with a minimum combined single limit of One Million
Dollars ($1,000,000) per occurrence. . Notwithstanding the requirements of
Section 9(b)(ii), so long as no Default has occurred and is continuing under
this Agreement, Lessee may self insure with respect to the insurance coverage
otherwise required pursuant to Section 9(b)(ii). Each of the foregoing
liability policies shall name Lessor as an additional insured. All such policies
shall be with companies, and on terms, satisfactory to Lessor. No insurance
shall be subject to any co-insurance clause. All policies required herein shall
require written notice to Lessor at least thirty (30) days prior to cancellation
or material change. Prior to the Lease Commencement Date, Lessee shall deliver
to Lessor a valid certificate of insurance evidencing insurance coverage in
compliance herewith. .
(c) Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make proof of
loss and claim for insurance, and to make adjustments with insurers and to
receive payment of and execute or endorse all documents, checks or drafts in
connection with insurance payments'. Lessor shall not act as Lessee's
attorney-in-fact unless Lessee is in default under Section 11 hereof. Lessee
shall pay any reasonable expenses of Lessor in adjusting or collecting
insurance. Lessee shall not make adjustments with insurers except with respect
to claims for damage to any Vehicle where the repair costs are less than Ten
Thousand Dollars ($10,000). Lessor may, at its option, apply proceeds of
physical damage insurance, in whole or in part, to (i) repair or replace the
Vehicles or any portion thereof, or (ii) satisfy any obligation of Lessee to
Lessor under this Agreement.
10. RETURN OF VEHICLES.
(a) Upon expiration or earlier termination of the Term with respect to each
applicable Schedule (subject to Section 20 hereof), Lessee shall return each
Vehicle described on such Schedule to Lessor, free and clear of all liens and
encumbrances, at locations mutually agreeable to Lessor and Lessee (which shall
include Lessee's terminals in Chattanooga TN, Little Rock, AR and Fontana, CA_)
and in the condition set forth on Annex E to the Schedule, with all Lessee
identification, logos and decals, together with any residue therefrom, removed
to Lessor's satisfaction, and otherwise in accordance with any maintenance
addendum executed in connection herewith. Lessor may store the Vehicles at such
locations for up to 120 days at no charge. If upon return, any Vehicle has
logos, markings or is painted any color other than white, Lessee shall pay
Lessor the cost of logo removal and repainting. If upon return, any Vehicle has
mudflaps with logos or other markings, Lessee shall pay Lessor the cost of
replacing such mudflaps. Upon termination of this Agreement in any manner
permitted hereunder, or upon the return of any Vehicle, Lessee shall deliver
said Vehicle to Lessor at any Lessor branch location, provided however that
Lessee shall not return more than fifty (50) Vehicles per branch per calendar
quarter without prior written consent of Lessor. In the event Lessee returns
more than said amount at any location, Lessee shall pay all costs incurred by
Lessor in returning said Vehicle to an acceptable location. Any Vehicle not
returned in good operating condition and otherwise as set forth herein shall
remain leased hereunder and Lessee shall continue to pay lease payments required
hereunder until the required repairs are completed by Lessee in a manner
acceptable to Lessor or Lessee pays Lessor the actual or estimated cost of
repair or Lessee purchases the Vehicle in accordance herewith, provided however
such lease payments shall be abated in the event that Lessee disputes in good
faith such condition.
(b) Until Lessee had fully complied with the requirements of Section 10(a)
above, Lessee's Rent payment obligation and all other obligations under this
Agreement shall continue from month to month notwithstanding the expiration or
termination of the Term. Lessor may terminate Lessee's right to use the Vehicles
upon ten (10) days' notice to Lessee.
(c) Lessee shall make a sampling (sample subject to a mutually agreed upon
number) of the Vehicles available from time to time for on-site operational
inspections by Lessor at least ninety (90) days prior to and continuing up to
lease termination. Lessor shall provide Lessee with reasonable notice prior to
any inspection. Lessee shall provide personnel, power and other requirements
necessary to demonstrate electrical, hydraulic and mechanical systems of such
Vehicle. Lessor's right to inspect shall not unreasonably conflict or interfere
with the day-to-day business of the Lessee.
11. DEFAULT AND REMEDIES.
(a) Lessor may in writing declare this Agreement In default ("Default") if: (1)
Lessee breaches its obligation to pay Rent or any other sum when due and fails
to cure the breach within ten (10) days; (2) Lessee breaches any of its
insurance obligations under Section 9; (3) Lessee breaches any of its other
obligations hereunder and fails to cure that breach within thirty (30) days
after written notice from Lessor; (4) any representation or warranty made by
Lessee in connection with this Agreement shall be false or misleading in any
material respect; (5) Lessee becomes insolvent or ceases to do business as a
going concern; (6) any Vehicle is illegally used; (7) a petition is filed by or
against Lessee or Guarantor under any bankruptcy or insolvency laws and in the
event of an involuntary petition, the petition is not dismissed within
forty-five (45) days of the filing date; (8) there is a default in or a
revocation or anticipatory repudiation of Guarantor's obligations under the
Guaranty; (9) Lessee or Guarantor shall be in default under any material
obligation and the applicable grace period with respect thereto shall have
expired and such default shall not have been waived or cured; (10) Lessee or
Guarantor shall have terminated its existence, consolidated with, merged into or
conveyed or leased substantially all of its assets as an entirety to any person
(such actions being referred to as an "Event"), unless not less than sixty (60)
days prior to such Event: (x) such person is organized and existing under the
laws of the United States or any state, and executes and delivers to Lessor an
agreement containing an effective assumption by such person of the due and
punctual performance of this Agreement or guaranty thereof, as the case may be,
and (y) Lessor is reasonably satisfied as to the credit worthiness of such
person; (11) Lessee or Guarantor is a privately held corporation and effective
control of Lessee's or any guarantor's voting capital stock, issued and
outstanding from time to time, is not retained by the present stockholders
(unless Lessee shall have provided sixty (60) days' prior written notice to
Lessor of the proposed disposition of stock and Lessor shall have consented
thereto in writing). Any provision of this Agreement to the contrary
notwithstanding, Lessor may exercise all rights and remedies hereunder
independently with respect to each Schedule.
(b) After a Default, at the request of Lessor, Lessee shall comply with the
provisions of Section 10(a). Lessee hereby authorizes Lessor to peacefully enter
any premises where any Vehicles may be and take possession of the Vehicles.
After a Default, Lessee shall immediately pay to Lessor without further demand
as liquidated damages for loss of a bargain and not as a penalty, the Stipulated
Loss Value of the Vehicles (calculated as of the Rent Payment Date next
preceding the declaration of default), and all Rents and other sums then due
under this Agreement and all Schedules for periods up to such Rent Payment Date.
Lessor may cancel this Agreement as to any or all of the Vehicles. A
cancellation shall occur only upon written notice by Lessor to Lessee and only
as to the Vehicle specified in any such notice. Lessor may, but shall not be
required to, sell Vehicles and its contents, if any, at private or public sale,
in bulk or in parcels, with or without notice, and without having the Vehicles
present at the place of sale. Lessor may also, but shall not be required to,
lease, otherwise dispose of or keep idle all or part of the Vehicles. Lessor may
use Lessees premises for a reasonable period of time for any or all of the
purposes stated above without liability for rent, costs, damages or otherwise.
(c) The proceeds of sale, lease or other disposition (other than a purchase by
Lessee), if any, shall be applied in the following order of priorities: (1) to
pay all of Lessor's costs, charges and expenses incurred in taking, removing,
holding, repairing and selling, leasing or otherwise disposing of Vehicles, (2)
to the extent not previously paid by Lessee, to pay Lessor all sums due from
Lessee under this Agreement; (3) to reimburse Lessee for any amount paid as
liquidated damages, and (4) any surplus shall be retained by Lessor. Lessee
shall immediately pay any deficiency in clauses (1) and (2) above.
(d) The foregoing remedies are cumulative, and any or all thereof may be
exercised instead of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time end place thereof), and the manner and place of any advertising. Lessee
shall pay Lessor's actual expenses including attorney's fees incurred in
connection with the enforcement, assertion, defense or preservation of Lessor's
rights and remedies under this Agreement, or if prohibited by law, such lesser
sum as may be permitted. Waiver of any default shall not be a waiver of any
other or subsequent default.
(e) Any default under the terms of this or any other agreement between Lessor
and Lessee may be declared by Lessor a default under this and any such other
agreement.
12. ASSIGNMENT.
(a) LESSEE SHALL NOT SELL, TRANSFER, ASSIGN OR ENCUMBER ANY VEHICLES OR THE
INTEREST OF LESSEE IN THE VEHICLES OR IN THIS AGREEMENT, OR SUBLEASE OR
OTHERWISE PERMIT THE USE OF THE VEHICLES BY A THIRD PARTY (OTHER THAN PARTIES
IDENTIFIED IN SECTION 6(g)), WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.
(b) Lessor may, without the consent of Lessee, assign this Agreement, any
Schedule or the right to enter into a Schedule. Lessee agrees that if Lessee
receives written notice of an assignment from Lessor, Lessee shall pay all Rent
and all other amounts payable under any assigned Schedule to such assignee or as
instructed by Lessor. Each Schedule, incorporating by reference the terms and
conditions of this Agreement, constitutes a separate instrument of lease, and
the Lessor named therein or its assignee shall have all rights as "Lessor"
thereunder, separately exercisable by such named Lessor or assignee, as the case
may be, exclusively and independently of Lessor or any assignee with respect to
other Schedules executed pursuant hereto. Lessee also agrees to confirm in
writing receipt of the notice of assignment as may be reasonably requested by
assignee. Lessee hereby waives and agrees not to assert against any such
assignee any defense, set-off, recoupment claim or counterclaim which Lessee has
or may at any time have against Lessor for any reason whatsoever.
13. NET LEASE. This Agreement is a net lease. Lessee's obligation to pay Rent
and other amounts due hereunder shall be absolute and unconditional. Lessee
shall not be entitled to any abatement or reductions of, or set-offs against,
said Rent or other amounts, including, without limitation, those arising or
allegedly arising out of claims (present or future, alleged or actual, and
including claims arising out of strict tort or negligence of Lessor) of Lessee
against Lessor under this Agreement or otherwise. This Agreement shall not
terminate and the obligations of Lessee shall not be affected by reason of any
defect in or damage to, or loss of possession, use or destruction of, any
Vehicles from whatsoever cause. It is the intention of the parties that Rents
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.
14. INDEMNIFICATION.
(a) Lessee hereby agrees to indemnify Lessor, its agents, employees, successors
and assigns (on an after-tax basis) from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature arising out of or relating to this
Agreement or the use, operation or ownership of the Vehicles during the Term of
this Agreement, except to the extent the losses, damages, penalties, injuries,
claims, actions, suits or expenses result from Lessor's gross negligence or
willful misconduct or relate directly or indirectly to Taxes ("Claims"). This
indemnity shall include, but is not limited to, Lessor's strict liability in
tort and Claims arising out of (i) the selection, manufacture, purchase,
acceptance or rejection of Vehicles, the ownership of Vehicles during the Term
of this Agreement, and the delivery, lease, possession, maintenance, uses,
condition, return or operation of Vehicles (including, without limitation,
latent and other defects, whether or not discoverable by Lessor or
Lessee and any claim for patent, trademark or copyright infringement or
environmental damage), or (ii) any loss or damage Lessor may sustain as a result
of any damage to or loss of any Vehicle arising during the Term due to the
transport, loading or storage of Ultrahazardous Materials (as hereinafter
defined), or (iii) any loss, claim, liability, damages, expense or disbursement,
penalty or fine, disposal, remediation or corrective action cost, or forfeiture
or seizure that may arise in whole or in part from the use or condition, actual
or alleged, of any Vehicle during the Term for the transport, loading or storage
of Ultrahazardous Materials or the failure, actual or alleged, of Lessee to use
any such Vehicles in compliance with Applicable Laws. Lessee shall, upon
request, defend any actions based on, or arising out of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that (i) on the Lease
Commencement Date for any Vehicle, such unit shall qualify for all of the items
of deduction and credit specified in Section C of the applicable Schedule ("Tax
Benefits") in the hands of Lessor, and (ii) at no time during the Term of this
Agreement shall Lessee take or omit to take, nor shall it permit any assignee to
take or omit to take, any action (whether or not such act or omission is
otherwise permitted by Lessor or by this Agreement), which shall result in the
disqualification of any Vehicle for, or recapture of, all or any portion of such
Tax Benefits.
(c) (1) If as a result of a breach of any representation, warranty or covenant
of the Lessee contained in this Agreement or any Schedule (A) tax counsel of
Lessor shall determine that Lessor is not entitled to claim on its Federal
income tax return all or any portion of the Tax Benefits with respect to any
Vehicle, or (B) any Tax Benefit claimed on the Federal income tax return of
Lessor is disallowed, adjusted or required to be recaptured by the Internal
Revenue Service , or (2) Lessor shall become liable for additional tax as a
result of Lessee having added an attachment or made an alteration to the
Vehicles, including (without limitation) any such attachment or alteration which
would increase the productivity or capability of the Vehicles so as to violate
the provisions of Rev. Proc. 75-21, 1975-1 C.B. 715, or Rev. Proc. 79-48, 1979-2
C.B. 529 (as either or both may hereafter be modified or superceded); (any such
determination, disallowance, adjustment, recalculation or recapture being a
"Loss"); then Lessee shall pay to Lessor, as an indemnity and as additional
Rent, an amount that shall, in the reasonable opinion of Lessor, cause Lessor's
after-tax economic yields and cash flows to equal the Net Economic Return that
would have been realized by Lessor if such Loss had not occurred. Such amount
shall be payable upon demand accompanied by a statement describing in reasonable
detail such Loss and the computation of such amount. The economic yields and
cash flows shall be computed on the same assumptions, including tax rates as
were used by Lessor in originally evaluating the transaction ("Net Economic
Return").
(d) All references to Lessor in this Section 14 include Lessor and the
consolidated taxpayer group of which Lessor is a member. All of Lessor's rights,
privileges and indemnities contained in this Section 14 shall survive the
expiration or other termination of this Agreement. The rights, privileges and
indemnities contained herein are expressly made for the benefit of, and shall be
enforceable by Lessor, its successors and assigns.
15. DISCLAIMER. LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE VEHICLES WITHOUT
ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS
NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
VEHICLES LEASED UNDER THIS AGREEMENT OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE.
All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, during the Term
of this Agreement and any renewal thereof or holdover period, Lessor shall have
no responsibility or liability to Lessee or any other person with respect to any
of the following (1) any liability, loss or damage caused or alleged to be
caused directly or indirectly by any Vehicles, any inadequacy thereof, any
deficiency or defect (latent or otherwise) of the Vehicles, or any other
circumstance in connection with the Vehicles; (2) the use, operation or
performance of any Vehicles or any risks relating to it; (3) any interruption of
service, loss of business or anticipated profits or consequential damages; or
(4) the delivery, operation, servicing, maintenance, repair, improvement or
replacement of any Vehicles. If, and so long as, no default exists under this
Agreement, Lessee shall be, and hereby is, authorized during the Term of this
Agreement to assert and enforce whatever claims and rights Lessor may have
against any Supplier of the Vehicles at Lessee's sole cost and expense, in the
name of and for the account of Lessor and/or Lessee, as their interests may
appear.
16. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee makes each of the following
representations and warranties to Lessor on the date hereof and on the date of
execution of each Schedule.
(a) Lessee has adequate power and capacity to enter into, and perform under,
this Agreement and all related documents (together, the "Documents"). Lessee is
a corporation duly organized under the laws of the state specified in the first
paragraph hereof, duly qualified to do business wherever necessary to carry on
its present business and operations, including the jurisdiction(s) where the
Garage Location of the Vehicles is or is to be located, except where the failure
to be so qualified would not, individually or in the aggregate, have a material
adverse effect.
(b) The Documents have been duly authorized, executed and delivered by Lessee
and constitute valid, legal and binding agreements, enforceable in accordance
with their terms, except to the extent that the enforcement of remedies may be
limited under applicable bankruptcy and insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or entity with respect to the entry into or performance
by Lessee of the Documents except such as have already been obtained.
(d) The entry into and performance by Lessee of the Documents shall not: (i)
violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or bylaws; or (ii) result in
any breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Vehicles pursuant to any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party.
(e) There are no suits or proceedings pending or threatened in court or before
any commission, board or other administrative agency against or affecting
Lessee, which if decided against Lessee shall have a material adverse effect on
the ability of Lessee to fulfill its obligations under this Agreement.
(f) The Vehicles shall remain tangible personal property.
(g) Each financial statement delivered to Lessor has been prepared in accordance
with generally accepted accounting principles consistently applied. Since the
date of the most recent financial statement, there has been no material adverse
change.
(h) Lessee is and shall be at all times validly existing and in good standing
under the laws of the State of its incorporation (specified in the first
sentence of this Agreement).
(i) The Vehicles shall at all times be used for commercial or business purposes.
17.LIMITATION OF LIABILITY. Lessor shall not be liable in connection with this
Agreement for incidental, special, indirect, consequential or exemplary damages
of any kind, including without limitation, lost profits and business
interruption damages, suffered by Lessee or any other party. Lessee shall
indemnify and hold Lessor harmless from and against all claims arising out of
any such losses or damages. No right of Lessor under this Section 17 may be
waived unless in writing and signed by a corporate officer of Lessor.
18.HAZARDOUS MATERIALS.
(a) Lessee shall not transport, load or store in or on any Vehicle any
ultrahazardous materials, medical wastes, hazardous wastes, infectious
materials, poisonous gases, radioactive materials, or explosives (collectively
"Ultrahazardous Materials"). If Lessor determines that any vehicle has been used
for such purposes, Lessor, in its sole discretion, may require Lessee to
purchase the Vehicle at the greater of the then Stipulated Loss Value or the
Fair Market Value of such Vehicle. As used herein, "Fair Market Value" shall
mean the price that a willing buyer (who is neither a lessee in possession nor a
used vehicle dealer) would pay for the Vehicles in an arm's-length transaction
to a willing seller under no compulsion to sell. In determining the Fair Market
Value, the Vehicles shall be assumed to be in the condition in which they are
required to be maintained and returned under this Agreement. If Lessor and
Lessee are unable to agree on the Fair Market Value, Lessor shall appoint an
independent appraiser (reasonably acceptable to Lessee) to determine Fair Market
Value within thirty (30) days of such appointment. The independent appraiser's
determination shall be final, binding and conclusive. Lessee shall bear all
costs associated with any such appraisal.
(b) If any Vehicle is damaged, contaminated, stained, soiled or tainted as a
result of transporting, loading or storing Ultrahazardous Materials, Lessee
shall, at Lessee's sole expense, promptly restore such Vehicle to its original
condition and, if decontaminated, provide proof of such decontamination
including, without limitation, methodology and pre and post decontamination
sampling results. Lessor, in its sole discretion and at Lessee's sole cost, may
have any Vehicle inspected and tested for any hazardous substance or material by
any inspector of Lessor's choosing. If Lessee falls to restore any such damaged,
contaminated, stained soiled or tainted Vehicle within seven (7) business days
of Lessor's demand therefor, Lessor may at its sole discretion (i) require
Lessee to purchase the Vehicle at the greater of the then Stipulated Loss Value
or the Fair Market Value of such Vehicle prior to use for such purposes, or (ii)
restore such Vehicle and invoice Lessee for costs incurred.
19.LICENSES. Lessee, at its sole cost and expense, shall procure licenses and
registrations required for the lawful operation of each Vehicle. Increases in
license and registration fees during the Term shall be the responsibility of
Lessee and shall be billed to Lessee at the beginning of each license period. If
registration or testing is required during the Term, Lessee shall, at Lessor's
direction, deliver the Vehicles to the test stations during the required testing
period and take repossession upon the conclusion of registration and/or testing
for the remaining Term.
20. [INTENTIONALLY OMITTED]
21.MISCELLANEOUS.
(a) LESSEE AND LESSOR UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLSHED
BETWEEN LESSEE AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER
IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE
WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION.
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) The Vehicles shall remain Lessor's property and Lessee shall only have the
right to use the Vehicles as a lessee. Any cancellation or termination by Lessor
of this Agreement, any Schedule, supplement or amendment hereto, or the lease of
any Vehicles hereunder shall not release Lessee from any then outstanding
obligations to Lessor hereunder. All Vehicles shall at all times remain personal
property of Lessor even though it may be attached to real property. The Vehicles
shall not become part of any other property by reason of any installation in, or
attachment to, other real or personal property.
(c) Time is of the essence of this Agreement. Lessor's failure at any time to
require strict performance by Lessee of any of the provisions hereof shall not
waive or diminish Lessor's right at any other time to demand strict compliance
with this Agreement.
(d) Lessee agrees, upon Lessors request, to execute any instrument necessary or
expedient for filing, recording or perfecting the interest of Lessor.
(e) All notices required to be given hereunder shall be deemed adequately given
if personally delivered or sent by certified mail to the addressee at its
address stated herein, or at such other place as such addressee may have
specified in writing
(f) This Agreement and any Schedule thereto, constitutes the entire agreement of
the parties with respect to the subject matter hereof. NO VARIATION OR
MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR
CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE PARTIES HERETO. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(g) The representations, warranties and covenants of Lessee herein shall be
deemed to survive the closing hereunder. Lessor's obligations to acquire and
lease specific Vehicles shall be conditioned upon Lessee providing to Lessor
such information with respect to Lessee's financial condition as Lessor may
require, and Lessor being satisfied that there shall have been no material
adverse change in the business or financial condition of Lessee from the date of
execution hereof. Notwithstanding anything else to the contrary during the Term
of this Agreement, the obligations of the Lessee under Sections 4, 10 and 14
which accrue during the Term of this Agreement and obligations which by their
express Terms survive the termination of this Agreement, shall survive the
termination of this Agreement.
(h) If Lessee does not comply with any provision of this Agreement, Lessor shall
have the right, but shall not be obligated, to effect such compliance, in whole
or in part. All reasonable amounts spent and obligations incurred or assumed by
Lessor in effecting such compliance, together with interest thereon at the Late
Rate (as hereinafter defined), shall constitute additional rent due to Lessor.
Lessee shall pay the additional rent within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default.
(i) Any Rent or other amount not paid to Lessor within three days when due shall
bear interest, from the due date until paid, at the lesser of the prime rate (as
reported in the Wall Street Journal from time-to-time as representing the prime
rate on corporate loans at large U.S. money center commercial banks) plus 2% or
the maximum rate allowed by law (the "Late Rate"), so long as Lessot has
fulfilled its obligation to issue monthly invoices to Lessee under this
Agreement.
(j) Any cancellation or termination by Lessor, pursuant to the provision of this
Agreement, any Schedule, supplement or amendment hereto, of the lease of any
Vehicles hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder.
(k) To the extent that any Schedule would constitute chattel paper, as such term
is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest therein may be created through the transfer
or possession of this Agreement in and of itself without the transfer or
possession of the original of a Schedule executed pursuant to this Agreement and
incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
22.INVESTMENT STATUS. (i) No part of the funds used by the Lessor to acquire any
interest in this Agreement constitutes assets of any "employee benefit plan" as
defined in the Employee Retirement Income Security Act of 1974, as amended, or
any other entity subject to Section 4975 of the Code; (ii) neither he Lessor nor
anyone authorized by it has sold or offered any interest in this Agreement or
any part thereof to, or has solicited any offer to acquire any of the same from,
or has otherwise dealt in respect thereof with, any Persons so as to bring the
sale of any interest in the Lease or any part thereof within the provisions of
Section5 of the Securities Act of 1933 or within the provisions of any similar
state law; and (c) the Lessor is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, and the Lessor 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.
23.CHOICE OF LAW; JURISDICTION.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA (WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE
VEHICLES. The parties agree that any action or proceeding arising out of or
relating to this Agreement shall be commenced in the courts having situs in the
Eastern District of Pennsylvania and Xxxxxxx County, Pennsylvania.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Master Lease
Agreement to be executed by their duly authorized representatives as of the date
first above written.
LESSOR: LESSEE:
TRANSPORT INTERNATIONAL. POOL. INC. COVENANT TRANSPORT, INC.,
A Tennessee Corporation
By: /s/ Xxx Xxxxxxxx By: /s/ Xxxx X. Xxxxx
-------------------------------- ------------------------
Name: Xxx Xxxxxxxx Name: Xxxx X. Xxxxx
Title: SR VP, TIP Sales Title: Senior VP/CFO
