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Paccar1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 1-10883 WABASH NATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 52-1375208 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1000 SAGAMORE PARKWAY SOUTH, 47905 LAFAYETTE, INDIANA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (765) 771-5300Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, $.01 Par Value New York Stock ExchangeSeries A Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. X Yes. No. Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. [ ] The aggregate market value of voting stock held by non-affiliates ofthe registrant as of March 22, 2001 was $230,024,900 based upon the closingprice of the Company's common stock as quoted on the New York Stock Exchangecomposite tape on such date. The number of shares outstanding of the registrant's Common Stock andSeries A Preferred Share Purchase Rights as of March 22, 2001 was 23,002,490. Part III of this Form 10-K incorporates by reference certain portionsof the Registrant's Proxy Statement for its Annual Meeting of Stockholders to beheld May 15, 2001. 2 TABLE OF CONTENTS WABASH NATIONAL CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 PAGES ----- PART I.Item 1. Business.............................................................................. 3Item 2. Properties............................................................................ 11Item 3. Legal Proceedings..................................................................... 11Item 4 Submission of Matters to Vote of Security Holders..................................... 11Item 4A. Risk Factors.......................................................................... 11PART II.Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............. 13Item 6. Selected Financial Data............................................................... 14Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................... 15Item 7A. Quantitative and Qualitative Disclosures about Market Risks........................... 22Item 8. Financial Statements and Supplementary Data........................................... 24Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................................................................... 47PART III.Item 10. Directors and Executive Officers of the Registrant.................................... 47Item 11. Executive Compensation................................................................ 48Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 48Item 13. Certain Relationships and Related Transactions........................................ 49PART IV.Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................... 49SIGNATURES ...................................................................................... 51 2 3PART IITEM 1 -- BUSINESS Wabash designs, manufactures and markets standard and customized trucktrailers under the Wabash National and Fruehauf trademarks. The Company producesand sells aftermarket parts through its division, Wabash National Parts and itswholly-owned subsidiary, Fruehauf Trailer Services, Inc. (FTSI). In addition toits aftermarket parts sales and service revenues, FTSI sells new and usedtrailers through its retail network as well as providing rental, leasing andfinance programs to its customers for new and used trailers. The Company's business strategy is to follow an integrated approach toengineering, manufacturing and marketing which emphasizes flexibility in productdesign and operations while preserving a low cost structure. Wabash seeks toidentify and produce proprietary products in the trucking and bimodal industriesthat offer added value to customers and, therefore, generate higher demand andhigher profit margins than those associated with standard trailers. The Companyhas developed its rental, leasing and finance business for new and used trailerswithin its retail and distribution network and expects to continue suchdevelopment. The Company has also expanded its factory-owned retail distributionnetwork in order to more effectively distribute its products. The retail sale ofnew and used trailers, aftermarket parts and maintenance service generallyprovides the opportunity for higher gross margins. The Company believes that itsRoadRailer(R) bimodal technology provides the opportunity to maintain areputation for design and new product development leadership. The importantelements of the Company's strategies are: - Assessment of Customer Needs. The Company's engineering, manufacturing, and marketing departments work with customers to assess customer needs and to develop cost-effective engineering and manufacturing solutions. This process results in many highly customized products incorporating unique design features. The Company seeks to acquire products, services and technologies that address customer needs and provide the Company with the opportunity for enhanced profit margins. The Company emphasizes long-term customer relationships at all levels in the Company, built on Wabash's reputation for flexibility and customization. - Engineering, Manufacturing and Purchasing. The Company's integrated approach emphasizes low-cost and flexible production on existing assembly lines without the need for extensive capital investment or re-tooling. The Company uses computer-aided design (CAD) and computer-aided manufacturing (CAM) techniques throughout the production process. The Company also utilizes just-in-time techniques for many aspects of the production process including delivery of components immediately prior to the time needed for assembly. These techniques have substantially reduced the capital investment and set-up time associated with introducing product innovations and have also reduced product waste and unnecessary product handling time. - Product Differentiation. Wabash has developed or acquired several proprietary products and processes which, it believes, are recognized as high in quality and distinctive in design. While the Company is a competitive producer of standardized products, it emphasizes the development and manufacture of distinctive and more customized products and believes that it has the engineering and manufacturing capability to produce these products efficiently. The Company expects to continue a program of aggressive product development and selective acquisitions of quality proprietary products that distinguish the Company from its competitors and provide opportunities for enhanced profit margins. - Corporate Culture. Since the Company's founding, management has fostered a corporate culture that emphasizes design and new product development capabilities as well as extensive employee involvement. All employees participate in extensive classroom training covering all aspects of the Company's business, including team building and problem solving, statistical process control, economics and finance. Wabash also employs a compensation program that rewards most hourly employees through the distribution of a percentage of the Company's after-tax profits. Wabash's safety program has been developed with employee participation and has been cited for each of the last twelve years (1988-1999) by the Truck Trailer Manufacturing Association for achieving the best safety record among large plants in the industry. The 3 4 Company believes that its corporate culture has produced a highly trained and motivated workforce that understands the Company's business strategy and that is keenly interested in and rewarded by the success of the Company. Wabash was incorporated in Delaware in 1991 and is the successor bymerger to a Maryland corporation organized in 1985. Wabash operates in twosegments: manufacturing and retail and distribution. Financial results bysegment are discussed in detail within Footnote 5, Segment Reporting, of theaccompanying Consolidated Financial Statements.Manufacturing The Company believes that it is the largest United States manufacturerof truck trailers, including the Company's proprietary DuraPlate(R) andRoadRailer trailers. Wabash markets its products directly and through dealers to truckloadand less-than-truckload (LTL) common carriers, private fleet operators, leasingcompanies, package carriers and intermodal carriers including railroads. TheCompany has established significant relationships as a supplier to many largecustomers in the transportation industry, including those set forth below: - Truckload Carriers: Schneider National, Inc.; Werner Enterprises, Inc.; Swift Transportation Corporation; J.B. Hunt Transport Services, Inc.; Dart Transit; Heartland Express, Inc.; Crete Carrier Corporation; Knight Transportation, Inc.; USXpress Enterprises, Inc.; Frozen Food Express Industries (FFE); KLLM, Inc.; Interstate Distributor Co. - Leasing Companies: Transport International Pool (TIP); Penske Truck Leasing; National Semi- Trailer Corp. - Private Fleets: Safeway; DaimlerChrysler; The Kroger Company; Foster Farms - Less-Than-Truckload Carriers: Roadway Express, Inc.; Old Dominion Freight Line, Inc.; USF Holland; GLS Leasco; Yellow Services, Inc. - Package Carriers: Federal Express Corporation - North American Intermodal Carriers: Triple Crown Services; National Rail Passenger Corp. (Amtrak); GATX Capital (in conjunction with Burlington Northern Santa Fe and Mark VII Transportation); Canadian National RailroadRetail and Distribution The Company has 29 retail outlets in mostly major, metropolitan marketsas well as 5 locations that sell and rent used trailers. During January 2001,the Company expanded its branch network through the acquisition of the BreadnerGroup of Companies, headquartered in Ontario, Canada. The Breadner Group has tenbranch locations in six Canadian Provinces and is the leading Canadiandistributor of new trailers and related parts and service. As a result, theCompany believes it has the largest company-owned distribution system in theindustry selling new and used trailers, aftermarket parts and maintenanceservice. The retail sale of new and used trailers, aftermarket parts andmaintenance service generally produces higher gross margins and tend to be morestable in demand. The Company also provides rental, leasing and financingprograms, primarily to its retail customers for new and used trailers, throughits subsidiaries, Apex Trailer Leasing and Rentals, L.P. and National TrailerFunding (the Finance Companies). In December 2000, the Company's wholly-ownedsubsidiary, Wabash National Finance Corporation, was merged into Apex TrailerLeasing and Rentals, L.P. as the Company consolidated its rental, leasing andfinance activities into the retail and distribution segment as a separate retailproduct line. This activity tends to be more stable and predictable while at thesame time provides the Company an additional channel of distribution for usedtrailers taken in trade on the sale of new trailers. Due to the strategicimportance of the combined product lines of the retail and distribution segment,the Company intends to continue to place emphasis on this revenue source and hasadded additional retail outlets over the past few years either throughacquisition or greenfield start-up. 4 5THE TRUCK TRAILER INDUSTRY The United States market for truck trailers and related products hashistorically been cyclical and has been affected by overall economic conditionsin the transportation industry as well as regulatory changes. Managementbelieves that customers historically have replaced trailers in cycles that runfrom approximately six to ten years. Both State and Federal regulation of thesize, safety features and configuration of truck trailers have led to increaseddemand for trailers meeting new regulatory requirements from time to time. A large percentage of the new trailer market has historically beenserved by the ten largest truck trailer manufacturers, including the Company.Price, flexibility in design and engineering, product quality and durability,warranty, dealer service and parts availability are competitive factors in themarkets served. Historically, there has been manufacturing over-capacity in thetruck trailer industry. The following table sets forth domestic new trailer shipments for theCompany, its nine largest competitors and for the United States trailer industryas a whole: 2000 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- ---- WABASH 66,283 69,772 61,061 48,346(1) 36,517 42,424Great Dane 46,698 58,454 50,513 37,237 25,730 36,514Utility 28,780 30,989 26,862 23,084 19,731 25,068Trailmobile 28,089 31,329 23,918 18,239 11,094 21,239Stoughton 15,050 14,673 11,750 11,700 8,300 14,770Strick 10,500 11,000 10,959 10,488 8,141 18,427Hyundai 6,261 5,716 5,200 3,445 2,007 6,705Fontaine 6,000 6,500 5,894 5,063 4,613 5,465HPA Monon 5,726 8,386 7,313 2,534 11,184 21,172Dorsey 5,000 9,013 8,375 7,939 8,595 12,276Total Industry 270,817 317,388 278,821 222,550 197,519 284,268(1) Includes shipments of 1,467 units by Fruehauf in 1997 prior to the acquisition by Wabash of certain assets of Fruehauf. Sources: Individual manufacturer information provided by Southern MotorCargo Magazine (C) 1999 (1998-1995) and Trailer Body Builders Magazine (2000 and1999 only). Industry totals provided by Southern Motor Cargo Magazine (C) 1999(1998-1995) and A.C.T. Research Company, L.L.C. (2000 and 1999).REGULATION Truck trailer length, height, width, maximum weight capacity and otherspecifications are regulated by individual states. The Federal Government alsoregulates certain safety features incorporated in the design of truck trailers,including new regulations in 1998 which require anti-lock braking systems (ABS)on all trailers produced beginning in March 1998 and certain rear bumperstrength regulations effective at the beginning of 1998. Manufacturingoperations are subject to environmental laws enforced by federal, state andlocal agencies. (See "Environmental Matters")PRODUCT LINES Manufacturing Segment Since the Company's inception in 1985, the Company has expanded itsproduct offerings from a single product into a broad line of transportationequipment and related products and services. As a result of its long-termrelationships with its customers, the Company has been able to work closely withits customers to create competitive advantages through development andproduction of productivity-enhancing transportation equipment. The sale of newtrailers through the manufacturing segment represented 76.0%, 76.6% and 76.5% ofnet sales during 2000, 1999 and 1998, respectively. The current new trailerproduct lines include the following:Transportation Equipment - DuraPlate trailers. In late 1995, the Company introduced its composite plate trailer. Features of the new composite plate trailer include increased durability and greater strength than the 5 6 aluminum plate trailer. The composite material is a high-density vinyl core with a steel skin. The Company holds a number of patents regarding its composite trailer and believes this proprietary trailer will continue to become a greater source of business. - Plate trailers. The aluminum plate trailer was introduced into the Company's product line in 1985. Since these trailers utilize thicker and more durable sidewalls than standard sheet and post or fiberglass reinforced plywood ("FRP") construction and avoid the use of interior liners, the life of the trailer is extended and maintenance costs are significantly reduced. In addition, the post used in constructing the sidewalls of the aluminum plate trailer is much thinner and therefore provides greater interior volume than a standard sheet and post trailer. Plate trailers are used primarily by truckload carriers. - RoadRailer trailers. In 1987, the Company began manufacturing RoadRailer trailers. RoadRailer trailers represent a patented bimodal technology consisting of a truck trailer and detachable rail "bogie" permitting a trailer to run both over the highway and directly on railroad lines. The Company believes that the RoadRailer system can be operated more efficiently than alternative intermodal systems such as "piggyback" or "stack" railcars which require terminal operators to transfer vehicles or containers to railcars. In 1991, the Company acquired the exclusive rights to market and exploit RoadRailer technology. By offering the bimodal technology in a number of variations, the Company believes it can increase its penetration of the intermodal market and enlarge its pool of potential customers. The current models are the ReeferRailer(R) trailer, the ChassisRailer(R) trailer, the PupRailer(TM) trailer, the AutoRailer(R) trailer and the 19.5 RoadRailer trailer. Management believes that RoadRailer trailers provide the opportunity for the Company to maintain a reputation for technological leadership in the transportation industry. - Refrigerated trailers. Refrigerated trailers were introduced into the product line in 1990. The Company's proprietary process for building these trailers involves injecting insulating foam in the sidewalls and roof in a single process prior to assembly, which improves both the insulation capabilities and the durability of the trailers. These trailers are used primarily by private fleets in the transportation of perishable food products. During 1995, the Company opened its refrigerated trailer manufacturing facility in Lafayette, Indiana. - Aluminum vans and doubles. Aluminum vans and doubles, also known as sheet and post trailers, were introduced into the product line in 1986 and are the standard trailer product purchased by customers in most segments of the trucking industry. These products represent the most common trailer sold throughout the Company's retail distribution network. - FRP vans and doubles. The Company's initial product was FRP trailers, which have been purchased primarily by LTL carriers utilizing doubles or triples. Motor carriers utilizing standard double or triple trailers frequently reach the maximum legal weight limits before they fill the capacity of the trailers. Since FRP trailers are lighter in weight than these double trailers, they enable LTL carriers to attain higher productivity than could be achieved using other types of double trailers. - Platform trailers. Platform trailers are typically purchased by owner-operators and are often used for transporting heavier, more durable goods such as those used in the construction and steel industries. In 2000, the Company introduced its ElectroShield(TM) technology for use on platform trailers produced at its manufacturing facility in Huntsville, Tennessee. The ElectroShield technology provides a uniform finish that coats the entire surface of the frame, inside and out. The result is complete surface coverage that is vastly superior to conventional "spray-on" coating systems. ElectroShield coatings provide the best protection in the industry, with greatly improved resistance to corrosion, chipping and fading from exposure to sunlight. The Company believes this new technology adds to its already strong reputation for technological leadership in the transportation industry. - Other. The Company's other transportation equipment includes container chassis, rollerbed trailers, soft-sided trailers, dumps and converter dollies. 6 7 Retail and Distribution Segment The Company believes it has the largest, company-owned retail anddistribution network serving the truck trailer industry with the followingproduct lines:Transportation Equipment The Company sells new transportation equipment such as those productsoffered by the manufacturing segment including DuraPlate trailers, refrigeratedtrailers, sheet and post trailers and platform trailers. The Company also sellsspecialty trailers not produced by the manufacturing segment including tanktrailers and construction trailers. Customers for this equipment typicallypurchase in smaller quantities for local or regional transportation needs. Thesale of new trailers through the branch network represented 6.3%, 8.1% and 7.3%of net sales during 2000, 1999 and 1998, respectively.Aftermarket Parts and Service The Company also offers replacement parts and accessories and providesmaintenance service both for its own and competitors' trailers and relatedequipment. The aftermarket parts business is less cyclical than trailer salesand generally has higher gross profit margins. The Company markets itsaftermarket parts and services through its division, Wabash National Parts andthrough its wholly-owned subsidiary, Fruehauf Trailer Services, Inc. Managementexpects that the manufacture and sale of aftermarket parts and maintenanceservice will be a growing part of its product mix as the number and age of itsmanufactured trailers in service increases and due to the growth of the retailand distribution segment. Sales of these products and services represented 9.6%,7.9% and 9.7% of net sales during 2000, 1999 and 1998, respectively.Rental, Leasing and Finance Through 1991, the Company leased trailers to customers on a verylimited basis, primarily involving used trailers taken in trade from othercustomers. In late 1991, the Company began to build its in-house capability toprovide leasing programs to its customers through Wabash National Finance. Inaddition, in late 1998 the Company began offering a rental program for usedtrailers, primarily on a short-term basis, through its retail branch network. InDecember 2000, the Company's wholly-owned subsidiary, Wabash National FinanceCorporation, was merged into Apex Trailer Leasing and Rentals, L.P. as theCompany consolidated its rental, leasing and finance activities into the retailand distribution segment as a separate retail product line. At December 31,2000, the Company had approximately $52.0 million in equipment leased to others,net and $56.5 million invested in finance contracts. These leasing assets havebeen financed through sale and leasebacks, term debt and equity. Leasingrevenues of the Company represented 2.5%, 1.6% and 1.8% of net sales during2000, 1999 and 1998, respectively.Used Trailers The Company is also involved in the sale of used trailers, which areprimarily trade-ins from its customers for new trailers. The Company generallysells its used trailers directly through its retail and distribution segment.Used trailer sales promote new sales by permitting trade-in allowances and haverepresented a stable source of revenue for the Company. The sale of usedtrailers represented 5.6%, 5.8% and 4.7% of net sales during 2000, 1999 and1998, respectively.CUSTOMERS The Company's customer base includes many of the nation's largesttruckload common carriers, leasing companies, LTL common carriers, private fleetcarriers, package carriers and domestic and international intermodal carriersincluding railroads. The Company believes it is the sole supplier of dry vans,refrigerated trailers and platform trailers to approximately 15 customers. Salesto these customers accounted for approximately 41.8%, 32.6% and 28.9% of theCompany's new trailer sales in 2000, 1999 and 1998, respectively. The retail anddistribution business primarily services small fleets and individual owneroperators in which the credit risk varies significantly from customer tocustomer. The Company's international sales accounted for approximately 3.1% ofnet sales during 2000 and 2.0% of net sales during 1999 and 1998. 7 8 The Company had one customer, J.B. Hunt Transport Services, Inc., whichrepresented 11.4% of its net sales in 2000, while no other customer exceeded 10%of its net sales in 2000, 1999 and 1998. The Company's net sales in theaggregate to its five largest customers were 30.5%, 22.2% and 18.3% of its salesin 2000, 1999 and 1998, respectively. Truckload common carriers include large national lines as well asregional carriers. The large national truckload carriers, who continue to gainmarket share at the expense of both regional carriers and private fleets,typically purchase trailers in large quantities with highly individualizedspecifications. Trailers purchased by truckload common carriers includingSchneider National, Inc., Werner Enterprises, Inc., Swift TransportationCorporation, J.B. Hunt Transport Services, Inc., Heartland Express, Inc., DartTransit, Crete Carrier Corporation, Knight Transportation, Inc., USXpressEnterprises, Inc., and Interstate Distributor Co. represented 59.7%, 54.3% and44.7% of the Company's new trailer sales in 2000, 1999 and 1998, respectively. LTL carriers have experienced consolidation in recent years and theindustry is increasingly dominated by a few large national and several regionalcarriers. Since the Highway Reauthorization Act of 1983 mandated that all statespermit the use of 28-foot double trailers, there has been a conversion of nearlyall LTL carriers to doubles operations. Order sizes for LTL carriers tend to bein high volume and with standard specifications. LTL carriers who have purchasedCompany products include Roadway Express, Inc., Old Dominion Freight Line, Inc.,USF Holland, GLS Leasco, and Yellow Services, Inc. New trailer sales to LTLcarriers accounted for 10.5%, 9.1% and 11.9% of new trailer sales in 2000, 1999and 1998, respectively. Private fleet carriers represent the largest segment of the trucktrailer industry in terms of total units, but are dominated by small fleets of 1to 100 trailers. Among the larger private fleets, such as those of the largeretail chain stores, automotive manufacturers and paper products, truck trailersare often ordered with customized features designed to transport specializedcommodities or goods. Among private fleets, the Company's customers includeDaimlerChrysler, Safeway, Foster Farms and The Kroger Company. New trailer salesto private fleets represented 6.7%, 6.4% and 7.5% of new trailer sales in 2000,1999 and 1998, respectively. Leasing companies include large national companies as well as regionaland local companies. Among leasing companies, the Company's customers includeTransport International Pool (TIP), National Semi-Trailer Corp. and Penske TruckLeasing. New trailer sales to leasing companies represented 4.2%, 6.0% and 10.0%of new trailer sales in 2000, 1999 and 1998, respectively. Customers for the Company's proprietary RoadRailer products includeU.S. and foreign intermodal carriers such as Triple Crown Services, Amtrak,Swift Transportation Corporation, GATX Capital (in conjunction with BurlingtonNorthern Santa Fe Corporation and Mark VII Transportation), BayerischeTrailerzug Gesellschaft, Compagnie Nouvelle De Conteneurs and Canadian NationalRailroad. New trailer sales of RoadRailer products to these customersrepresented 2.4%, 2.8% and 4.7% of new trailer sales in 2000, 1999 and 1998,respectively. The Company believes that the RoadRailer technology has enabled itto develop an international presence. Anticipated sources of future revenue inthe RoadRailer business also include license fees from the license of RoadRailertechnology to overseas manufacturers. In the United States, FedEx Corporation is one of two primary carriersdominating the package carrier industry. Package carriers have developed rigidspecifications for their highly specialized trailers and have historicallypurchased trailers from a small number of suppliers, including Wabash. Newtrailer sales to package carriers represented 0.7%, 0.8% and 1.1% of new trailersales in 2000, 1999 and 1998, respectively. Retail sales of new trailers to independent operators through theCompany's factory-owned distribution network provide the Company with access tosmaller unit volume sales, which typically generate higher gross margins. Retailsales of new trailers represented 7.4%, 8.9% and 9.2% of total new trailer salesin 2000, 1999 and 1998, respectively. The balance of new trailer sales in 2000, 1999 and 1998 were made todealers and household moving carriers. 8 9MARKETING AND DISTRIBUTION The Company markets and distributes its products through one of threechannels, which include: - factory direct accounts; - the factory-owned distribution network; and - independent dealerships. The factory direct accounts include larger full truckload, LTL, packageand household moving carriers and certain private fleets and leasing companiesand are high volume purchasers. In the past, the Company has focused itsresources on the factory direct market, where customers are generally aware ofthe Company's management and its reputation in the trailer manufacturingindustry. The larger LTL and private fleets, as well as the national fleetswhich increasingly dominate the truckload segment, buy factory direct with agreat deal of customization. These larger carriers will generally purchase thelargest trailer allowed by law in the areas that they intend to operate, withmaximum interior space. These carriers are the largest customers of thecomposite plate trailers manufactured by the Company. The Company's factory-owned distribution network provides theopportunity to generate retail sales of trailers as well as leasing andfinancing arrangements to smaller independent operators. This branch networkenables the Company to provide maintenance and other services to customers on anationwide basis and to take trade-ins, which are common with new trailer dealswith fleet customers. In addition to the 29 U.S. factory-owned branches, the 10retail locations recently acquired in Canada and the 5 U.S. locations that selland rent used trailers, the Company also sells its products through a nationwidenetwork of over 90 full-line and over 120 parts only independent dealerships,which generally serve the trucking and transport industry. The dealers primarilyserve intermediate and smaller sized carriers and private fleets in thegeographic region where the dealer is located and on occasion may sell to largefleets. The dealers may also perform service work for many of their customers.RAW MATERIALS The Company utilizes a variety of raw materials and componentsincluding steel, aluminum, lumber, tires and suspensions, which it purchasesfrom a large number of suppliers. Significant price fluctuations or shortages inraw materials or finished components may adversely affect the Company's resultsof operations. In 2000 and for the foreseeable future, the raw material used inthe greatest quantity will be composite plate material used on the Company'sproprietary DuraPlate trailer. The composite material is comprised of an innerand outer lining made of high strength steel surrounding a vinyl core, of whichboth components are in ready supply. In August 1997, the Company completedconstruction of a composite material facility located in Lafayette, Indianawhere the Company produces the composite plate material from steel and vinylcomponents. Due to the continued strong demand for the Company's DuraPlatetrailer, additional composite material manufacturing capacity was added to thisfacility in 2000. The Company believes the addition of this new facility willprovide adequate capacity to meet its composite material requirements. During1998, the Company acquired Cloud Corporation and Cloud Oak Flooring Company,Inc. (Wabash Wood Products), manufacturers of laminated hardwood floors for thetruck body and trailer industry. During the course of 2000, the Companyincreased its hardwood flooring production capacity at its Harrison, Arkansasfacility in order to accommodate 100% of the Company's trailer flooring needs.The central U.S. location of the Company's plants gives Wabash a competitiveadvantage in the transportation cost of inbound raw materials as well as thecost of delivery of finished product as customers often use trailers coming offthe assembly line to deliver freight outbound from the Midwest.BACKLOG The Company's backlog of orders was approximately $0.7 billion, $1.1billion and $1.0 billion at December 31, 2000, 1999 and 1998, respectively. TheCompany expects to fill a majority of its existing backlog of orders by the endof 2001. 9 10PATENTS AND INTELLECTUAL PROPERTY The Company holds or has applied for 76 patents in the United States onvarious components and techniques utilized in its manufacture of truck trailers.In addition, the Company holds or has applied for 119 patents in 14 foreigncountries and the European patent community. The Company also holds or has applied for 44 trademarks in the UnitedStates as well as 30 trademarks in foreign countries. These trademarks includethe Wabash and Fruehauf brand names as well as trademarks associated with theCompany's proprietary products such as the DuraPlate trailer and the RoadRailertrailer.RESEARCH AND DEVELOPMENT The Company has a reputation in the industry for its innovation inproduct design and low cost manufacturing. Research and development expenses arecharged to earnings as incurred and approximated $2.4 million, $1.5 million and$1.8 million in 2000, 1999 and 1998, respectively. The Company promotes aculture that encourages innovation by all employees, particularly those workingon the factory floor.ENVIRONMENTAL MATTERS The Company is aware of soil and ground water contamination at some ofits facilities. Accordingly, the Company has recorded a reserve of approximately$0.9 million associated with environmental remediation at these sites. Thisreserve was determined based upon currently available information and managementdoes not believe the outcome of these matters will be material to theconsolidated annual results of operations or financial condition of the Company. In the second quarter 2000, the Company received a grand jury subpoenarequesting certain documents relating to the discharge of wastewaters into theenvironment at a Wabash facility in Huntsville, Tennessee. The subpoena soughtthe production of documents and related records concerning the design of thefacility's discharge system and the particular discharge in question. On April17, the Company received a Notice of Violation/Request for Incident Report fromthe Tennessee Department of Environmental Conservation (TDEC) with respect tothe same matter. On September 6, 2000, the Company received an Order andAssessment from TDEC directing the Company to pay a fine of $100,000 forviolations of Tennessee environmental requirements as a result of the discharge.The Company filed an appeal of the Order and Assessment on October 10, 2000. TheCompany is fully cooperating with state and federal officials with respect totheir investigation into the matter. At this time, the Company is unable topredict the outcome of federal grand jury inquiry into this matter, but does notbelieve it will result in a material adverse effect on its financial position orfuture results of operations; however, at this early stage of the proceedings,no assurance can be given as to the ultimate outcome of the case. Future information and developments will require the Company tocontinually reassess the expected impact of these environmental matters.However, the Company has evaluated its total environmental exposure based oncurrently available data and believes that compliance with all applicable lawsand regulations will not have a materially adverse effect on the consolidatedfinancial position and annual results of operations. See Footnote 16 to the Consolidated Financial Statements for additionalenvironmental information and the Company's accounting for such costs.EMPLOYEES As of December 31, 2000, the Company had approximately 5,200 employees,of which less than 1% are represented by labor unions. The Company places aheavy emphasis on employee relations through educational programs and qualitycontrol teams. The Company believes its employee relations are good. 10 11ITEM 2 -- PROPERTIESMANUFACTURING FACILITIES The Company's main facility of 1.2 million sq. ft. in Lafayette,Indiana, consists of truck trailer and composite material production, tool anddie operations, research laboratories, management offices and headquarters. TheCompany owns three other trailer manufacturing facilities, in Lafayette, Indiana(572,000 sq. ft.), in Ft. Madison, Iowa (255,000 sq. ft.) and Huntsville,Tennessee (287,000 sq. ft.). There are three leased manufacturing facilities inLafayette, Indiana (144,000 sq. ft.). In addition, the Company owns a trailerflooring manufacturing facility, in Harrison, Arkansas (456,000 sq. ft.) andintends to close its flooring operation in Sheridan, Arkansas (117,000 sq. ft.)during the first quarter of 2001.RETAIL AND DISTRIBUTION FACILITIES The Company leases a facility in St. Louis, Missouri (6,700 sq. ft.)that serves as headquarters for its retail and distribution segment. Thislocation oversees the operation of 29 sales and service branches (4 of which areleased) and 5 locations that sell and rent used trailers (all of which areleased.) All of these facilities are located throughout the United States. Thebranch facilities consist of an office, warehouse and service space andgenerally range in size from 20,000 to 50,000 square feet per facility. InJanuary 2001, the Company expanded its branch network through the acquisition of10 branch locations in six Canadian Provinces. In addition, the Company owns itsaftermarket parts distribution center in Lafayette, Indiana (300,000 sq. ft.)and leases a parts center in Montebello, California (44,000 sq. ft.).ITEM 3 -- LEGAL PROCEEDINGS There are certain lawsuits and claims pending against the Company thatarose in the normal course of business. None of these claims are expected tohave a material adverse effect on the Company's financial position or itsresults of operations. See Footnote 16 to the Consolidated Financial Statements for additionalinformation related to certain lawsuits filed against the Company and certain ofits officers and directors.ITEM 4 -- SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS None to report.ITEM 4A -- RISK FACTORS Investing in our securities involves a high degree of risk. In additionto the other information contained in this Form 10-K, including the reports weincorporate by reference, you should consider the following factors beforeinvesting in our securities:We Face Intense Competition. The truck trailer manufacturing industry is highlycompetitive. We compete with other truck trailer manufacturers of varying sizes,some of which may have greater financial resources than we do. Barriers to entryin the truck trailer manufacturing industry are low and, therefore, it ispossible that additional competitors could enter the market at any time. Certainparticipants in the industry in which we compete may have manufacturingover-capacity and high leverage, and the industry has experienced a number ofbankruptcies and financial stresses, all of which have resulted in significantpricing pressures. Our inability to compete effectively with existing orpotential competitors would have a material adverse effect on our business,financial condition and results of operations.Our Business Is Cyclical and May Be Adversely Affected By An Economic Downturn.The truck trailer manufacturing industry historically has been and is expectedto continue to be cyclical and affected by overall economic conditions. Newtrailer shipments for the trailer industry as a whole decreased to 271,000 unitsin 2000 as compared to 317,000 units in 1999 and the current forecast forindustry shipments in 2001 is between 190,000 and 210,000 units. Sales of newtruck trailers have been subject to cyclical variations based on a six to eightyear replacement cycle. Poor economic conditions can adversely affect demand fornew trailers and in the past have led to an overall aging of trailer fleetsbeyond this typical replacement cycle. If such economic conditions were torecur, our business could be adversely affected. 11 12Our New Technology and Products May Not Achieve Market Acceptance. We haverecently introduced new products including the DuraPlate composite platetrailer, constructed from a high density vinyl core with a steel skin, andprototypes including the AllRailer railcar, a fully enclosed high-speed railcar.There can be no assurance that these or other new products or technologies willachieve sustained market acceptance. There can also be no assurance that newtechnologies or products introduced by competitors will not render our productsobsolete or uncompetitive.We Depend on Key Members of Our Management. The success of our business is andwill continue to be highly dependent upon its President, Donald J. Ehrlich, andother members of senior management. We do not have employment agreements withany of these people. The loss of any of their services could have a materialadverse effect upon our business, financial condition and results of operations.We Rely on the Strength of our Corporate Partnerships and the Success of OurCustomers. We have corporate partnering relationships with a number of customerswhere we supply the requirements of these customers. To a significant extent,our success is dependent upon the continued strength of their relationships withus and the growth of our corporate partners. Further, we often are unable topredict the level of demand for our products from these partners, or theirtiming of orders. The loss of a significant customer or unexpected delays inproduct purchases could have a material adverse effect on our business,financial condition and results of operations.We Have A Limited Supply of Raw Materials. We currently rely on a limited numberof suppliers for certain key components in the manufacturing of truck trailers.The loss of our suppliers or the inability of the suppliers to meet our price,quality, quantity and delivery requirements could have a material adverse effecton our business, financial condition and results of operations.We are Subject to Government Regulations That May Adversely Affect OurProfitability. The length, height, width, maximum weight capacity and otherspecifications of truck trailers are regulated by individual states. The FederalGovernment also regulates certain safety features incorporated in the design oftruck trailers. Changes or anticipation of changes in these regulations can havea material impact on our customers, may defer customer purchasing decisions, mayresult in reengineering and may affect our financial results. In addition, weare subject to various environmental laws and regulations dealing with thetransportation, storage, presence, use, disposal and handling of hazardousmaterials, discharge of stormwater and underground fuel storage tanks and may besubject to liability associated with operations of prior owners of acquiredproperty. If we are found to be in violation of applicable laws or regulations,it could have a material adverse effect on our business, financial condition andresults of operations.We May Not Be Successful in Integrating Business that We Acquire into OurBusiness. We have made and expect to make acquisitions of technology, businessesand product lines in the future. Our ability to expand successfully throughacquisitions depends on many factors, including the successful identificationand acquisition of products, technologies or businesses and management's abilityto effectively integrate and operate the acquired products, technologies orbusinesses. We may compete for acquisition opportunities with other companiesthat have significantly greater financial and management resources. We cannotassure you that we will be successful in acquiring or integrating any suchproducts, technologies or businesses.Disclosure Regarding Forward-Looking Statements. This report, includingdocuments incorporated herein by reference, contains forward-looking statements.Additional written or oral forward-looking statements may be made by the Companyfrom time to time in filings with the Securities and Exchange Commission orotherwise. The words "believe," "expect," "anticipate," and "project" andsimilar expressions identify forward-looking statements, which speak only as ofthe date the statement is made. Such forward-looking statements are within themeaning of that term in Section 27A of the Securities Act of 1933, as amended,and Section 21E of the Securities Exchange Act of 1934, as amended. Suchstatements may include, but are not limited to, information regarding revenues,income or loss, capital expenditures, acquisitions, number of retail branchopenings, plans for future operations, financing needs or plans, the impact ofinflation and plans relating to services of the Company, as well as assumptionsrelating to the foregoing. Forward-looking statements are inherently subject torisks and uncertainties, some of which cannot be predicted or quantified. Futureevents and actual results could differ materially from those set forth in,contemplated by or underlying the forward- looking statements. Statements inthis report, including those set forth in "The Company" and "Risk Factors," andin "Business" and "Management's Discussion and Analysis of Financial Conditionand Results of Operations", describe factors, among others, that couldcontribute to or cause such differences. 12 13PART IIITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange(ticker symbol WNC). The number of record holders of the Company's common stockat February 28, 2001, was 1,082. High and low stock prices and dividends for the last two years were: DIVIDENDS DECLARED PER HIGH LOW COMMON SHARE ---- --- ------------ 2000 Fourth Quarter....................... $ 9.25 $ 7.25 $0.04 Third Quarter........................ $12.94 $ 8.31 $0.04 Second Quarter...................... $15.25 $10.50 $0.04 First Quarter......................... $17.88 $13.00 $0.041999 Fourth Quarter....................... $20.50 $13.06 $0.04 Third Quarter........................ $22.50 $19.13 $0.0375 Second Quarter...................... $19.94 $10.94 $0.0375 First Quarter......................... $21.00 $11.63 $0.0375 The Company expects to continue its policy of paying regular dividends,although there is no assurance as to future dividends because they depend onfuture earnings, capital requirements, and financial conditions. 13 14ITEM 6 -- SELECTED FINANCIAL DATA The following selected consolidated financial data with respect to theCompany, for the five years in the period ended December 31, 2000, have beenderived from the Company's consolidated financial statements, which have beenaudited by Arthur Andersen LLP, independent public accountants, as indicated intheir reports. The following information should be read in conjunction withManagement's Discussion and Analysis of Financial Condition and Results ofOperations and the consolidated financial statements and notes thereto includedelsewhere herein. Years Ended December 31, --------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 (Dollar amounts in thousands, except per share data) INCOME STATEMENT DATA:Net sales $ 1,332,172 $ 1,454,570 $ 1,292,259 $ 846,082 $ 631,492Cost of sales 1,216,205(1) 1,322,852 1,192,968 778,620 602,629 ----------- ----------- ----------- ---------- ----------- Gross profit 115,967 131,718 99,291 67,462 28,863Selling, general and administrative expenses 55,874 50,796 38,626 26,307 13,359Restructuring charge 36,338 -- -- -- -- ----------- ----------- ----------- ---------- ----------- Income from operations 23,755 80,922 60,665 41,155 15,504Interest expense (19,740) (12,695) (14,843) (16,100) (10,257)Accounts receivable securitization costs (7,060) (5,804) (3,966) -- --Equity in losses of unconsolidated affiliate (3,050) (4,000) (3,100) (400) --Restructuring charge (5,832) -- -- -- --Other, net 877 6,310 (259) 1,135 788 ----------- ----------- ----------- ---------- ----------- Income (loss) before income taxes (11,050) 64,733 38,497 25,790 6,035Provision (benefit) for income taxes (4,314) 25,891 15,226 10,576 2,397 ----------- ----------- ----------- ---------- ----------- Net income (loss) $ (6,736) $ 38,842 $ 23,271 $ 15,214 $ 3,638 =========== =========== =========== ========== ===========Basic earnings (loss) per common share $ (0.38) $ 1.60 $ 1.00 $ 0.74 $ 0.19 =========== =========== =========== ========== ===========Diluted earnings (loss) per common share $ (0.38) $ 1.59 $ 0.99 $ 0.74 $ 0.19 =========== =========== =========== ========== ===========Cash dividends declared per common share $ 0.16 $ 0.1525 $ 0.1425 $ 0.13 $ 0.12 =========== =========== =========== ========== =========== (1) Includes a $4.5 million charge related to the Company'srestructuring activities. Years Ended December 31, --------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 (Dollar amounts in thousands) BALANCE SHEET DATA: Working capital $270,722 $228,751 $271,256 $280,212 $148,712 Total lease portfolio 108,451 130,626 117,038 103,222 113,811 Total assets 781,614 791,291 704,486 629,870 440,071 Long-term debt, net of current maturities 226,126 164,367 165,215 231,880 151,307 Stockholders' equity 367,233 379,365 345,776 226,516 178,368 14 15ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of Wabash National Corporation's (Wabash orthe Company) historical results of operations and of its liquidity and capitalresources should be read in conjunction with the consolidated financialstatements and related notes thereto. Wabash designs, manufactures and markets standard and customized trucktrailers under the Wabash National and Fruehauf trademarks. The Company believesthat it is the leading U.S. manufacturer of composite trailers and bimodalvehicles through its RoadRailer products. The Company produces and sellsaftermarket parts through its division, Wabash National Parts and itswholly-owned subsidiary, Fruehauf Trailer Services, Inc. (FTSI). In addition toits aftermarket parts sales and service revenues, FTSI sells new and usedtrailers through its retail network as well as providing rental, leasing andfinance programs to its customers for new and used trailers through itssubsidiaries Apex Trailer Leasing and Rentals, L.P. and National Trailer Funding(the Finance Companies). In December 2000, the Company recorded restructuring and other relatedcharges totaling $46.6 million ($28.5 million, net of tax) primarily related tothe Company's exit from manufacturing products for export outside the NorthAmerican market, international leasing and financing activities and theconsolidation of certain domestic operations. Included in this total is $40.8million that has been included as a component in computing income fromoperations. Specifically, $19.1 million of this amount represents the impairmentof certain equipment subject to leases with the Company's internationalcustomers, $8.6 million represents losses recognized for various financialguarantees related to international financing activities and $6.9 million wasrecorded for the write-down of other assets as well as charges associated withthe consolidation of certain domestic operations including severance of $0.2million. Also included in the $40.8 million is a $4.5 million charge forinventory write-downs related to the restructuring actions. The Company hasrecorded $5.8 million as a restructuring charge in Other Income (Expense)representing the write-off of the Company's remaining equity interest in ETZ fora decline in fair value that is deemed to be other than temporary. The total impairment charge recognized by the Company as a result ofits restructuring activities was $26.7 million. This amount was computed inaccordance with the provisions of SFAS 121. The estimated fair value of theimpaired assets totaled $3.4 million and was determined by management based uponeconomic conditions and potential alternative uses and markets for theequipment. These assets are held for sale and are classified in prepaid expensesand other in the accompanying Consolidated Balance Sheets. Depreciation has beendiscontinued on these assets pending their disposal. In addition, upon theultimate divestiture of the Company's ownership in ETZ, expected to occur in2001, the Company will no longer record equity in losses of unconsolidatedaffiliate which amounted to $3.1 million, $4.0 million and $3.1 million in 2000,1999 and 1998, respectively. The impact of restructuring activities undertaken in 2000 is notexpected to have a significant effect on the Company's revenues going forward asthese businesses on a combined basis accounted for less than 5% of consolidatednet sales in 2000, 1999 and 1998. Although the Company has elected to discontinue manufacturing productsfor export outside of North America and the related international financingactivities, the Company will continue to pursue opportunities in internationalmarkets to license and market its proprietary RoadRailer bimodal technology. Under the provisions of Financial Accounting Standards (SFAS) No. 131,Disclosure about Segments of an Enterprise and Related Information, the Companydetermined it has two reportable business segments. These segments are themanufacturing segment and the retail and distribution segment. The manufacturingsegment includes the Company's trailer manufacturing facilities located inLafayette, Indiana, Ft. Madison, Iowa and Huntsville, Tennessee as well as thetrailer flooring operation (Wabash Wood Products) located in Harrison, Arkansas.The retail and distribution segment includes the sale, lease and financing ofnew and used trailers, as well as the sale of aftermarket parts and servicethrough its retail branch network. In addition, the retail and distributionsegment includes the sale of aftermarket parts through Wabash National Parts. 15 16OVERVIEW In 2000, the U.S. truck trailer industry experienced a 15% decrease toapproximately 271,000 units shipped as compared to 317,000 units shipped in therecord year 1999. The Company's market share in the U.S. trailer industry wasapproximately 24.5% in 2000, which represents a slight increase over 1999.Deteriorating economic conditions during 2000, including higher interest ratesand fuel costs, negatively affected the purchasing activities of the truckingindustry and as a result, the Company's backlog has decreased from $1.1 billionat December 31, 1999 to $0.7 billion at December 31, 2000.RESULTS OF OPERATIONSThe following table sets forth certain operating data as a percentage of netsales for the periods indicated: Percentage of Net Sales Years Ended December 31, ------------------------ 2000 1999 1998 ---- ---- ---- Net sales 100.0% 100.0% 100.0%Cost of sales 91.3(1) 90.9 92.3 ----- ----- ----- Gross profit 8.7 9.1 7.7General and administrative expense 2.6 2.1 2.0Selling expense 1.6 1.4 1.0Restructuring charge 2.7 -- -- ----- ----- ----- Income from operations 1.8 5.6 4.7Interest expense (1.5) (0.9) (1.1)Accounts receivable securitization costs (0.5) (0.4) (0.3)Equity in losses of unconsolidated affiliate (0.2) (0.3) (0.3)Restructuring charge (0.4) -- --Other, net -- 0.4 -- ----- ----- ----- Income (loss) before taxes (0.8) 4.4 3.0Provision (benefit) for income taxes (0.3) 1.8 1.2 ----- ----- ----- Net income (loss) (0.5)% 2.6% 1.8% ===== ===== ===== (1) Includes a $4.5 million charge (0.3%) related to the Company'srestructuring activities.2000 Compared to 1999 During 2000, the Company achieved net sales of $1.3 billion, which were8.4% lower than 1999 net sales of $1.5 billion. Net income (loss) for 2000,including the impact of restructuring and other related charges, decreased to($6.7) million as compared to $38.8 million in 1999.Net Sales Years Ended December 31, ------------------------ 2000 1999 % Change ---- ---- -------- Net External Sales by Segment: (Dollar amounts in millions) Manufacturing $1,013.1 $1,113.9 (9.0%) Retail and Distribution 319.1 340.7 (6.3%) -------- -------- ---- Total Net Sales $1,332.2 $1,454.6 (8.4%) ======== ======== ==== The manufacturing segment's external net sales decreased 9.0% or $100.8million in 2000 compared to 1999 driven primarily by a 6.9% decrease in thenumber of units sold, from approximately 64,100 units in 1999 to approximately59,700 units in 2000. The average selling price per new trailer sold decreased1.7%, from approximately $17,200 in 1999 to approximately $16,900 in 2000. Thedecrease in net sales during the period was primarily driven by the continuedimpact of a general slowing in freight tonnage, increased interest rates andcontinued high fuel prices within the transportation industry. As a result ofthese unfavorable conditions, the transportation industry continues to operatein a very difficult environment, 16 17which has caused new trailer orders to decrease. As of December 31, 2000, theCompany's backlog of orders was approximately $0.7 billion, over $0.4 billion ofwhich is related to the DuraPlate trailer. The retail and distribution segment's external net sales decreased 6.3%or $21.6 million in 2000 compared to 1999 driven primarily by a decrease in newand used trailer sales. New trailer sales decreased 28.1% on approximately 5,900units sold in 1999 to approximately 4,300 units sold in 2000 and used trailersales decreased by 11.9% in 2000 compared to 1999. The decreases in new and usedtrailer sales were offset somewhat by a 15.4% increase in aftermarket parts,service revenues and rental, leasing and finance revenues. The increase inaftermarket parts and service revenues was driven primarily by thereconfiguration of the retail distribution network and the creation ofadditional service capacity. The increase in rental, leasing and financerevenues primarily reflects the Company's strategy to expand its used trailerrental program as the number of trailers in the rental fleet increased toapproximately 6,900 at December 31, 2000 compared to approximately 1,800 atDecember 31, 1999.Gross Profit Years Ended December 31, ------------------------ 2000 1999 % Change ---- ---- -------- Gross Profit by Segment: (Dollar amounts in millions) Manufacturing $ 86.7 $ 99.6 (13.0%) Retail and Distribution 31.5 34.3 (8.2%) Eliminations (2.2) (2.2) 0.0% --------- --------- ------- Total Gross Profit $116.0 $ 131.7 (11.9%) ====== ======== ====== The Company finished 2000 with gross profit as a percent of sales of8.7% on a consolidated basis (9.0% excluding the impact from a non-recurringcharge) as compared to 9.1% in 1999. This decrease was primarily due to themanufacturing segment, as discussed below. The manufacturing segment's gross profit decreased by 13.0% primarilyas a result of the following factors: - the decrease in net sales previously discussed; - start-up costs related to the state-of-the-art painting and coating system at its Huntsville, Tennessee plant; - increased depreciation and amortization primarily related to several projects completed and placed in service during the year; and - the impact of other charges related to restructuring. These factors were partially offset by the Company's strategy ofincreasing the proportion of revenues attributable to proprietary products, suchas the DuraPlate trailer. These proprietary products accounted for approximately67% of production in 2000 as compared to 59% in 1999, and have been successfulin generating higher gross profits than have historically been possible with amore traditional, commodity type product mix. The retail and distribution segment's gross profit decreased by 8.2%primarily as a result of decreased net sales previously discussed, offsetsomewhat by increased sales for aftermarket parts, service revenues and rental,leasing and finance revenues which typically have higher margins as compared tothe segment as a whole.Income from Operations (before interest, taxes and other items) Years Ended December 31, ------------------------ 2000 1999 % Change ---- ---- -------- Operating Income by Segment: (Dollar amounts in millions) Manufacturing $ 36.9 $ 72.0 (48.8%) Retail and Distribution (10.9) 11.1 (198.2%) Eliminations (2.2) (2.2) 0.0% ------- ------- -------- Total Operating Profit $ 23.8 $ 80.9 (70.6%) ====== ======= ======= The manufacturing segment's income from operations decreased by 48.8%primarily because of a $22.8 million charge related to the Company'srestructuring activities, as well as the decrease in gross profit previouslydiscussed. 17 18 The retail and distribution segment's income from operations decreasedby $22.0 million due primarily to a $13.6 million charge related to theCompany's restructuring activities and a $5.7 million increase in selling,general and administrative expenses. The increase in selling, general andadministrative expenses primarily reflects increased selling expensesprincipally to support increased sales activity in its aftermarket parts,service and trailer rental, leasing and finance businesses.Other Income (Expense) Interest expense totaled $19.7 million and $12.7 million for the yearsended December 31, 2000 and 1999, respectively. The increase in interest expenseprimarily reflects higher interest rates coupled with the issuance of additionalterm debt and higher borrowings under the Company's revolving credit facilityduring 2000 to fund increased investing activities and working capitalrequirements. Accounts receivable securitization costs related to the Company'sreceivable sale and servicing agreement increased from $5.8 million in 1999 to$7.1 million in 2000 primarily as a result of higher interest rates during theyear. Equity in losses of unconsolidated affiliate consists of the Company'sinterest in the losses of ETZ, a non-operating, European holding company, at a25.1% share that represents the Company's interest acquired in November 1997.ETZ is the majority shareholder of BTZ, a European RoadRailer operating companybased in Munich, Germany, which began operations in 1996. As part of itsrestructuring activities, during the fourth quarter of 2000, the Companyrecorded a $5.8 million charge to Other Income (Expense) in order to reflect itsplanned divestiture of this investment. In January 2001, in connection with its restructuring activities, theCompany assumed the remaining ownership interest in ETZ from the majorityshareholder. The Company intends to pursue the orderly divestiture of the ETZduring 2001 and as a result will record 100% of ETZ's operating results untilthe divestiture is complete. These results will be recorded as Equity in lossesof unconsolidated affiliate in the Consolidated Statements of Income in 2001. Other, net totaled income of $0.9 million in 2000 compared to income of$6.3 million in 1999. Included in other, net for 1999 was the reversal of $3.5million in an accrual related to the Company's favorable resolution of a taxdispute with the Internal Revenue Service. During September 2000, the Company'sfinance operation sold a portion of its leasing and finance portfolio to a largefinancial institution. Proceeds of the sale were approximately $20.8 million andresulted in a loss of approximately $0.9 million, which is reflected in Other,net in the accompanying Consolidated Statements of Income for 2000. Interestincome was approximately $0.5 million and $0.8 million in 2000 and 1999,respectively.Income Taxes The Company's effective tax rates were 39.0% and 40.0% of pre-taxincome (loss) for 2000 and 1999, respectively, and differed from the U.S.Federal Statutory rate of 35% due primarily to state taxes.1999 Compared to 1998 During 1999, the Company achieved net sales of $1.5 billion, which were12.6% higher than 1998 net sales of $1.3 billion. Net income for 1999 rose 67%to $38.8 million as compared to $23.3 million in 1998.Net Sales Years Ended December 31, 1999 1998 % Change Net External Sales by Segment: (Dollar amounts in millions) Manufacturing $1,113.9 $ 988.2 12.7% Retail and Distribution 340.7 304.1 12.0% -------- -------- ------- Total Net Sales $1,454.6 $1,292.3 12.6% ======== ======== ======= The manufacturing segment's external net sales rose 12.7% or $125.7million in 1999 compared to 1998 driven primarily by a 12.7% increase in unitssold, from approximately 56,900 units in 1998 to 18 19approximately 64,100 units in 1999. The average selling price per new trailersold increased 1.2%, from approximately $17,000 in 1998 to approximately $17,200in 1999. The increase in new trailer sales reflects the continued strong demandfor the Company's DuraPlate trailer, which accounted for approximately 59% ofnew trailer production in 1999. The retail and distribution segment's external net sales rose 12.0% or$36.6 million in 1999 compared to 1998 driven primarily by an increase in newand used trailers sales. New trailer sales increased 24.4% on approximately5,000 units sold in 1998 to approximately 5,900 units sold in 1999 and usedtrailer sales increased 38.2% in 1999 compared to 1998. In addition, the averageprice per new trailer sold increased 5.3%, from approximately $19,000 in 1998 toapproximately $20,000 in 1999. The increases in new and used trailer sales wereoffset somewhat by an 6.7% decrease in aftermarket parts and service revenues.Rental, leasing and finance revenues in 2000 were equal to 1999. The netdecrease in aftermarket parts and service revenues was driven primarily by lowersales from the Company's parts distribution center, which during 1999 continuedto focus on consolidating its operations with the distribution center acquiredas part of the Fruehauf asset acquisition in 1997 and the impact of theconversion and implementation of new operating software within the Company'sretail and distribution network.Gross Profit Years Ended December 31, ------------------------ 1999 1998 % Change ---- ---- -------- Gross Profit by Segment: (Dollar amounts in millions) Manufacturing $ 99.6 $ 68.0 46.5% Retail and Distribution 34.3 33.9 1.2% Eliminations (2.2) (2.5) 12.0% ------ ------ ------- Total Gross Profit $131.7 $ 99.3 32.6% ====== ====== ======= The Company finished 1999 with gross profit as a percent of sales of9.1% on a consolidated basis, the highest gross profit margin since 1993. Thisfavorable increase in gross profits was primarily driven by the manufacturingsegment, as discussed below. The manufacturing segment's gross profit increased 46.5% primarily as aresult of a 12.7% increase in net sales, higher margins from an improved productmix toward more proprietary products, reduced hardwood flooring costs resultingfrom the acquisition of the Cloud Companies in July 1998 and a generalimprovement in production efficiencies throughout the year. The retail and distribution segment's gross profit remained unchanged,primarily due to the increase in net sales previously discussed offset by lowermargins resulting from a higher level of sales of used trailers which have lowergross profit percentages than the segment as a whole. In addition, gross profitsat the Company's parts distribution center were down in 1999 compared to 1998due to the margin impact of the Company's consolidation of its two aftermarketparts operations and the conversion of its operating systems.Income from Operations (before interest, taxes and other items) Years Ended December 31, ------------------------ 1999 1998 % Change ---- ---- -------- Operating Income by Segment: (Dollar amounts in millions) Manufacturing $ 72.0 $ 48.7 47.8% Retail and Distribution 11.1 14.5 (23.4%) Eliminations (2.2) (2.5) 12.0% ------ ------ ------- Total Operating Income $80.9 $ 60.7 33.3% ===== ====== ======= The manufacturing segment's income from operations increased 47.8%primarily because of the increase in gross profit previously discussed. Selling,general and administrative expenses increased primarily as a result of normaloperating costs generated from the continued growth in this segment. The retail and distribution segment's income from operations decreasedby 23.4% as a result of increased selling, general and administrative expensesassociated with the growth of the segment. 19 20Other Income (Expense) Interest expense totaled $12.7 million and $14.8 million for the yearsended December 31, 1999 and 1998, respectively. The decrease in interest expenseprimarily reflects lower borrowings on the Company's revolving credit facilityand higher usage of the Company's accounts receivable securitization facility in1999 compared to 1998. Accounts receivable securitization costs related to theCompany's receivable sale and servicing agreement totaled $5.8 million and $4.0million for the years ended December 31, 1999 and 1998, respectively. Theincrease in securitization costs is due to the full-year impact of this newfacility in 1999 compared to 9 months in 1998 and an increase in the amountoutstanding under this facility during late 1998 from $83 million to $105million. Equity in losses of unconsolidated affiliate consists of the Company'sinterest in the losses of ETZ, a non-operating, European holding company, at a25.1% share, which represents the Company's interest acquired in November 1997.ETZ is the majority shareholder of BTZ, a European RoadRailer operating companybased in Munich, Germany, which began operations in 1996. Other, net totaled income of $6.3 million in 1999 compared to a loss of$0.3 million in 1998. On December 24, 1998, the Company received notice from theInternal Revenue Service that it intended to assess additional federal excisetax, primarily on the restoration of certain used trailers. Although the Companystrongly disagreed with the IRS, it recorded a $4.6 million accrual during thefourth quarter of 1998 for this loss contingency. In December 1999, the Companyfavorably resolved the dispute at less than 25% of the accrued amount, orapproximately $1.1 million, net of interest, of which less than $1 million wasrelated to the restoration of used trailers. As a result of this favorableresolution, in December 1999 the Company reversed $3.5 million of the previouslyrecorded accrual. Also included in Other, net in 1999 are gains from the sale ofproperty, plant and equipment of approximately $0.9 million and interest incomeof approximately $0.8 million.Income Taxes The Company's effective tax rates were 40.0% and 39.6% of pre-taxincome (loss) for 1999 and 1998, respectively and differed from the U.S. FederalStatutory rate of 35% due primarily to State taxes.LIQUIDITY AND CAPITAL RESOURCES As presented in the Consolidated Statements of Cash Flows, theCompany's cash position decreased $18.3 million during 2000 from $22.5 millionin cash and cash equivalents at December 31, 1999 to $4.2 million at December31, 2000. This decrease was due to cash used in operating and investingactivities of $83.3 million partially offset by cash provided by financingactivities of $65.0 million.Operating Activities: Net cash used in operating activities of $13.7 million in 2000 isprimarily the result of the net loss and changes in working capital, partiallyoffset by the add-back of non-cash charges for depreciation and amortization andrestructuring and other related charges. Changes in working capital consistedprimarily of increased inventory and decreased accounts payable and accruedliabilities offset by a reduction in accounts receivable. The net increase ininventory was primarily due to a higher level of used trailers taken in tradeduring the year, an increase in new trailer inventory within the retail branchnetwork due to deteriorating conditions in the transportation industry, higherfinished trailer inventory resulting from customers delaying taking delivery ofthe trailers they ordered offset partially by the manufacturing segment reducingits required raw materials inventory level. The decrease in accounts receivablewas primarily the result of a favorable decrease in days sales outstandingoffset somewhat by a decrease in the proceeds from the Company's tradereceivable securitization facility. As of December 31, 2000, $69 million wasoutstanding under this facility, compared to $105 million as of December 31,1999. Advance rates under this facility continued to decline into 2001 and, as aresult, the Company will evaluate alternative financing arrangements orreplacement facilities in 2001 to compensate for the lower borrowing capacity. 20 21Investing Activities: Net cash used in investing activities of $69.6 million was primarilydue to the following: - capital expenditures of $60.3 million during the year which were primarily associated with the following: + completion of a new, state of the art painting and coating system and plant expansion at its trailer manufacturing facility in Huntsville, Tennessee; + additional composite material capacity; + increasing productivity within the Company's manufacturing operations in Lafayette, Indiana; and + on-going capital expenditures related to the Company's branch expansion strategy. - net investment in the Company's rental and operating lease portfolio of approximately $35.9 million; - net decrease in the Company's finance contract portfolio of approximately $20.7 million; and - proceeds from the sale and leaseback of composite material production equipment closed in the fourth quarter of 2000 for approximately $9.1 million. The increase in the Company's rental and operating lease portfolioprimarily reflects the Company's strategy to expand its used trailer rentalprogram and is offset somewhat by $31 million of proceeds from a new sale andleaseback facility related to the Company's trailer rental facility which closedon December 29, 2000. The proceeds were used to reduce the Company's line ofcredit borrowings. This new facility, to be syndicated in the first quarter of2001 and is expected to increase the total facility size to approximately $110million, allows for additional draws during 2001 as the trailer rental fleetcontinues to expand. The facility has an initial term of 18 months followed byfour annual renewals and contains financial covenants substantially identical tothe Company's existing credit facilities. The decrease in the Company's financecontract portfolio was primarily driven by the September 2000 sale ofapproximately $21.7 million of its leasing and finance portfolio previouslydiscussed. The Company anticipates future capital expenditures related to thecontinuation of the capital projects previously discussed and other activitiesto be $20 to $30 million over the next 12 months. In addition, the Company hasfuture residual guarantees or purchase options of approximately $55.8 millionand $171.2 million, respectively, related to certain new and used trailertransactions. The majority of these do not come due until 2002 or after. TheCompany anticipates re-marketing these trailers to the current users or throughthe retail and distribution segment.Financing Activities: Net cash provided by financing activities of $65.0 million in 2000 isprimarily due to an increase in total debt of $70.4 million offset partially bythe payment of common stock dividends and preferred stock dividends of $5.6million in the aggregate. In connection with the aforementioned activity, the Company's totaldebt increased to $238.3 million at December 31, 2000 compared to $167.9 millionat December 31, 1999. The Company maintains a $125 million unsecured revolvingline of credit facility, of which approximately $90.2 million remains availableat year end. On September 29, 2000, the Company entered into a $75 million NotePurchase and Private Shelf Agreement with a large financial institution. Underthis agreement, the Company initially issued $50 million of unsecured seniornotes, $25 million of which are due September 29, 2005 with the remaining $25million due September 29, 2007. These Series I Senior Notes bear interest at8.04% with interest payments due semi-annually in March and September andcontain financial covenants substantially identical to the Company's existingsenior notes. The proceeds were used to repay the amount outstanding under theCompany's 364-day Credit Facility. The uncommitted Private Shelf Agreementexpires on September 29, 2003 and provides for the possible issuance ofadditional senior notes up to an aggregate amount of $25 million. 21 22 On June 22, 2000, the Company entered into a new, unsecured 364-dayCredit Facility, which permits the Company to borrow up to $70 million. Underthis facility, the Company has a right to borrow until June 21, 2001, at whichtime the principal amount then outstanding will be due and payable. At December31, 2000, the Company had no borrowings against this facility. Other sources of funds for capital expenditures, continued expansion ofbusinesses, dividends, principal repayments on debt, stock repurchase andworking capital requirements are expected to be cash from operations, additionalborrowings under the credit facilities and term borrowings and equity offerings.The Company believes these funding sources will be adequate for its anticipatedrequirements.INFLATION The Company has been generally able to offset the impact of risingcosts through productivity improvements as well as selective price increases. Asa result, inflation is not expected to have a significant impact on theCompany's business.NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards (SFAS) No. 133, Accounting forDerivative Instruments and Hedging Activities which was subsequently amended bySFAS 137 and SFAS 138. These statements require that all derivative instrumentsbe recorded on the balance sheet at their fair value. This standard is effectivefor the Company's financial statements beginning January 1, 2001, with earlyadoption permitted. The adoption of SFAS 133 did not have an effect on theCompany's annual results of operations or its financial position.ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS In addition to the risks inherent in its operations, the Company hasexposure to financial and market risk resulting from volatility in commodityprices, interest rates and foreign exchange rates. The following discussionprovides additional detail regarding the Company's exposure to these risks. a. Commodity Price Risks The Company is exposed to fluctuation in commodity prices through thepurchase of raw materials that are processed from commodities such as aluminum,steel, wood and virgin plastic pellets. Given the historical volatility ofcertain commodity prices, this exposure can significantly impact product costs.The Company manages aluminum and virgin plastic pellets price changes byentering into fixed price contracts with its suppliers prior to a customer salesorder being finalized. Because the Company typically does not set prices for itsproducts in advance of its commodity purchases, it can take into account thecost of the commodity in setting its prices for each order. To the extent thatthe Company is unable to offset the increased commodity costs in its productprices, the Company's results would be materially and adversely affected. b. Interest Rates As of December 31, 2000, the Company had approximately $20 million ofLondon Interbank Rate (LIBOR) based debt outstanding under its Revolving CreditFacility, $31 million of proceeds from its rental fleet sale and leasebackagreement which calls for LIBOR based interest payments and $69 million ofproceeds from its accounts receivable securitization facility, which alsorequires LIBOR based interest payments. A hypothetical 100 basis-point increasein the floating interest rate from the current level would correspond to a $1.2million increase in interest expense over a one-year period. This sensitivityanalysis does not account for the change in the Company's competitiveenvironment indirectly related to the change in interest rates and the potentialmanagerial action taken in response to these changes. 22 23 c. Foreign Exchange Rates The Company has historically entered into foreign currency forwardcontracts (principally against the German Deutschemark and French Franc) tohedge the net receivable/payable position arising from trade sales (includinglease revenues) and purchases with regard to the Company's internationalactivities. The Company does not hold or issue derivative financial instrumentsfor speculative purposes. As of December 31, 2000, the Company had no foreigncurrency forward contracts outstanding. 23 24ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PAGES ----- Report of Independent Public Accountants...................................................... 25Consolidated Balance Sheets as of December 31, 2000 and 1999.................................. 26Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998..................................................................................... 27Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998............................................................................ 28Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998..................................................................................... 29Notes to Consolidated Financial Statements.................................................... 30 24 25 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTSTo the Stockholders of Wabash National Corporation: We have audited the accompanying consolidated balance sheets of WABASHNATIONAL CORPORATION (a Delaware corporation) and subsidiaries as of December31, 2000 and 1999, and the related consolidated statements of income,stockholders' equity and cash flows for each of the three years in the periodended December 31, 2000. These financial statements are the responsibility ofthe Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits. We conducted our audits in accordance with auditing standards generallyaccepted in the United States. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion. In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of WabashNational Corporation and subsidiaries as of December 31, 2000 and 1999, and theresults of their operations and their cash flows for each of the three years inthe period ended December 31, 2000, in conformity with accounting principlesgenerally accepted in the United States. ARTHUR ANDERSEN LLPIndianapolis, Indiana,February 6, 2001. 25 26 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) December 31, ------------------- ASSETS 2000 1999 ------ ---- ---- CURRENT ASSETS: Cash and cash equivalents.................................. $ 4,194 $ 22,484 Accounts receivable, net................................... 49,320 111,567 Current portion of finance contracts....................... 11,544 8,423 Inventories................................................ 330,326 269,581 Prepaid expenses and other................................. 24,030 16,962 --------- --------- Total current assets............................... 419,414 429,017 --------- ---------PROPERTY, PLANT AND EQUIPMENT, net................................ 216,901 186,430 --------- ---------EQUIPMENT LEASED TO OTHERS, net................................... 52,001 50,364 --------- ---------FINANCE CONTRACTS, net of current portion......................... 44,906 71,839 --------- ---------INTANGIBLE ASSETS, net............................................ 31,123 32,669 --------- ---------OTHER ASSETS...................................................... 17,269 20,972 --------- --------- $ 781,614 $ 791,291 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES: Current maturities of long-term debt....................... $ 12,134 $ 3,514 Accounts payable........................................... 94,118 145,568 Accrued liabilities........................................ 42,440 51,184 --------- --------- Total current liabilities.......................... 148,692 200,266 --------- ---------LONG-TERM DEBT, net of current maturities......................... 226,126 164,367 --------- ---------DEFERRED INCOME TAXES............................................. 23,644 30,640 --------- ---------OTHER NONCURRENT LIABILITIES AND CONTINGENCIES.................... 15,919 16,653 --------- ---------STOCKHOLDERS' EQUITY: Preferred stock, 482,041 shares issued and outstanding with an aggregate liquidation value of $30,600............. 5 5 Common stock, 23,002,490 and 22,985,186 shares issued and outstanding, respectively.......................... 230 230 Additional paid-in capital................................. 236,660 236,474 Retained earnings.......................................... 131,617 143,935 Treasury stock at cost, 59,600 common shares............... (1,279) (1,279) --------- --------- Total stockholders' equity......................... 367,233 379,365 --------- --------- $ 781,614 $ 791,291 ========= =========The accompanying notes are an integral part of these Consolidated Statements. 26 27 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Years Ended December 31, ----------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- NET SALES............................................... $ 1,332,172 $ 1,454,570 $ 1,292,259COST OF SALES........................................... 1,216,205 1,322,852 1,192,968 ----------- ----------- ----------- Gross profit................................. 115,967 131,718 99,291GENERAL AND ADMINISTRATIVE EXPENSES..................... 34,354 30,396 25,780SELLING EXPENSES........................................ 21,520 20,400 12,846RESTRUCTURING CHARGE.................................... 36,338 -- -- ----------- ----------- ----------- Income from operations....................... 23,755 80,922 60,665OTHER INCOME (EXPENSE): Interest expense................................. (19,740) (12,695) (14,843) Accounts receivable securitization costs......... (7,060) (5,804) (3,966) Equity in losses of unconsolidated affiliate..... (3,050) (4,000) (3,100) Restructuring charge............................. (5,832) -- -- Other, net....................................... 877 6,310 (259) ----------- ----------- ----------- Income (loss) before income taxes............ (11,050) 64,733 38,497PROVISION (BENEFIT) FOR INCOME TAXES.................... (4,314) 25,891 15,226 ----------- ----------- ----------- Net income (loss)............................ $ (6,736) $ 38,842 $ 23,271PREFERRED STOCK DIVIDENDS............................... 1,903 2,098 1,391 ----------- ----------- -----------NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS.................................... $ (8,639) $ 36,744 $ 21,880 =========== =========== ===========EARNINGS (LOSS) PER SHARE: Basic........................................... $ (0.38) $ 1.60 $ 1.00 =========== =========== =========== Diluted......................................... $ (0.38) $ 1.59 $ 0.99 =========== =========== ===========The accompanying notes are an integral part of these Consolidated Statements. 27 28 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS) Additional Preferred Stock Common Stock Paid-In Retained Treasury Shares Amount Shares Amount Capital Earnings Stock Total ------- ------- ---------- ------ --------- --------- --------- --------- BALANCES, December 31, 1997........... 352,000 $ 4 19,954,874 $ 200 $ 135,611 $ 91,980 $ (1,279) $ 226,516 Net income for the year.............. -- -- -- -- -- 23,271 -- 23,271 Cash dividends declared: Common stock ($0.1425 per share)... -- -- -- -- -- (3,167) -- (3,167) ......... Preferred stock.................... -- -- -- -- -- (1,391) -- (1,391) Issuance of common stock, net of expenses.................... -- -- 3,000,000 30 87,256 -- -- 87,286 Common stock issued under: Employee stock purchase plan....... -- -- 4,896 -- 110 -- -- 110 Employee stock bonus plan.......... -- -- 3,900 -- 120 -- -- 120 Stock option plan.................. -- -- 1,420 -- 27 -- -- 27 Preferred stock issued for acquisition......................... 130,041 1 -- -- 13,003 -- -- 13,004 ------- ------- ---------- ------ --------- --------- -------- ---------BALANCES, December 31, 1998........... 482,041 $ 5 22,965,090 $ 230 $ 236,127 $ 110,693 $ (1,279) $ 345,776 Net income for the year.............. -- -- -- -- -- 38,842 -- 38,842 Cash dividends declared: Common stock ($0.1525 per share)... -- -- -- -- -- (3,502) -- (3,502) Preferred stock.................... -- -- -- -- -- (2,098) -- (2,098) Common stock issued under: Employee stock purchase plan....... -- -- 10,556 -- 177 -- -- 177 Employee stock bonus plan.......... -- -- 4,400 -- 79 -- -- 79 Stock option plan.................. -- -- 5,140 -- 91 -- -- 91 ------- ------- ---------- ------ --------- --------- -------- ---------BALANCES, December 31, 1999........... 482,041 $ 5 22,985,186 $ 230 $ 236,474 $ 143,935 $ (1,279) $ 379,365 Net loss for the year................ -- -- -- -- -- (6,736) -- (6,736) Cash dividends declared: Common stock ($0.16 per share)..... -- -- -- -- -- (3,679) -- (3,679) Preferred stock.................... -- -- -- -- -- (1,903) -- (1,903) Common stock issued under: Employee stock purchase plan....... -- -- 15,544 -- 158 -- -- 158 Employee stock bonus plan.......... -- -- 1,760 -- 28 -- -- 28 ------- ------- ---------- ------ --------- --------- -------- ---------BALANCES, December 31, 2000........... 482,041 $ 5 23,002,490 $ 230 $ 236,660 $ 131,617 $ (1,279) $ 367,233 ======= ======= ========== ====== ========= ========= ======== =========The accompanying notes are an integral part of these Consolidated Statements. 28 29 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) Years Ended December 31, ------------------------------------ 2000 1999 1998 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)................................................................... $ (6,736) $ 38,842 $ 23,271 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization...................................................... 30,051 21,773 18,405 Net (gain) loss on the sale of assets.............................................. 1,474 (864) (2,077) Provision for losses on accounts receivable........................................ 4,088 2,829 772 Deferred income taxes.............................................................. (8,906) (6,947) 6,388 Equity in losses of unconsolidated affiliate....................................... 3,050 4,000 3,100 Restructuring and other related charges............................................ 46,650 -- -- Change in operating assets and liabilities, excluding effects of the acquisitions Accounts receivable............................................................ 52,709 (18,810) 72,557 Inventories.................................................................... (64,879) (37,573) 2,379 Prepaid expenses and other..................................................... (184) 8,607 (5,842) Accounts payable and accrued liabilities....................................... (69,880) 55,537 6,041 Other, net..................................................................... (1,106) (3,924) (1,911) ------- ------ ------- Net cash provided by (used in) operating activities........................ (13,669) 63,470 123,083 ------- ------ -------CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures................................................................ (60,342) (68,119) (31,006) Net additions to equipment leased to others......................................... (69,553) (11,828) (15,288) Net additions to finance contracts.................................................. (19,400) (28,762) (30,056) Investment in unconsolidated affiliate.............................................. (3,706) (3,580) (2,866) Acquisitions, net of cash acquired.................................................. -- (12,413) (9,515) Proceeds from sale of leased equipment and finance contracts........................ 60,845 12,927 12,357 Principal payments received on finance contracts.................................... 12,914 10,246 7,920 Proceeds from the sale of property, plant and equipment............................. 9,638 7,236 4,084 ------- ------ ------- Net cash used in investing activities.............................................. (69,604) (94,293) (64,370) ------- ------ -------CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from: Long-term revolver................................................................. 512,300 244,200 276,600 Long-term debt..................................................................... 62,500 -- -- Common stock, net of expenses...................................................... 186 347 87,543Payments: Long-term revolver................................................................. (500,299) (242,200) (336,600) Long-term debt..................................................................... (4,122) (10,651) (29,420) Common stock dividends............................................................. (3,679) (3,446) (3,004) Preferred dividends................................................................ (1,903) (2,065) (1,357) ------- ------ ------- Net cash provided by (used in) financing activities............................ 64,983 (13,815) (6,238) ------- ------ -------NET (DECREASE) INCREASE IN CASH...................................................... (18,290) (44,638) 52,475CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD............................. 22,484 67,122 14,647 ------- ------ -------CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD................................... $ 4,194 $ 22,484 $ 67,122 ========= ========= =========The accompanying notes are an integral part of these Consolidated Statements. 29 30 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. DESCRIPTION OF THE BUSINESS Wabash National Corporation (the Company) designs, manufactures andmarkets standard and customized truck trailers under the Wabash National andFruehauf trademarks. The Company produces and sells aftermarket parts throughits division, Wabash National Parts, and its wholly-owned subsidiary, FruehaufTrailer Services, Inc. (FTSI). In addition to its aftermarket parts sales andservice revenues, FTSI sells new and used trailers through its retail network.The Company's other significant wholly-owned subsidiaries include Apex TrailerLeasing and Rentals, L.P. and National Trailer Funding (the Finance Companies)and Cloud Corporation (Wabash Wood Products). The Finance Companies providerental, leasing and finance programs to their customers for new and usedtrailers through the retail and distribution segment. Wabash Wood Productsmanufactures hardwood flooring primarily for the Company's manufacturingsegment.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Consolidation The consolidated financial statements reflect the accounts of theCompany and its subsidiaries. All significant intercompany accounts andtransactions have been eliminated. Investment in an unconsolidated affiliate inwhich the Company exercises significant influence but not control is accountedfor by the equity method and the Company's share of net income or loss of itsaffiliate is included in the Consolidated Statements of Income. b. Significant Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amount reported in its consolidated financial statements and accompanying notes. Actual results could differ from these estimates. c. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments, which arereadily convertible into cash and have maturities of three months or less. d. Allowance for Doubtful Accounts Accounts receivable as shown in the accompanying Consolidated BalanceSheets are net of allowance for doubtful accounts of $3.7 million, $2.9 millionand $2.3 million at December 31, 2000, 1999 and 1998, respectively. The activityin the allowance for doubtful accounts includes (i) provision for losses onaccounts receivable of $4.1 million, $2.8 million and $0.8 million; (ii) netaccounts written-off of $3.3 million, $2.5 million, and $0.2 million; and (iii)reserves recorded in connection with the acquisition of the Apex Group of $0,$0.3 million, and $0 during 2000, 1999 and 1998, respectively. e. Inventories Inventories are primarily priced at the lower of first-in, first-out(FIFO) cost or market. Inventory costs include raw material, labor and overheadcosts for manufactured inventories. Used trailers are carried at the lower oftheir estimated net realizable value or cost. Inventories consist of thefollowing (in thousands): 30 31 December 31, ------------ 2000 1999 ---- ---- Raw materials and components $ 84,167 $105,476Work in progress 18,765 11,215Finished goods 93,332 49,906Aftermarket parts 33,566 37,894Used trailers 100,496 65,090 -------- -------- $330,326 $269,581 ======== ======== f. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation isrecorded using the straight-line method over the estimated useful lives of thedepreciable assets. Estimated useful lives are thirty-three and one-third yearsfor buildings and building improvements and range from three to ten years formachinery and equipment. Maintenance and repairs are charged to expense asincurred. Property, plant and equipment consist of the following (in thousands): December 31, 2000 1999 Land $ 29,314 $ 28,190Buildings and improvements 109,596 81,585Machinery and equipment 123,989 93,861Construction in progress 18,587 31,477 --------- --------- 281,486 235,113Less -- Accumulated depreciation (64,585) (48,683) --------- --------- $ 216,901 $ 186,430 ========= ========= g. Impairment Long-lived assets, including property, plant and equipment,identifiable intangibles and goodwill are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of suchassets may not be recoverable. If this process concludes that the carrying valueof a long-lived asset is not recoverable, then a write-down of the asset wouldbe recorded as a charge to operations. h. Intangible Assets Intangible assets, net of accumulated amortization of $12.2 million and$9.7 million at December 31, 2000 and December 31, 1999, respectively, relateprimarily to goodwill and other intangible assets associated with recentacquisitions (See Footnote 6 for further discussion) and RoadRailer acquisitioncosts. These amounts are being amortized on a straight-line basis over periodsranging from five to forty years. i. Capitalized Software The Company adopted Statement of Position No. 98-1, Accounting for theCosts of Computer Software Developed or Obtained for Internal Use, during 1999.This pronouncement specifies the appropriate accounting for costs incurred todevelop or obtain computer software for internal use. The new pronouncementprovides guidance on which costs should be capitalized, when and over whatperiod such costs should be amortized and what disclosures should be maderegarding such costs. The adoption of this pronouncement did not have a materialeffect on the Company's results of operations or financial position. j. Fair Values of Financial Instruments Statement of Financial Accounting Standards (SFAS) No. 107, DisclosuresAbout Fair Value of Financial Instruments, requires disclosure of fair valueinformation for certain financial instruments. The differences between thecarrying amounts and the estimated fair values, using the methods andassumptions listed below, of the Company's financial instruments at December 31,2000 and 1999 were immaterial. Cash and Cash Equivalents, Accounts Receivable and Accounts Payable. The carrying amounts reported in the Consolidated Balance Sheets approximate fair value. 31 32 Long-Term Debt. The fair value of long-term debt, including current portion, is estimated based on quoted market prices for similar issues or on the current rates offered to the Company for debt of the same maturities. The interest rates on the Company's bank borrowings under its long-term revolving credit agreement are adjusted regularly to reflect current market rates. The carrying values of the Company's long-term borrowings approximate fair value. Foreign Exchange Contracts. The Company occasionally enters into foreign currency forward contracts to hedge the net receivable/payable position arising from trade sales (including lease revenues) and purchases related to the Company's international activities. Gains and losses related to qualifying hedges are deferred and included in the measurement of the related transaction, when the hedged transaction occurs. As of December 31, 2000 and 1999, the Company had deferred net gains of approximately $0 and $1.2 million, respectively. The Company does not hold or issue derivative financial instruments for speculative purposes. The fair values of foreign currency contracts (used for hedging purposes) are estimated by obtaining quotes. As of December 31, 2000 and 1999, the Company had approximately $0 and $4.4 million in foreign currency contracts, respectively, which approximate their fair values at those dates. As part of the Company's 2000 restructuring initiative the Company recognized its remaining net hedge gains as part of its restructuring charge. In addition, all foreign currency contracts were terminated as of December 31, 2000. k. Revenue Recognition The Company recognizes revenue from the sale of trailers andaftermarket parts when risk of ownership is transferred to the customer.Customers that have requested to pick up their trailers are invoiced prior totaking physical possession when the customer has made a fixed commitment topurchase the trailers, the trailers have been completed and are available forpickup or delivery, the customer has requested in writing that the Company holdthe trailers until the customer determines the most economical means of takingpossession and the customer takes possession of the trailers within a specifiedtime period. In such cases, the trailers, which have been produced to thecustomer specifications, are invoiced under the Company's normal billing andcredit terms. In addition, the Company recognizes revenue for direct finance leasesbased upon a constant rate of return while revenue is recognized for operatingleases on a straight-line basis in an amount equal to the invoiced rentals. The Company had one customer that represented 11.4% of its net sales in2000, while no other customer exceeded 10% of its net sales in 2000, 1999 and1998. The Company's net sales in the aggregate to its five largest customerswere 30.5%, 22.2% and 18.3% of its sales in 2000, 1999 and 1998, respectively. l. Income Taxes The Company recognizes income taxes under the liability method ofaccounting for income taxes. The liability method measures the expected taximpact of future taxable income or deductions resulting from differences in thetax and financial reporting bases of assets and liabilities reflected in theConsolidated Balance Sheets. m. Research and Development Research and development expenses are charged to earnings as incurredand approximated $2.4 million, $1.5 million and $1.8 million in 2000, 1999 and1998, respectively. During 2000, the Company incurred research and developmentexpenses related to the development of its proprietary anti-lock braking andtrailer electronics systems. n. Reclassifications Certain items previously reported in specific consolidated financialstatement captions have been reclassified to conform to the 2000 presentation. 32 33 o. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards (SFAS) No. 133, Accounting forDerivative Instruments and Hedging Activities which was subsequently amended bySFAS 137 and SFAS 138. These statements require that all derivative instrumentsbe recorded on the balance sheet at their fair value. This standard is effectivefor the Company's financial statements beginning January 1, 2001, with earlyadoption permitted. The adoption of SFAS 133 did not have an effect on theCompany's annual results of operations or its financial position.3. RESTRUCTURING AND OTHER RELATED CHARGES In December 2000, the Company recorded restructuring and other relatedcharges totaling $46.6 million ($28.5 million, net of tax) primarily related tothe Company's exit from manufacturing products for export outside the NorthAmerican market, international leasing and financing activities and theconsolidation of certain domestic operations. Included in this total is $40.8million that has been included as a component in computing income fromoperations. Specifically, $19.1 million of this amount represents the impairmentof certain equipment subject to leases with the Company's internationalcustomers, $8.6 million represents losses recognized for various financialguarantees related to international financing activities, and $6.9 million wasrecorded for the write-down of other assets as well as charges associated withthe consolidation of certain domestic operations including severance of $0.2million. Also included in the $40.8 million is a $4.5 million charge forinventory write-downs related to the restructuring actions which is included incost of sales. The Company has recorded $5.8 million as a restructuring chargein Other Income (Expense) representing the write-off of the Company's remainingequity interest in ETZ for a decline in fair value that is deemed to be otherthan temporary. The total impairment charge recognized by the Company as a result ofits restructuring activities was $26.7 million. This amount was computed inaccordance with the provisions of SFAS 121. The estimated fair value of theimpaired assets totaled $3.4 million and was determined by management based uponeconomic conditions and potential alternative uses and markets for theequipment. These assets are held for sale and are classified in prepaid expensesand other in the accompanying Consolidated Balance Sheets. Depreciation has beendiscontinued on these assets pending their disposal. In addition, upon theultimate divestiture of the Company's ownership in ETZ, expected to occur in2001, the Company will no longer record equity in losses of unconsolidatedaffiliate which amounted to $3.1 million, $4.0 million and $3.1 million in 2000,1999 and 1998, respectively. The cash and non-cash elements of the restructuring charge wereapproximately $11.9 million and $34.7 million, respectively. Details of therestructuring charges are as follows (in thousands): Original UTILIZED Balance Provision Cash Non-Cash 12/31/00 --------- ---- -------- -------- Restructuring of majority-owned operations: Impairment of long-term assets $20,819 $ -- $20,819 $ -- Loss related to equipment guarantees 8,592 -- -- 8,592 Write-down of other assets and other charges 6,927 -- 4,187 2,740 ------- ------- ------- ------- $36,338 $ -- $25,006 $11,332 ------- ------- ------- -------Restructuring of minority interest operations: Impairment of long-term assets $ 5,832 $ -- $ 5,832 $ -- ------- ------- ------- -------Inventory write-down $ 4,480 $ -- $ 3,897 $ 583 ------- ------- ------- -------Total restructuring and other related charges $46,650 $ -- $34,735 $11,915 ======= ======= ======= ======= As of December 31, 2000, the $11.9 million restructuring reserve isincluded in accrued liabilities in the accompanying Consolidated Balance Sheets.The Company anticipates completion of its restructuring activities during 2001. 33 344. EARNINGS (LOSS) PER SHARE Earnings (loss) per share (EPS) are computed in accordance with SFASNo. 128, Earnings per Share. A reconciliation of the numerators and denominatorsof the basic and diluted EPS computations, as required by SFAS No. 128, ispresented below. Stock options were not included in the computation of dilutedEPS for 2000 and the convertible preferred stock was not included in thecomputation of diluted EPS for 2000 and 1998 since the inclusion would haveresulted in an antidilutive effect (in thousands except per share amounts): Net Income (Loss) Weighted Available to Average Earnings (Loss) Common Shares Per Share 2000Basic $ (8,639) 22,990 $ (0.38)Options -- --Preferred Stock -- -- -------- ------ -----------Diluted $ (8,639) 22,990 $ (0.38) ======== ====== ===========1999Basic $ 36,744 22,973 $ 1.60Options -- 30Preferred Stock (Series B only) 1,151 823 -------- ------ -----------Diluted $ 37,895 23,826 $ 1.59 ======== ====== ===========1998Basic $ 21,880 21,990 $ 1.00Options -- 85Preferred Stock -- -- -------- ------ -----------Diluted $ 21,880 22,075 $ 0.99 ======== ====== ===========5. SEGMENT REPORTING Under the provisions of SFAS No. 131, the Company has two reportablesegments: manufacturing and retail and distribution. The manufacturing segmentproduces trailers and sells new trailers to customers who purchase trailersdirect or through independent dealers and also produces trailers for the retailand distribution segment. The retail and distribution segment includes the sale,leasing and financing of new and used trailers, as well as the sale ofaftermarket parts and service through its retail branch network. In addition,the retail and distribution segment includes the sale of aftermarket partsthrough Wabash National Parts. In December 2000, the Company combined itsrental, leasing and finance activities into a separate product line within theretail and distribution segment. As a result, the 1999 and 1998 presentationshave been restated to conform to the 2000 presentation. The accounting policies of the segments are the same as those describedin the summary of significant accounting policies except that the Companyevaluates segment performance based on income from operations. The Company hasnot allocated certain corporate related charges such as administrative costs,interest expense and income taxes from the manufacturing segment to theCompany's other reportable segments. The Company accounts for intersegment salesand transfers at cost plus a specified mark-up. Reportable segment informationis as follows (in thousands): 34 35 Retail and Combined Consolidated Manufacturing Distribution Segments Eliminations Totals ------------- ------------ -------- ------------ ------ 2000-----------Revenues External customers $ 1,013,108 $ 319,064 $ 1,332,172 $ -- $ 1,332,172 Intersegment sales 83,796 1,141 84,937 (84,937) -- ----------- ----------- ----------- ----------- -----------Total Revenues $ 1,096,904 $ 320,205 $ 1,417,109 $ (84,937) $ 1,332,172 =========== =========== =========== =========== ===========Depreciation & amortization 16,390 13,661 30,051 -- 30,051Restructuring charge from operations 22,771 13,567 36,338 -- 36,338Income (loss) from operations 36,897 (10,926) 25,971 (2,216) 23,755Interest income 340 174 514 -- 514Interest expense 18,632 1,108 19,740 -- 19,740Equity in losses of unconsolidated affiliate 3,050 -- 3,050 -- 3,050Restructuring charge included in other 5,832 -- 5,832 -- 5,832Income tax benefit (4,314) -- (4,314) -- (4,314)Investment in unconsolidated affiliate -- -- -- -- --Capital additions 48,712 11,630 60,342 -- 60,342Assets 846,740 407,915 1,254,655 (473,041) 781,6141999-----------Revenues External customers $ 1,113,872 $ 340,698 $ 1,454,570 $ -- $ 1,454,570 Intersegment sales 92,537 640 93,177 (93,177) -- ----------- ----------- ----------- ----------- -----------Total Revenues $ 1,206,409 $ 341,338 $ 1,547,747 $ (93,177) $ 1,454,570 =========== =========== =========== =========== ===========Depreciation & amortization 13,332 8,441 21,773 -- 21,773Restructuring charge from operations -- -- -- -- --Income from operations 71,976 11,127 83,103 (2,181) 80,922Interest income 820 -- 820 -- 820Interest expense 12,163 532 12,695 -- 12,695Equity in losses of unconsolidated affiliate 4,000 -- 4,000 -- 4,000Restructuring charge included in other -- -- -- -- --Income tax expense 25,891 -- 25,891 -- 25,891Investment in unconsolidated affiliate 5,176 -- 5,176 -- 5,176Capital additions 54,945 13,174 68,119 -- 68,119Assets 768,017 355,890 1,123,907 (332,616) 791,2911998-----------Revenues External customers $ 988,128 $ 304,131 $ 1,292,259 $ -- $ 1,292,259 Intersegment sales 97,986 -- 97,986 (97,986) -- ----------- ----------- ----------- ----------- -----------Total Revenues $ 1,086,114 $ 304,131 $ 1,390,245 $ (97,986) $ 1,292,259 =========== =========== =========== =========== ===========Depreciation & amortization 11,324 7,081 18,405 -- 18,405Restructuring charge from operations -- -- -- -- --Income from operations 48,731 14,457 63,188 (2,523) 60,665Interest income 981 -- 981 -- 981Interest expense 13,540 1,303 14,843 -- 14,843Equity in losses of unconsolidated affiliate 3,100 -- 3,100 -- 3,100Restructuring charge included in other -- -- -- -- --Income tax expense 15,226 -- 15,226 -- 15,226Investment in unconsolidated affiliate 5,595 -- 5,595 -- 5,595Capital additions 23,435 7,571 31,006 -- 31,006Assets 682,822 270,412 953,234 (248,748) 704,486 The Company's international sales accounted for approximately 3.1% ofconsolidated net sales during 2000 and 2.0% of net sales in 1999 and 1998.During 2000, as part of the restructuring charges, all assets attributable tointernational operations were written down to their estimated recovery valuesand these charges are included in income from operations in the accompanyingConsolidated Statements of Income. These assets accounted for less than 5% ofconsolidated assets for 2000, 1999 and 1998.6. ACQUISITIONS On December 1, 1999, the Company acquired Apex Trailer Service, Inc.,Apex Trailer and Truck Equipment Sales, Inc. and Apex Rentals, Inc. (the ApexGroup) in a stock purchase agreement (the Apex Acquisition). For financialstatement purposes, the Apex Acquisition was accounted for as a purchase, andaccordingly, the Apex Group's assets and liabilities were recorded at fair valueand the operating results are included in the consolidated financial statementssince the date of acquisition. The Apex Group has four 35 36branch locations. These branches sell new and used trailers, aftermarket partsand provide service work. The aggregate consideration for this transactionincluded approximately $12.4 million in cash and the assumption of $11.3 millionin liabilities. Included in the $11.3 million of assumed liabilities was $8.2million of debt, of which the Company retired $6.8 million immediately followingthe acquisition using cash from operations. The excess of the purchase priceover the underlying assets acquired was approximately $1.8 million. On July 14, 1998, the Company acquired Cloud Corporation and Cloud OakFlooring Company, Inc. (the Cloud Acquisition) manufacturers of laminatedhardwood floors for the truck body and trailer industry in a merger and stockpurchase, respectively. For financial statement purposes, the Cloud Acquisitionwas accounted for as a purchase, and accordingly, Cloud's assets and liabilitieswere recorded at fair value and the operating results are included in theconsolidated financial statements since the date of acquisition. The aggregateconsideration for this transaction included approximately $9.5 million in cash,$13.0 million in convertible preferred stock and the assumption of $33.8 millionin liabilities. Included in the $33.8 million of assumed liabilities was $18.8million of debt, which the Company paid off immediately following theacquisition using cash from operations. The excess of the purchase price overthe underlying assets acquired was approximately $20.3 million.7. INVESTMENT IN UNCONSOLIDATED AFFILIATE On November 4, 1997, the Company purchased a 25.1% equity interest inEuropaische Trailerzug Beteiligungsgessellschaft mbH (ETZ). ETZ is the majorityshareholder of Bayersriche Trailerzug Gesellschaft fur Bimodalen GuterverkehrmbH (BTZ), a European RoadRailer operation based in Munich, Germany, which beganoperations in 1996 and has incurred operating losses since inception. TheCompany paid approximately $6.2 million for its ownership interest in ETZ during1997 and made additional capital contributions of $3.7 million, $3.6 million and$2.9 million during 2000, 1999 and 1998, respectively. During 2000, 1999 and1998, the Company recorded approximately $3.1 million, $4.0 million and $3.1million, respectively, for its share of ETZ losses and the amortization of thepremiums. Such amounts are recorded as Equity in losses of unconsolidatedaffiliate on the accompanying Consolidated Statements of Income. In January 2001, in connection with its restructuring activities, theCompany assumed the remaining ownership interest in ETZ from the majorityshareholder. The Company intends to pursue the orderly divestiture of the ETZduring 2001 and as a result will record 100% of ETZ's operating results untilthe divestiture is complete. These results will be recorded as Equity in lossesof unconsolidated affiliate in the Consolidated Statements of Income in 2001.Although the Company has elected to discontinue manufacturing products forexport outside of North America and the related international financingactivities, the Company will continue to pursue opportunities in internationalmarkets to license and market its proprietary RoadRailer bimodal technology. Summarized financial information for ETZ is as follows (in millions): December 31, -------------------------------- 2000 1999 1998 ---- ---- ---- Condensed Statement of Operations: Net sales $ 18.9 $ 14.2 $ 11.5 Gross profit (8.9) (11.3) (7.0) Net earnings (loss) (12.6) (17.6) (12.4) Wabash National's share (3.2) (4.4) (3.1)Condensed Statement of Financial Condition: Current assets $ 4.7 $ 6.1 $ 5.3 Non-current assets 3.4 3.2 3.8 Current liabilities 5.5 7.2 5.9 Non-current liabilities 1.4 2.3 2.8 Net assets 1.1 (0.2) 0.4 Wabash National's share 0.3 0.0 0.1 36 378. ACCOUNTS RECEIVABLE SECURITIZATION On March 31, 1998, the Company replaced its existing $40.0 millionreceivable sale and servicing agreement with a new three-year trade receivablesecuritization facility. The new facility allows the Company to sell, withoutrecourse on an ongoing basis, all of their accounts receivable to Wabash FundingCorporation (Funding Corp). Simultaneously, the Funding Corp. has sold and,subject to certain conditions, may from time to time sell an undivided interestin those receivables to a large financial institution. The Funding Corp. is aqualifying special purpose entity under the provisions of SFAS No. 125,Accounting for Transfers and Servicing of Financial Assets and Extinguishmentsof Liabilities. As of December 31, 2000 and 1999, $69.4 million and $105.0million, respectively, in proceeds have been received under the facility.Amounts reflected as accounts receivable in the accompanying ConsolidatedBalance Sheets as of December 31, 2000 and 1999 represent receivables sold tothe Funding Corp. in excess of proceeds received. Proceeds from the sale in 1998 were used to reduce outstandingborrowings under the Company's Revolving Bank Line of Credit and are reflectedas operating cash flows in the accompanying Consolidated Statements of CashFlows. In order to operate this facility on an on-going basis, the FundingCorp. is required to meet certain covenants primarily related to the performanceof the accounts receivable portfolio. Servicing responsibility for thesereceivables resides with the Company.9. LEASES a. Equipment Leased to Others The Finance Companies have leased equipment to others under operatingleases, whereby revenue is recognized as lease payments are due from thecustomers and the related costs are amortized over the equipment life. Equipmentleased to others is depreciated over the estimated useful life of the equipment,not to exceed 15 years and a 20% residual value, or in some cases, a depreciablelife equal to the term of the lease and a residual value equal to the estimatedmarket value at lease termination. Depreciation expense on equipment leased toothers was $10.9 million, $7.5 million and $6.4 million during 2000, 1999 and1998, respectively. Accumulated depreciation of equipment leased to others is$11.4 million and $9.3 million at December 31, 2000 and 1999, respectively.Future minimum lease payments to be received from these noncancellable operatingleases at December 31, 2000 are as follows (in thousands): Amounts ------- 2001 $3,7242002 1,8082003 1,3622004 9142005 689Thereafter 589 ------ $9,086 ====== Additionally, the Company has equipment available for short-termcancelable operating leases. The net amount included in equipment leased toothers under this type of arrangement totaled $32.1 million and $16.2 million atDecember 31, 2000 and 1999, respectively. b. Finance Contracts The Finance Companies provide finance contracts for the sale of trailerequipment to certain of its customers. The financing is principally structuredin the form of finance leases, typically for a five-year term. During 2000, theCompany sold approximately $27.1 million of its finance contracts portfolio.Included in this amount is $21.7 million in contracts in which the Company had a20% participation arrangement with a major finance company. Finance contracts,as shown on the accompanying Consolidated Balance Sheets, are as follows (inthousands): 37 38 DECEMBER 31, ------------ 2000 1999 ---- ---- Lease payments receivable $ 53,351 $ 72,004Estimated residual value 11,041 16,622 -------- -------- 64,392 88,626Unearned finance charges (13,666) (17,218) -------- -------- 50,726 71,408Other, net 5,724 8,854 -------- -------- 56,450 80,262Less: current portion (11,544) (8,423) -------- -------- $ 44,906 $ 71,839 ======== ======== Other, net. Other, net includes equipment subject to capital lease thatis awaiting customer pick-up. The net amounts under such arrangements totaled$2.3 million and $2.9 million at December 31, 2000 and 1999, respectively. Inaddition, Other, net also includes the sale of certain finance contracts withfull recourse provisions. As a result of the recourse provision, the FinanceCompanies have reflected an asset and offsetting liability totaling $3.4 millionand $6.0 million at December 31, 2000 and December 31, 1999, respectively, inthe Company's Consolidated Balance Sheets as a Finance Contract and OtherNon-Current Liabilities and Contingencies. The future minimum lease payments tobe received from finance contracts as of December 31, 2000 are as follows (inthousands): Amounts ------- 2001 $13,0352002 11,6582003 9,8612004 7,0822005 4,911Thereafter 6,804 ------- $53,351 ======= c. Off-Balance Sheet Financing In certain situations, the Finance Companies have sold equipment leasedto others to independent financial institutions and simultaneously leased theequipment back under operating leases with some of these containing end-of-termresidual value guarantees. These end-of-term residual guarantees totaled $18.3million and $19.4 million as of December 31, 2000 and 1999, respectively. Rentalpayments made by the Finance Companies under these types of transactions totaled$9.1 million, $9.1 million and $8.8 million during 2000, 1999 and 1998,respectively. On December 29, 2000, the Company closed on a new sale and leasebackfacility with an independent financial institution related to its trailer rentalfacility. This new facility, to be syndicated in the first quarter of 2001 andis expected to increase the total facility size to $110 million, allows foradditional draws during 2001 as the trailer rental fleet continues to expand.The facility has an initial term of 18 months followed by four annual renewalsand contains financial covenants substantially identical to the Company'sexisting credit facilities. Initial proceeds received under this facility onDecember 29, 2000, were $31 million. The future minimum lease payments to be paid by the Finance Companiesunder these lease transactions as of December 31, 2000 are as follows (inthousands): Amounts ------- 2001 $14,852 2002 9,221 2003 5,702 2004 4,676 2005 1,145 Thereafter -- ------- $35,596 ======= 38 39 The future minimum lease payments related to non-cancelable leases tobe received by the Finance Companies under these sublease arrangements are $10.0million in 2001, $6.2 million in 2002, $5.9 million in 2003, $4.4 million in2004, $2.0 million in 2005 and $1.0 million thereafter. Not included in thesefuture minimum lease payments to be received by the Finance Companies arepayments related to short-term cancelable sublease arrangements associated withthe $31 million of rental fleet equipment sold and simultaneously leased back inDecember 2000. d. Lease Commitments The Company leases office space, manufacturing, warehouse and servicefacilities and equipment under operating leases expiring through 2007. Futureminimum lease payments required under non-cancelable operating leases as ofDecember 31, 2000 are as follows (in thousands): Amounts ------- 2001 $ 6,9732002 3,8182003 3,1422004 1,5462005 1,371Thereafter 12 ------- $16,862 ======= Total rental expense under operating leases was $7.9 million, $5.4million, and $4.2 million for the years ended December 31, 2000, 1999 and 1998,respectively.10. DEBT a. Long-term debt consists of the following (in thousands): DECEMBER 31, ------------ 2000 1999 ---- ---- Revolving Bank Line of Credit $ 20,000 $ 7,999Mortgage and Other Notes Payable (3.0% - 8.17%, Due 2001-2008 Secured by general business assets) 18,260 9,882Series A Senior Notes (6.41%, Due January 2003) 50,000 50,000Series B-H Senior Notes (6.99% - 7.55%, Due 2001-2008) 100,000 100,000Series I Senior Notes (8.04%, Due September 2005-2007) 50,000 -- --------- --------- 238,260 167,881 Less: Current maturities (12,134) (3,514) --------- --------- $ 226,126 $ 164,367 ========= ========= b. Maturities of long-term debt at December 31, 2000, are as follows (in thousands): Amounts 2001 $ 12,1342002 45,1232003 51,3752004 10,4452005 29,553Thereafter 89,630 -------- $238,260 ======== c. Revolving Bank Line of Credit The Company has an unsecured revolving bank line of credit thatpermits the Company to borrow up to $125 million. Under this facility, theCompany has a right to borrow until September 30, 2002, at which time theprincipal amount then outstanding will be due and payable. Interest payable onsuch borrowings is variable based upon the London Interbank Rate (LIBOR) plus 25to 55 basis points, as defined, 39 40or a prime rate of interest, as defined. The Company pays a commitment fee onthe unused portion of this facility at rates of 8.5 to 17.5 basis points perannum, as defined. At December 31, 2000, the Company had borrowings of $20.0million under this facility, at interest rates ranging from 7.125% - 7.25%. TheCompany had available credit under the revolving credit facility ofapproximately $90.2 million after letters of credit and borrowings. On June 22, 2000, the Company entered into a new, unsecured 364-dayCredit Facility, which permits the Company to borrow up to $70 million. Underthis facility, the Company has a right to borrow until June 21, 2001, at whichtime the principal amount then outstanding will be due and payable. At December31, 2000, the Company had no borrowings against this facility. d. Senior Notes On September 29, 2000, the Company entered into a $75 million NotePurchase and Private Shelf Agreement with a large financial institution. Underthis agreement, the Company initially issued $50 million of unsecured Series ISenior Notes, $25 million of which is due September 29, 2005 with the remaining$25 million due September 29, 2007. The uncommitted Shelf Agreement expires onSeptember 29, 2003 and provides for the possible issuance of additional seniornotes up to an aggregate amount of $25 million. Included in current maturities of long-term debt is $8 million whichrepresents a portion of the Company's Series B-H Senior Notes that matures in2001. e. Covenants Under various loan agreements, the Company is required to meet certainfinancial covenants. These covenants require the Company to maintain certainlevels of net worth as well as comply with certain limitations on indebtedness,investments and sales of assets. The Company was in compliance with thesecovenants at December 31, 2000.11. STOCKHOLDERS' EQUITY a. Capital Stock DECEMBER 31,(Dollars in thousands) 2000 1999 Preferred Stock - $0.01 par value, 25,000,000 shares authorized:Series A Junior Participating Preferred Stock 300,000 shares authorized, 0 shares issued and outstanding $ -- $ --Series B 6% Cumulative Convertible Exchangeable Preferred Stock, 352,000 shares authorized, issued and outstanding at December 31, 2000 and 1999 ($17.6 million aggregate liquidation value) 4 4Series C 5.5% Cumulative Convertible Exchangeable Preferred Stock, 130,041 shares authorized, issued and outstanding at December 31, 2000 and 1999 ($13.0 million aggregate liquidation value) 1 1 ---- ---- Total Preferred Stock $ 5 $ 5 ==== ====Common Stock - $0.01 par value, 75,000,000 shares authorized, 23,002,490 and 22,985,186 shares issued and outstanding at December 31, 2000 and 1999, respectively $230 $230 ==== ==== 40 41 The Series B 6% Cumulative Convertible Exchangeable Preferred Stock isconvertible at the discretion of the holder, at a conversion price of $21.38 pershare, into up to approximately 823,200 shares of common stock. This conversionis subject to adjustment for dilutive issuances and changes in outstandingcapitalization by reason of a stock split, stock dividend or stock combination. The Series C 5.5% Cumulative Convertible Exchangeable Preferred Stockis convertible at the discretion of the holder, at a conversion price of $35.00per share, into up to approximately 371,500 shares of common stock, subject toadjustment. On April 28, 1998, the Company sold three million shares of its commonstock in a registered public offering at a public-offering price of $30.75 pershare, for net proceeds to the Company of $87.3 million. The Board of Directors has the authority to issue shares ofunclassified preferred stock and to fix dividends, voting and conversion rights,redemption provisions, liquidation preferences and other rights andrestrictions.b. Stock Option Plans The Company has two non-qualified stock option plans (the 1992 and 2000Stock Option Plans) under which options may be granted to officers and other keyemployees of the Company and its subsidiaries to purchase shares of common stockat a price not less than market price at the date of grant. Under the terms ofthe Stock Option Plans, up to an aggregate of 3,750,000 shares are reserved forissuance, subject to adjustment for stock dividends, recapitalizations and thelike. Options granted to employees under the Stock Option Plans becomeexercisable in annual installments of three years for options granted under the2000 Plan and five years for options granted under the 1992 Plan. Optionsgranted to non-employee Directors of the Company are fully vested on the date ofgrant and are exercisable six months thereafter. All options granted expire tenyears after the date of grant. The Company has elected to follow APB No. 25, Accounting for StockIssued to Employees, in accounting for its stock options and, accordingly, nocompensation cost has been recognized for stock options in the consolidatedfinancial statements. Had compensation cost for these plans been determinedconsistent with SFAS No. 123, Accounting for Stock-Based Compensation, theCompany's net income (loss) available to common would have been ($10.6) million(($0.46) Basic and Diluted EPS) in 2000, $35.2 million ($1.53 Basic and DilutedEPS) in 1999 and $20.8 million ($0.95 Basic EPS and $0.94 Diluted EPS) in 1998. A summary of stock option activity and weighted-average exercise pricesfor the periods indicated are as follows: Number of Weighted-Average Options Exercise Price ------- -------------- Outstanding at December 31, 1997 855,900 $ 25.05 --------- ---------- Granted 368,500 15.31 Exercised (1,420) 18.82 Cancelled (24,720) 24.00Outstanding at December 31, 1998 1,198,260 21.57 --------- ---------- Granted 537,375 21.52 Exercised (5,140) 17.76 Cancelled (11,590) 20.05Outstanding at December 31, 1999 1,718,905 21.57 --------- ---------- Granted 277,500 7.50 Exercised -- -- Cancelled (76,780) 20.43Outstanding at December 31, 2000 1,919,625 $ 19.59 ========= ========== 41 42 The following table summarizes information about stock optionsoutstanding at December 31, 2000: Weighted Weighted Weighted Range of Average Average Number Average Exercise Number Remaining Exercise Exercisable Exercise Prices Outstanding Life Price at 12/31/00 Price ------ ----------- ---- ----- ----------- ----- $ 7.38 to $10.49 273,000 9.9 yrs. $ 7.38 -- --$10.50 to $15.49 359,500 7.7 yrs. $ 15.31 149,200 $ 15.31$15.50 to $22.99 883,125 6.7 yrs. $ 20.46 436,705 $ 19.41$23.00 to $33.50 404,000 5.5 yrs. $ 29.73 312,000 $ 30.02 Using the Black-Scholes option valuation model, the estimated fairvalues of options granted during 2000, 1999 and 1998 were $3.54, $11.12 and$8.07 per option, respectively. Principal assumptions used in applying theBlack-Scholes model were as follows:Black-Scholes Model Assumptions 2000 1999 1998 ------- ------- ------- Risk-free interest rate 5.32% 6.06% 4.88%Expected volatility 45.38% 43.95% 40.89%Expected dividend yield 2.21% 0.74% 0.98%Expected term 10 yrs. 7 yrs. 7 yrs. c. 1993 Employee Stock Purchase Plan During 1993, the Company adopted its 1993 Employee Stock Purchase Plan(the "Purchase Plan"), which enables eligible employees of the Company topurchase shares of the Company's $0.01 par value common stock. Eligibleemployees may contribute up to 15% of their eligible compensation toward thesemi-annual purchase of common stock. The employees' purchase price is based onthe fair market value of the common stock on the date of purchase. Nocompensation expense is recorded in connection with the Purchase Plan. During2000, 15,544 shares were issued to employees at a weighted average price of$10.16 per share. At December 31, 2000, there were 254,186 shares available foroffering under this Purchase Plan. d. Stock Bonus Plan During 1997, the Company adopted its Stock Bonus Plan (the "BonusPlan"). Under the terms of the Bonus Plan, common stock may be granted toemployees under terms and conditions as determined by the Board of Directors.During 2000, 1,760 shares were issued to employees at a weighted average priceof $15.91. At December 31, 2000 there were 478,640 shares available for offeringunder this Bonus Plan.12. STOCKHOLDERS' RIGHTS PLAN On November 7, 1995, the Board of Directors adopted a StockholderRights Plan (the "Rights Plan"). The Rights Plan is designed to deter coerciveor unfair takeover tactics, to prevent a person or group from gaining control ofthe Company without offering fair value to all shareholders and to deter otherabusive takeover tactics, which are not in the best interest of stockholders. Under the terms of the Rights Plan, each share of common stock isaccompanied by one right; each right entitles the stockholder to purchase fromthe Company, one one-thousandth of a newly issued share of Series A PreferredStock at an exercise price of $120. The rights become exercisable ten days after a public announcement thatan acquiring person or group (as defined in the Plan) has acquired 20% or moreof the outstanding Common Stock of the Company (the Stock Acquisition Date) orten days after the commencement of a tender offer which would result in a personowning 20% or more of such shares. The Company can redeem the rights for $.01per right at any time until ten days following the Stock Acquisition Date (the10-day period can be shortened or lengthened by the Company). The rights willexpire in November 2005, unless redeemed earlier by the Company. If, subsequent to the rights becoming exercisable, the Company isacquired in a merger or other business combination at any time when there is a20% or more holder, the rights will then entitle a holder to buy shares of theAcquiring Company with a market value equal to twice the exercise price of eachright. 42 43Alternatively, if a 20% holder acquires the Company by means of a merger inwhich the Company and its stock survives, or if any person acquires 20% or moreof the Company's Common Stock, each right not owned by a 20% or moreshareholder, would become exercisable for Common Stock of the Company (or, incertain circumstances, other consideration) having a market value equal to twicethe exercise price of the right.13. EMPLOYEE 401(k) SAVINGS PLAN Substantially all of the Company's employees are eligible toparticipate in a voluntary 401(k) Savings Plan, which provides for the Companyto match a percentage of each employee's contributions under various formulas.The Company's matching contribution and related expense for the plan wasapproximately $1.5 million, $1.4 million and $1.0 million for the years endedDecember 31, 2000, 1999 and 1998, respectively.14. SUPPLEMENTAL CASH FLOW INFORMATION DECEMBER 31, ------------(In thousands) 2000 1999 1998-------------- ---- ---- ---- Cash paid during the period for: Interest $ 19,694 $ 13,954 $ 12,168 Income taxes 18,064 20,319 17,018 -------- -------- --------Acquisitions, net of cash acquired: Fair value of assets acquired -- 23,698 56,300 Liabilities assumed -- (11,285) (33,781) Preferred stock issued -- -- (13,004) -------- -------- --------Net cash used in acquisitions $ -- $(12,413) $ (9,515) ======== ======== ========15. INCOME TAXESa. Provisions for Income Taxes The consolidated income tax provision for 2000, 1999 and 1998 consistsof the following components (in thousands): 2000 1999 1998 ---- ---- ---- Current: Federal $ 3,196 $ 28,769 $ 6,024 State 1,396 4,069 2,814Deferred (8,906) (6,947) 6,388 -------- -------- --------Total consolidated provision (benefit) $ (4,314) $ 25,891 $ 15,226 ======== ======== ======== The Company's effective tax rates were 39.0%, 40.0% and 39.6% of pre-taxincome for 2000, 1999 and 1998, respectively, and differed from the U.S. FederalStatutory rate of 35% due primarily to State taxes. b. Deferred Taxes Deferred income taxes are primarily due to temporary differencesbetween financial and income tax reporting for the depreciation of property,plant and equipment and equipment under lease, the recognition of payments madein connection with the acquisition of RoadRailer technology (and theamortization thereof), the recognition of income from assets under financeleases and charges the Company recorded in 2000 related to the restructuring ofcertain international and domestic operations. The long-term deferred tax liabilities were $23.6 million and $30.6million and current prepaid income tax assets were $9.2 million and $7.3 millionas of December 31, 2000 and 1999, respectively. The components of deferred tax assets and deferred tax liabilities asof December 31, 2000 and 1999 were as follows (in thousands): 43 44 2000 1999 ---- ---- Deferred tax assets: Rentals on Finance Leases $18,651 $15,545 Leasing Difference 7,912 6,060 Operations Restructuring 18,194 -- Other 12,481 16,808Deferred tax liabilities: Book-Tax Basis Differences-Property, Plant and Equipment 48,158 41,433 Earned Finance Charges on Finance Leases 9,241 9,273 RoadRailer Acquisition Payments/Amortization 1,387 1,522 Other 12,893 9,532 ------- -------Net deferred tax liability $14,441 $23,347 ======= =======16. COMMITMENTS AND CONTINGENCIES a. Litigation Various lawsuits, claims and proceedings have been or may be institutedor asserted against the Company arising in the ordinary course of business,including those pertaining to product liability, labor and health relatedmatters, successor liability, environmental and possible tax assessments. Whilethe amounts claimed could be substantial, the ultimate liability cannot now bedetermined because of the considerable uncertainties that exist. Therefore, itis possible that results of operations or liquidity in a particular period couldbe materially affected by certain contingencies. However, based on factscurrently available, management believes that the disposition of matters thatare pending or asserted will not have a material adverse effect on the Company'sfinancial position or its annual results of operations. From January 22, 1999 through February 24, 1999, five purported classaction complaints were filed against the Company and certain of its officers inthe United States District Court for the Northern District of Indiana. Thecomplaints purported to be brought on behalf of a class of investors whopurchased the Company's common stock between April 20, 1998 and January 15,1999. The complaints alleged that the Company violated Section 10(b) of theSecurities Exchange Act of 1934 and Rule 10b-5 promulgated under the Act bydisseminating false and misleading financial statements and reports respectingthe first three quarters of the Company's fiscal year 1998. The complaintssought unspecified compensatory damages and attorney's fees, as well as otherrelief. In addition, on March 23, 1999, another purported class action lawsuitwas also filed in the United States District Court for the Northern District ofIndiana, naming the Company, its directors and the underwriters of the Company'sApril 1998 public offering. That complaint alleged that the Company and theindividual defendants violated Section 11 of the Securities Act of 1933, andthat the Company, the individual defendants as "controlling persons" of theCompany, and the underwriters are liable under Section 12 of that Act, by makinguntrue statements of material fact in and omitting material facts from theprospectus used in that offering. The complaint sought unspecified compensatorydamages and attorney's fees, as well as other relief. Both the SecuritiesExchange Act complaints and the Securities Act complaint arise out of therestatement of the Company's financial statements for the first three quartersof 1998. At a hearing on May 10, 1999 and in an order entered on June 22, 1999,Judge Allen Sharp consolidated the six pending cases under the caption In reWabash National Corporation Securities Litigation, No. 4:99CV0003AS andestablished a schedule for further proceedings. Pursuant to the order, selectedlead plaintiffs filed a Consolidated Class Action Complaint on July 6, 1999. Theconsolidated complaint repeats the claims made in the original complaintsrespecting the restatement and also alleges that the loss contingency forcertain excise taxes, which Wabash disclosed on January 19, 1999, should havebeen recorded earlier. The Company's motion to dismiss the consolidatedcomplaint was denied by the Court in February 2000. The Court subsequently denied plaintiff's motion to certify the case asa class action and fixed April 30, 2001 as the deadline for submission ofsummary judgment motions. Discovery proceedings are expected to end on March 31,2001. On March 29, 2001, all plaintiffs voluntarily withdrew their claimsarising under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934(the "1934 Act Claims"), when a Stipulation of Dismissal with Prejudice wasfiled with the Court. As a result of that dismissal, the only claims remainingin the case are those brought by purchasers of shares in the Company's publicoffering on April 23, 1998 (i.e., claims arising under Sections 11 and 12 of theSecurities Act of 1933). The dismissal of the 1934 Act Claims both decreases thenumber of persons who might be potential claimants against the Company and theindividual defendants and effectively eliminates from the case issues arisingfrom the financial statements prepared for the second and third quarters of1998. The Company believes the allegations in the consolidated complaint arewithout merit, and intends to defend itself and its directors and officersvigorously. The Company believes the resolution of the lawsuit 44 45(as to which the Company is self-insured), including any Company indemnificationobligations to its officers and directors and to the underwriters of its April1998 public offering, will not have a material adverse effect on its financialposition or future results of operations; however, at this early stage of theproceedings, no assurance can be given as to the ultimate outcome of the case. b. Environmental The Company generates and handles certain material, wastes andemissions in the normal course of operations that are subject to various andevolving Federal, state and local environmental laws and regulations. The Company assesses its environmental liabilities on an on-going basisby evaluating currently available facts, existing technology, presently enactedlaws and regulations as well as experience in past treatment and remediationefforts. Based on these evaluations, the Company estimates a lower and upperrange for the treatment and remediation efforts and recognizes a liability forsuch probable costs based on the information available at the time. As ofDecember 31, 2000, the estimated potential exposure for such costs ranges fromapproximately $0.5 million to approximately $1.7 million, for which the Companyhas a reserve of approximately $0.9 million. As of December 31, 1999, theestimated potential exposure for such costs ranged from $1.5 million toapproximately $2.7 million for which the Company had a reserve of approximately$1.0 million. The reduction in the reserve during 2000 reflects payments madeduring the period and a $0.8 million change in estimate resulting fromexperience and the availability of additional information. These reserves wereprimarily recorded for exposures associated with the costs of environmentalremediation projects to address soil and ground water contamination as well asthe costs of removing underground storage tanks at its branch service locations.The possible recovery of insurance proceeds has not been considered in theCompany's estimated contingent environmental costs. Future information and developments will require the Company tocontinually reassess the expected impact of these environmental matters.However, the Company has evaluated its total environmental exposure based oncurrently available data and believes that compliance with all applicable lawsand regulations will not have a materially adverse effect on the consolidatedfinancial position of the Company. c. Used Trailer Restoration Program During 1999, the Company reached a settlement with the Internal RevenueService related to federal excise tax on certain used trailers restored by theCompany during 1996 and 1997. The Company has continued the restoration programwith the same customer since 1997. The customer has indemnified the Company forany potential excise tax assessed by the IRS for years subsequent to 1997. As aresult, the Company has recorded a liability and a corresponding receivable ofapproximately $7.9 million and $5.2 million in the accompanying ConsolidatedBalance Sheets at December 31, 2000 and 1999, respectively. d. Letters of Credit As of December 31, 2000, the Company had standby letters of credittotaling $16.7 million issued in connection with certain foreign salestransactions and other domestic purposes. Of this total, $14.8 million issecured by the revolving bank line of credit while the remaining $1.9 million isunsecured. e. Royalty Payments Beginning in the first quarter of 1998 and extending through 2007, theCompany is obligated to make quarterly royalty payments in accordance with alicensing agreement related to the development of the Company's composite platematerial used on its proprietary DuraPlate trailer. The amount of the paymentsvaries with the production volume of usable material, but requires minimumroyalties of $0.5 million annually through 2005. 45 46 f. Used Trailer Residual Guarantees and Purchase Commitments In connection with certain new trailer sale transactions, the Companyhas entered into residual value guarantees and purchase option agreements withcustomers or financing institutions whereby the Company agrees to guarantee anend-of-term residual value or has an option to purchase the used equipment at apre-determined price. Under these guarantees, future payments which may berequired as of December 31, 2000 and 1999 totaled approximately $37.5 millionand $31.0 million, respectively, the majority of which do not come due untilafter 2002.17. CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited quarterly results ofoperations for fiscal years 2000, 1999 and 1998 (Dollars in thousands except pershare amounts). First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- 2000 Net Sales $ 352,848 $ 358,729 $ 345,818 $ 274,777 Gross profit 34,423 34,045 29,512 17,987 Net income (loss) 9,132 7,515 4,992 (28,375)(2) Basic earnings (loss) per share(1) $ 0.38 $ 0.31 $ 0.20 $ (1.25) Diluted earnings (loss) per share(1) $ 0.38 $ 0.31 $ 0.20 $ (1.25)1999 Net Sales $ 341,624 $ 380,203 $ 374,708 $ 358,035 Gross profit 27,225 34,099 35,039 35,354 Net income 6,367 10,347 10,365 11,762 Basic earnings per share(1) $ 0.26 $ 0.42 $ 0.43 $ 0.49 Diluted earnings per share(1) $ 0.26 $ 0.42 $ 0.43 $ 0.491998 Net Sales $ 293,612 $ 337,733 $ 334,113 $ 326,801 Gross profit 25,888 24,038 27,634 21,731 Net income 6,958 6,203 7,909 2,201 Basic earnings per share(1) $ 0.34 $ 0.27 $ 0.33 $ 0.08 Diluted earnings per share(1) $ 0.33 $ 0.27 $ 0.33 $ 0.08 (1) Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share may differ from annual earnings per share due to rounding. (2) The fourth quarter 2000 results include restructuring and other related charges of $46.6 million ($28.5 million, net of tax.)18. SUBSEQUENT EVENT On January 10, 2001, the Company acquired the Breadner Group ofCompanies (the Breadner Group), headquartered in Kitchener, Ontario, Canada. TheBreadner Group has ten branch locations in six Canadian Provinces and is theleading Canadian distributor of new trailers and is a provider of new trailerservices and aftermarket parts. The Breadner Group had revenues of approximately$135 million (US Dollars) in its fiscal year ended September 30, 2000 andemploys approximately 130 associates. Aggregate consideration for this transaction included approximately$6.5 million in cash, and $10.5 million in long-term notes and the assumption ofcertain indebtedness. This transaction will be accounted for as a purchase withthe excess purchase price above the net assets acquired being recorded asgoodwill. 46 47ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.PART IIIITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following are the executive officers and key employees of the Company: NAME AGE POSITION Donald J. Ehrlich (1)........... 63 President, Chief Executive Officer and Chairman of the BoardDean A. Cervenka............. 43 Vice President -- SalesRick B. Davis.................. 33 Corporate ControllerRichard E. Dessimoz.......... 53 Vice President and DirectorCharles R. Ehrlich............. 56 Vice President -- ManufacturingRodney P. Ehrlich............. 54 Vice President -- EngineeringCharles E. Fish................. 46 Vice President -- Human RelationsLawrence J. Gross............. 46 Vice President -- MarketingMark R. Holden (1)............. 41 Vice President -- Chief Financial Officer and DirectorThomas L. Kassouf............ 48 Vice President -- Chief Operating OfficerKarl D. Kintzele................ 50 Director of Internal AuditConnie L. Koleszar............ 42 Director of Investor RelationsWilfred E. Lewallen........... 56 Vice President -- Industrial EngineeringDerek L. Nagle................. 50 Vice President and President of Fruehauf Trailer Services, Inc.Stanley E. Sutton............... 50 Vice President -- Purchasing (1) Member of the Executive Committee of the Board of Directors. Donald J. Ehrlich. Mr. Donald J. Ehrlich has been President, ChiefExecutive Officer and Director of the Company since its founding. In May 1995,Mr. Ehrlich was elected Chairman of the Board. He also serves as a director ofDanaher Corporation and Indiana Secondary Market Corporation. Dean A. Cervenka. Mr. Cervenka has been Vice President--Sales sinceJanuary 1997. Previously, Mr. Cervenka had been a Regional Sales Director forthe Company. Prior to his employment by the Company in April 1996, he wasemployed by Caterpillar, Inc. in various engineering and marketing positions. Rick B. Davis. Mr. Davis has been Corporate Controller of the Companysince May 1998. Previously, Mr. Davis was Controller of the Company since June1995. Prior to his employment by the Company, he was employed by Cummins EngineCompany, Inc. since 1994 and Arthur Andersen LLP since 1989. Richard E. Dessimoz. Mr. Dessimoz has been Vice President and ChiefExecutive Officer of Wabash National Finance Corporation since its inception inDecember 1991 and a Director of the Corporation since December 1995. Charles R. Ehrlich. Mr. Charles Ehrlich has been VicePresident--Manufacturing of the Company and has been in charge of the Company'smanufacturing operations since the Company's founding. Rodney P. Ehrlich. Mr. Rodney Ehrlich has been VicePresident--Engineering of the Company and has been in charge of the Company'sengineering operations since the Company's founding. Charles E. Fish. Mr. Fish is Vice President--Human Relations of theCompany and has been in charge of the Company's human relations operations sincethe Company's founding. 47 48 Lawrence J. Gross. Mr. Gross has been Vice President--Marketing of theCompany since December 1994. Previously he had been President of the Company'sRoadRailer division since joining the Company in July 1991. Prior to hisemployment by the Company, he was employed since 1985 by Chamberlain ofConnecticut, Inc., a licensor of bimodal technology, as VicePresident--Marketing until 1990 and as President until he began his employmentwith the Company. Mark R. Holden. Mr. Holden has been Vice President--Chief FinancialOfficer and Director of the Company since May 1995. Previously, Mr. Holden hadbeen Vice President--Controller of the Company. Prior to his employment by theCompany in December 1992, he was employed by Arthur Andersen LLP since 1981. Thomas L. Kassouf. Mr. Kassouf has been Vice President--Chief OperatingOfficer for the Company since January 2001. Prior to his employment by theCompany, he was Vice President and General Manager for Kohler Company forapproximately one year and was employed by United Technologies Corporation invarious capacities for approximately 22 years. Karl D. Kintzele. Mr. Kintzele has been Director of Internal Auditsince joining the Company in September, 1999. Prior to his employment by theCompany, he was employed by Teledyne, Inc. since 1979. Connie L. Koleszar. Ms. Koleszar has been Director of InvestorRelations since the Company's initial public offering in 1991 and has beenemployed by the Company in various administrative capacities since its founding. Wilfred E. Lewallen. Mr. Lewallen is Vice President--IndustrialEngineering of the Company and has been in charge of the Company's industrialengineering operations since the Company's founding. Derek L. Nagle. Mr. Nagle has been Vice President of the Company andPresident of Fruehauf Trailer Services, Inc. since the Company's acquisition ofcertain Fruehauf assets in April 1997. Prior to his employment by the Company,he was employed since 1970 at Fruehauf Trailer Corporation, where he heldvarious senior executive positions. Fruehauf Trailer Corporation filed forbankruptcy protection in October 1996. Stanley E. Sutton. Mr. Sutton has been Vice President--Purchasing ofthe Company since joining the Company in May 1992. Prior to his employment bythe Company, he was employed since 1973 by Pines Trailer Limited Partnership asVice President--Manufacturing Operations. Officers are elected for a term of one year and serve at the discretionof the Board of Directors. The Company hereby incorporates by reference the information containedunder the heading "Election of Directors" from its definitive Proxy Statement tobe delivered to stockholders of the Company in connection with the 2001 AnnualMeeting of Stockholders to be held May 15, 2001. Donald J. Ehrlich, President, Chief Executive Officer and Chairman, andCharles R. Ehrlich and Rodney P. Ehrlich, executive officers of the Company, arebrothers. Dean A. Cervenka and Connie L. Koleszar, executive officers of theCompany, are brother and sister.ITEM 11 -- EXECUTIVE COMPENSATION The Company hereby incorporates by reference the information containedunder the heading "Compensation" from its definitive Proxy Statement to bedelivered to the stockholders of the Company in connection with the 2001 AnnualMeeting of Stockholders to be held May 15, 2001.ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company hereby incorporates by reference the information containedunder the heading "Beneficial Ownership of Common Stock" from its definitiveProxy Statement to be delivered to the stockholders of the Company in connectionwith the 2001 Annual Meeting of Stockholders to be held on May 15, 2001. 48 49ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company hereby incorporates by reference the information containedunder the heading "Compensation Committee Interlocks and Insider Participant"from its definitive Proxy Statement to be delivered to the stockholders of theCompany in connection with the 2001 Annual Meeting of Stockholders to be held onMay 15, 2001.PART IVITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K(a) Financial Statements: The Company has included all required financial statements in Item 8 of this Form 10-K. The financial statement schedules have been omitted as they are not applicable or the required information is included in the Notes to the consolidated financial statements. The 2000 financial statements of Europaische Trailerzug Beteiligungsgessellschaft mBH (ETZ) which are required to be included in this report pursuant to Rule 3-09 of Regulation S-X, will be included in an amendment to this report to be filed within 90 days of the date of this Form 10-K.(b) Reports on Form 8-K: No reports on Form 8-K were filed during the fourth quarter of 2000.(c) Exhibits: The following exhibits are filed with this Form 10-K or incorporated herein by reference to the document set forth next to the exhibit listed below:2.01 Purchase Agreement dated March 31, 1997, as amended (Incorporated by reference from Exhibit 2.01 to Registrant's Form 8-K filed in May 1, 1997)3.01 Certificate of Incorporation of the Company (1)3.02 Certificate of Designations of Series A Junior Participating Preferred Stock (1)3.03 By-laws of the Company (1)3.04 Certificate of Designations of Series B 6% Cumulative Convertible Exchangeable Preferred Stock (5)3.05 Certificate of Designations of Series C 5.5% Convertible Exchangeable Preferred Stock (8)4.01 Specimen Stock Certificate (1)4.02 First Amendment to Shareholder Rights Agreement dated October 21, 1998 (9)4.03 Form of Indenture for the Company's 6% Convertible Subordinated Debentures due 2007 (5)4.04 Second Amendment to Shareholder Rights Agreement dated December 18, 2000 (13)10.01 Loan Agreement, Mortgage, Security Agreement and Financing Statement between Wabash National Corporation and City of Lafayette dated as of August 15, 1989(1)10.02 1992 Stock Option Plan (1)10.03 Real Estate Sale Agreement by and between Kraft General Foods, Inc. and Wabash National Corporation, dated June 1, 1994 (2)10.04 6.41% Series A Senior Note Purchase Agreement dated January 31, 1996, between certain Purchasers and Wabash National Corporation (3)10.05 Master Loan and Security Agreement in the amount of $10 million by Wabash National Finance Corporation in favor of Fleet Capital Corporation dated December 27, 1995 (3)10.06 First Amendment to the 6.41% Series A Senior Note Purchase Agreement dated January 31, 1996 between certain Purchasers and Wabash National Corporation (4)10.07 Series B-H Senior Note Purchase Agreement dated December 18, 1996 between certain Purchasers and Wabash National Corporation (4)10.08 Revolving Credit Loan Agreement dated September 30, 1997, between NBD Bank, N.A. and Wabash National Corporation (6)10.09 Investment Agreement and Shareholders Agreement dated November 4, 1997, between ETZ (Europaische Trailerzug Beteiligungsgesellschaft mbH) and Wabash National Corporation (6)10.10 Receivable Sales Agreement between the Company and Wabash Funding Corporation and the Receivables Purchase Agreement between Wabash Funding Corporation and Falcon Asset Securitization Corporation (7)10.11 Indemnification Agreement between the Company and Roadway Express, Inc. (10) 49 5010.12 364-day Credit Agreement dated June 22, 2000, between Bank One, Indiana, N.A., as administrative agent and Wabash National Corporation (11)10.13 Series I Senior Note Purchase Agreement dated September 29, 2000, between Prudential Insurance Company and Wabash National Corporation (12)10.14 Share Transfer Agreement dated December 12, 2000, between Bayerische Kapitalbeteiligungsgesellschaft mBH and Wabash National Corporation (15)10.15 Participation Agreement and Equipment Lease between Apex Trailer Leasing & Rentals L.P. as Lessee and Wabash Statutory Trust as Lessor dated December 29, 2000 (15)21.00 List of Significant Subsidiaries (15)23.01 Consent of Arthur Andersen LLP (15)99.01 Press Release, dated January 18, 2001 (14) (1) Incorporated by reference to the Registrant's Registration Statement on Form S-1 (No. 33-42810) or the Registrant's Registration Statement on Form 8-A filed December 6, 1995 (item 3.02 and 4.02) (2) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 1994. (3) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1995 (4) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1996 (5) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended March 31, 1997 (6) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1997 (7) Incorporated by reference to the Registrant's Form 8-K filed on April 14, 1998 (8) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1998 (9) Incorporated by reference to the Registrant's Form 8-K filed on October 26, 1998 (10) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1999 (11) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 2000 (12) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 2000 (13) Incorporated by reference to the Registrant's Amended Form 8-A filed January 18, 2001 (14) Incorporated by reference to the Registrant's Form 8-K filed on January 30, 2001 (15) Filed herewithThe Registrant undertakes to provide to each shareholder requesting the same acopy of each Exhibit referred to herein upon payment of a reasonable fee limitedto the Registrant's reasonable expenses in furnishing such Exhibit. 50 51 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ONITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. WABASH NATIONAL CORPORATIONMarch 29, 2001 By: /s/ Rick B. Davis -------------------------- Rick B. Davis Corporate Controller (Principal Accounting Officer) and Duly Authorized Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THEREGISTRANT IN THE CAPACITIES AND ON THE DATED INDICATED. DATE SIGNATURE AND TITLEMarch 29, 2001 By: /s/ Donald J. Ehrlich ------------------------------------ Donald J. Ehrlich Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer)March 29, 2001 By: /s/ Mark R. Holden ------------------------------------ Mark R. Holden Vice President -- Chief Financial Officer and DirectorMarch 29, 2001 By: /s/ Richard E. Dessimoz ------------------------------------ Richard E. Dessimoz Vice President and DirectorMarch 29, 2001 By: /s/ John T. Hackett ------------------------------------ John T. Hackett DirectorMarch 29, 2001 By: /s/ E. Hunter Harrison ------------------------------------ E. Hunter Harrison DirectorMarch 29, 2001 By: /s/ Ludvik F. Koci ------------------------------------ Ludvik F. Koci Director 51 1 Exhibit 10.14URNr. 3042 / K / 2000 ------------------Today on this twelfth day of December 2000 - 12.12.2000 -there appeared before me, Dr. Dieter Karlnotary public in Munich, at the offices of BayerischeKapitalbeteiligungsgesellschaft mbH, where I have come at the request of theappearing persons:1. Richard H. Snodgress, businessman, business address: 1000 Sagamore Parkway South, Lafayette, Indiana 47905, USAacting not on his own behalf but under power of attorney attached hereto onbehalf of WABASH NATIONAL CORPORATION, 1000 Sagamore Parkway South, Lafayette,Indiana 47905, U.S.A. (the "PURCHASER")and2. a. Eike Lehmann, businessman, business address: Promenadeplatz 1, D-80333 Munich and b. Dr. Werner Stockner businessman, business address: ibid.The persons appearing at ad. 2.a. and b. are not acting on their own behalf butin their capacity as managing director and fully authorized officer (Prokurist)of BAYERISCHE KAPITALBETEILIGUNGSGESELLSCHAFT MBH, with its seat in Munich andits business address at Promenadeplatz 1, 80333 Munich, Germany (the "SELLER")The Purchaser and the Seller are referred to herein as the "PARTIES".The appearing person identified themselves by official identity cards.Upon request by the notary, the appearing persons declared that the undersignednotary has not acted on behalf of the parties outside his official duties as anotary.The notary has verified that the appearing persons are in sufficient command ofthe English language to proceed with the notarization in English.At the request of the appearing persons, I record in accordance with thedeclarations the following 2 SHARE TRANSFER AGREEMENT (the "AGREEMENT"):WHEREAS1 ETZ Europaische Trailerzug Beteiligungsgesellschaft mbH (the "Company") is a company with limited liability under German law, with its registered seat in Munich, Germany, registered under the registration number HRB 106942 at the Commercial Register Munich with a fully paid up share capital of DM 17,357,000 (in words: German Mark seventeen million threehundred-fiftyseventhousand).2 The Purchaser is a corporation under the laws of Delaware, with its registered seat in Lafayette, Indiana, U.S.A., and currently owning 25.1% of the shares (Geschaftsanteile) in the Company.3 The Seller is a company with limited liability under German law, with its registered seat in Munich, Germany, registered under the registration number HRB 41723 at the Commercial Register Munich and currently owning shares in the total nominal amount of DM 13,000,000 equaling 74.9% of the nominal share capital in the Company.4 The Seller, as an investment company, is currently restructuring its portfolios. With regard to this process , the Seller wishes to dispose of the shares in the Company. The Seller wishes to sell to the Purchaser, and the Purchaser wishes to buy from the Seller all of the Shares in the Company currently held by the Seller under the terms and conditions set forth in this Agreement therewith acquiring 100% of the shares in the Company.5 The Seller is interested in and the Purchaser is willing to ensure a continuation of the business of the Company and its subsidiary, BTZ Bayerische Trailerzug Gesellschaft fur bimodalen Guterverkehr mbH ("BTZ"), including the preservation of existing jobs and of the principal place of business in the Free State of Bavaria.It is agreed as follows: ARTICLE I SALE AND PURCHASE OF SHARES1 The Seller owns shares in the aggregate nominal amount of DM 13,000,000 representing approx. 74.9% of the share-quotas in the Company (the "Shares").2 Under the terms and conditions of this Agreement, the Seller hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to buy from the Seller all of the Shares of the Seller in the Company in the aggregate nominal amount of DM 13,000,000.- and constituting approx. 74.9% in the nominal share capital of the Company.3 Subject to the fulfilment of the Conditions Precedent set out in Article IV hereof, the Seller hereby assigns the Shares to the Purchaser and the Purchaser hereby accepts such assignment.4 The Shares sold and assigned pursuant to subsection 2 and 3 above are sold and assigned with economic effect from 1 January 2001 with all rights attaching thereto, including, without limitation, the right to receive dividends, if any, for the fiscal year starting on 1 January 2000. 3 ARTICLE II PURCHASE PRICE1 The Purchase Price for the Shares in the Company is DEM 1 (in words: German Mark one).2 The Purchase Price shall be due and payable upon Closing to the Seller in cash.3 In the cases described in Article IX paras. 2 and 3, an additional purchase price shall apply. ARTICLE III EFFECTIVE DATE1 The ownership in the Shares is deemed to be transferred to the Purchaser with effect as of 1 January 2001 (the "Effective Date"). On Effective Date all rights related to the Shares shall accrue with the Purchaser.2 The Purchaser shall be entitled to receive the entire dividends of the Company, if any, for the business year 2000, which started on 1 January 2000. ARTICLE IV CONDITIONS PRECEDENTThe validity of this Agreement is subject to the fulfillment of the followingconditions, in respect of which each of the Parties shall make all reasonableefforts to procure that they are fulfilled as soon as possible after signing ofthis Agreement:1 Approval resolution by the general assembly of the Company on the transfer of the Shares to the Purchaser pursuant to Section 11 of the articles of association of the Company;2 Seller shall make, subject to paras 1 above and 3 below, a non-redeemable shareholder equity contribution to the Company in the amount of DM 7,500,000 (in words: German Marks seven million fivehundredthousand) less the amount withheld, if any, by the Seller in accordance with Article VIII below;3 Purchaser shall make a non-redeemable shareholder equity contribution to the Company in the amount of DM 2,500,000.-. (in words : German Marks two million fivehundredthousand), including an amount of DM 1,000,000. -- paid to the Company by the Purchaser in November 2000. 4In the event that (i) any of the conditions precedent, as set forth under thisArticle IV, has not been met by January 31, 2001, provided that the period hadnot been extended by mutual consent, either Party may terminate this Agreementupon written notice to the other Party, except that the Party whichunjustifiably prevents a condition precedent under this Article IV from beingmet, shall not have such right of termination. For the avoidance of doubt:nothing in paras. 2 and 3 above shall be construed to give the Company a directclaim for payment; rather, payment to the Company can only be requested by theparties hereto. Any claim for payment is subject to the condition that no priorfiling for insolvency proceedings has been made with regard to the Company. ARTICLE V CLOSING1 Closing shall take place no later than five business days following the fulfillment of all of the conditions precedent set forth under Article IV (the "Closing Date") at the registered seat of the Company or any other place mutually agreed upon by the Parties.2 On Closing Date the Seller shall provide the Purchaser with (i) a copy of the shareholder approval resolution described under Article IV Clause 1 and (ii) written confirmation, acceptable to the Purchaser in form and substance, evidencing payment of the non-redeemable shareholder equity contribution by the Seller to the Company as set out under Article IV Clause 2.3 On Closing Date the Purchaser shall (i), against receipt of the documents set out under Clause 2, pay to the Seller the Purchase Price and (ii) provide the Seller with written confirmation, acceptable to the Seller in form and substance, evidencing payment of the non-redeemable shareholder equity contribution by the Seller to the Company as set out under Article II Clause 2.4 On Closing Date, or any other date mutually agreed upon by the Parties, the Parties shall execute a closing confirmation as set forth in Annex ./1 (the "Closing Confirmation"). For the avoidance of doubt: the transfer of the shares shall become effective upon satisfaction of the conditions set forth in Article IV above and the Closing Confirmation shall be of confirmatory nature only. ARTICLE VI REPRESENTATIONS AND WARRANTIES1 Representations and Warranties of the Seller: The Seller represents and warrants by means of an independent guaranty undertaking ("selbstandiges Garantieversprechen") the following as of the date of the signing of this Agreement and as of the Closing Date: 1.1 The Company is a company with limited liability duly organized, registered, and validly existing under the laws of the Republic of Germany. The Purchaser is aware that the current financial situation of the Company may give rise to the need for filings under the German Insolvency Code. 5 1.2 The Seller is the owner of the Shares in the aggregate nominal amount of DM 13,000,000, constituting approx. 74.9% of the Shares in the Company and has good and valid title to the Shares, free and clear of liens, encumbrances, options and of other charges and claims of third parties. 1.3 The Seller has all requisite power and authority to execute this Agreement and to perform his obligations hereunder. This Agreement has been duly authorized, executed and delivered by Seller, and constitutes (assuming due authorization, execution and delivery by the Purchaser) a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms. 1.4 The Shares are fully paid up or contributed in kind, and no payments violating German law have been made to the Seller. 1.5 The Shares have been validly created, the capital contributions pertaining to such Shares have been fully paid in, no portion of the capital thereof has been returned or otherwise flowed back to the Seller and there have been no transactions of whatsoever nature between Seller and Company which may result in liabilities that pass from the Seller to the Purchaser by virtue of the transfer of the Shares. 1.6 There are no undisclosed facts with regard to the Company and BTZ known to the Seller of which the non-disclosure would give rise to claims of the Purchaser against the Seller for rescission on the grounds of fraud ("arglistige Tauschung") in the sense of (Section 123 of the German Civil Code (BGB).2 Representations and Warranties of the Purchaser: The Purchaser represents and warrants the following as of the date of signing of this Agreement: 2.1 The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Delaware. 2.2 The Purchaser has all requisite power and authority to execute this Agreement and to perform its obligation thereunder. ARTICLE VII INDEMNIFICATIONS1 The Seller and the Purchaser shall not be liable for any liabilities or damages resulting from any circumstances with respect to the Company or any of its subsidiaries which have occurred prior to Closing Date and Seller and Purchaser herewith expressly waive their rights to any remedy, whatsoever, with respect to such liabilities or damages.2 The Purchaser expressly waives its rights to any remedy, whatsoever, with respect to damages from any impairment in value of the Company and its subsidiaries as a result of this transaction.3 The Seller shall be liable to the Purchaser for, and shall indemnify and hold harmless the Purchaser, its agents and advisors, as the case may be, of any and all liabilities and damages incurred due to, or resulting from any incorrectness of any representation and warranty explicitly made hereunder. Any other claims by the Purchaser against the Seller (including but not limited to claims for rescission, reduction of purchase price - "Wandelung/Minderung" - or under the legal concepts of culpa in contrahendo or positive Vertragsverletzung) shall be expressly excluded to the extent permitted by law (it being understood that liability for fraud - "arglistige Tauschung" - cannot be excluded as a matter of mandatory German law). Any liability of the Purchaser shall be subject to a statute of limitation ("Verjahrungsfrist") of three years. ARTICLE VIII RELEASE OF COLLATERAL 61. The Seller has granted an absolute guarantee to Deutsche Bank AG Munich in a maximum amount of DM 2,000,000.-- dated April 1, 1997 as collateral for any and all obligations of BTZ to Deutsche Bank AG (the "GUARANTEE").2. The Purchaser shall use its best efforts to effect a release of the Guarantee from Deutsche Bank AG by no later than December 31, 2000. Until such time as a release shall have been effected, the Seller shall be entitled to withhold the amount of DM 2,000,000.-- from the shareholder equity contribution of DM 7,500,000.-- otherwise payable under Article IV para. 2. At such time as the release is effected, the Seller shall immediately release the withheld amount of DM 2,000,000. -- to the Company. ARTICLE IX CONTINUATION OF THE BUSINESS1 The Purchaser intends to ensure, through additional financing and other support or through a sale to a third party willing to provide such additional financing and support, that the business of the Company and of BTZ shall be continued as a going concern.2. Should the Company or BTZ on or before May 31, 2001 become subject to insolvency proceedings (including dismissal of insolvency petitions for lack of assets) or cease to do business as a going concern, (each an "Event of Default"), the purchase price payable to the Seller shall be increased. The amount of the increase shall equal the amounts of (i) any non-redeemable equity contributions made by the Seller to the Company after the date hereof and (ii) any payments made by the Seller to Deutsche Bank AG as described in Article VIII above up to the following maximum: In case the Event of Default occurs on or before March 31, 2001, the maximum shall be DM 7,500,000.--; if the Event of Default occurs on or before April 30, 2001 but after March 31, 2001, the maximum shall be DM 5,000,000.-; and if the Event of Default occurs on or before May 31, 2001 but after April 30, 2001, the maximum shall be DM 2,500,000.-. The additional purchase price shall be due and payable within five banking days (i.e. days on which banks are open in both Indiana and Bavaria) after the Seller has notified the Purchaser in writing of the Event of Default.3. Should the Purchaser resell the Shares to a third party on or before June 30, 2001 or on the basis of a Final Offer (as defined below) made on or before June 30, 2001 or exchange them into shares of another entity or other consideration (each a "Resale"), an additional purchase price equaling 50% (in the case of a Final Offer made on or before March 31, 2001) or 25% (in the case of a Final Offer made after March 31, 2001) of the Value Increase, as defined below, shall be due and payable simultaneously with payment of the purchase price by the third party to the Purchaser. The term "Value Increase" shall refer to (i) 74,9% of the purchase price (and / or of the fair market value of other consideration received) received upon Resale less (ii) 74.9% of all non-refundable cash contributions to the equity of the Company to be made by the Purchaser after the date hereof but excluding the amount of DM 2,500,000.-- referred to in Article IV para. 2 above. The term "Final Offer" shall refer to any offer by the respective acquirer received by the M&A Advisors engaged for reselling the Company or directly by Wabash National Corporation or any of its affiliates or made to the respective acquirer by or on behalf of the Purchaser for a Resale subject only to certain contingencies as specified therein (including, without limitation, execution of final and legally binding contracts)provided that an offer which lacks essential features of so-called "binding offers" customarily received by investment banks or M&A advisers in limited auction proceedings does not constitute a Final Offer for purposes of the above. 7 ARTICLE X COSTS, STAMP DUTIES AND TAXES1 All costs resulting from negotiation and drafting of this Agreement, including but not limited to, legal fees, shall be borne by such Party where they occurred and shall not be reimbursable by the other Party or the Company.2 Transfer taxes, stamp duties and fees, if applicable, notarial fees and registration fees in connection with this Agreement, including notarial deeds, will be borne by the Purchaser. ARTICLE XI GENERAL PROVISIONS1 This Agreement and any documents referred to in this Agreement contain the entire agreement between the Parties relating to the transaction contemplated by this Agreement and supersede any previous agreements between the Parties relating to this transaction. Each of the Parties acknowledges that in agreeing to enter into this Agreement it has not relied on any representation, warranty or other assurance except as explicitly set out in this Agreement.2 This Agreement shall not be amended orally and shall not be modified or discharged in whole or in part, otherwise than by an instrument in writing (or in such stricter form as may be required by law) signed by the Parties.3 Should any provision of this Agreement be or become wholly or partly invalid or unenforceable, this will not affect the validity or enforceability of the remaining provisions. In this event, the Parties shall start negotiations without undue delay with a view to amend this Agreement so that the invalid or unenforceable provision shall be substituted by a valid or enforceable provision which, in its essential purpose, comes as close as possible to the invalid or unenforceable provision.4 The failure of any party to enforce or exercise,at any time or for any period of time, any term of, or any right or remedy arising pursuant to, or under this Agreement, does not constitute and shall not be construed as, a waiver of such term or right or remedy and shall in no way affect the Parties' right to enforce or exercise it later, provided that such right is not time barred or precluded. Any waiver to this effect must be explicitly in writing. 8 ARTICLE XII GOVERNING LAW, ARBITRATION1 This Agreement shall be governed by and construed in accordance with the laws of the Federal Republic of Germany, without giving effect to the principles of conflicts of law thereof. The applicability of the provisions of the UN Sales Law is expressly excluded.2 Any dispute, controversy or claim arising out of, relating to or in connection with this Agreement of the breach, termination or validity thereof shall be finally settled exclusively by arbitration under the Rules of Arbitration of the International Chamber of Commerce (the "ICC") then in effect (the "Rules"), except as modified herein. The arbitration proceedings shall be conducted, and the award shall be rendered in Munich, Germany in the German language. There shall be three arbitrators of whom each of the claimant Party and the defendant Party shall select one in accordance with the Rules. The two arbitrators so appointed shall select a third arbitrator to serve as presiding arbitrator. The Parties hereto hereby waive any rights of application or appeal to any court or tribunal of competent jurisdiction to the fullest extent permitted by law in connection with any question of law arising in the course of the arbitration or with respect to any award made except for actions relating to enforcement of the arbitration agreement or an arbitral award. Among other remedies otherwise available to them, the arbitrators shall be authorized to order the specific performance of any provision contained herein. The award shall be final and binding upon the Parties hereto, and shall be the sole and exclusive remedy between the Parties regarding any claims, counter-claims, issues or accounting presented to the arbitral tribunal.Read out in the presence of the Notary, approved by the appearing persons andsigned by them and by the Notary as follows: signed by Eike Lehman signed by Dr. Werner Stocker signed by Richard H. Snodgress signed by Dr. Karl, Notaryplace of seal 1 Exhibit 10.15 EXECUTION COPY PARTICIPATION AGREEMENT dated as of December 29, 2000 among APEX TRAILER LEASING & RENTALS, L.P., as Lessee WABASH NATIONAL CORPORATION, as Guarantor WABASH STATUTORY TRUST - 2000, as Lessor STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as provided herein, but solely as Trustee FLEET CAPITAL CORPORATION, as Tranche A Lender FLEET CAPITAL CORPORATION, as Tranche B Lender FLEET CAPITAL CORPORATION, as Owner Participant FLEET CAPITAL CORPORATION as Collateral Agent and FLEET CAPITAL CORPORATION, as Administrative Agent 2 TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS; INTERPRETATION ................................................... 2 SECTION 1.1. Definitions; Interpretation ....................................... 2ARTICLE II CLOSING DATES; CONDITIONS ................................................... 2 SECTION 2.1. Closing Dates ..................................................... 2 SECTION 2.2. Initial Closing Date Conditions ................................... 3 SECTION 2.3. Closing Conditions for Each Closing Date .......................... 5ARTICLE III FUNDING OF ADVANCES; NOTES .................................................. 8 SECTION 3.1. Advances .......................................................... 8 SECTION 3.2. Owner Participant's Commitment .................................... 9 SECTION 3.3. Loan Commitment ................................................... 9 SECTION 3.4. Procedures for Advances ........................................... 9 SECTION 3.5. Repayment of Loans, Notes and Evidence of Debt .................... 10ARTICLE IV EQUITY RETURN; INTEREST; FEES ................................................ 10 SECTION 4.1. Calculation of Basic Rent ......................................... 10 SECTION 4.2. Interest on Loans ................................................. 11 SECTION 4.3. Equity Return ..................................................... 11 SECTION 4.4. Computation of Interest and Equity Return ......................... 12 SECTION 4.5. Payment of Unused Commitment Fees ................................. 12ARTICLE V THE NOTES ..................................................................... 12 SECTION 5.1. Form of Notes ..................................................... 12 SECTION 5.2. Terms of Notes .................................................... 12 SECTION 5.3. Taxes; Withholding ................................................ 13 SECTION 5.4. Payments from Trust Estate Only ................................... 14 SECTION 5.5. Method of Payment ................................................. 14 SECTION 5.6. Application of Payments ........................................... 15 SECTION 5.7. Registration. Transfer and Exchange of Notes ...................... 15 SECTION 5.8. Mutilated, Destroyed, Lost or Stolen Notes ........................ 16 SECTION 5.9. Payment of Expenses on Transfer ................................... 16 SECTION 5.10. The New Notes .................................................... 16 -i- 3 TABLE OF CONTENTS (CONTINUED) PAGE SECTION 5.11. Prepayments ...................................................... 17ARTICLE VI COVENANTS .................................................................... 19 SECTION 6.1. Covenants of Obligors ............................................. 19 SECTION 6.2. Covenants of Owner Participant .................................... 22 SECTION 6.3. Covenants of Collateral Agent ..................................... 22 SECTION 6.4. Covenants of Trust Company ........................................ 22 SECTION 6.5. Covenant of Lessor ................................................ 22ARTICLE VII GENERAL INDEMNITY ........................................................... 22 SECTION 7.1. Indemnity ......................................................... 22ARTICLE VIII GENERAL TAX INDEMNITY; OTHER INDEMNITIES .................................. 26 SECTION 8.1. Indemnity ......................................................... 26 SECTION 8.2. Indemnity Payments in Addition to Lease Obligations ............... 30 SECTION 8.3. Eurodollar Rate Lending Unlawful .................................. 30 SECTION 8.4. Deposits Unavailable .............................................. 30 SECTION 8.5. Increased Costs, Etc .............................................. 31 SECTION 8.6. Funding Losses .................................................... 32 SECTION 8.7. Capital Adequacy .................................................. 32ARTICLE IX REPRESENTATIONS AND WARRANTIES ............................................... 33 SECTION 9.1. Representations and Warranties of the Obligors .................... 33 SECTION 9.2. Representations and Warranties of Lessor .......................... 39 SECTION 9.3. Representations and Warranties of the Trustee and the Trust Company 40ARTICLE X PAYMENT OF CERTAIN EXPENSES ................................................... 42 SECTION 10.1. Payment of Costs and Expenses .................................... 42 SECTION 10.2. Brokers' Fees and Stamp Taxes .................................... 43 SECTION 10.3. Related Obligations .............................................. 43ARTICLE XI TRANSFERS OF PARTICIPANTS' INTERESTS ......................................... 43 SECTION 11.1. Assignments by Participants ...................................... 43 SECTION 11.2. Participants ..................................................... 44 -ii- 4 PAGE SECTION 11.3. Pledge Under Regulation A ........................................ 45ARTICLE XII THE ADMINISTRATIVE AGENT ................................................... 45 SECTION 12.1. Appointment ...................................................... 45 SECTION 12.2. Delegation of Duties ............................................. 45 SECTION 12.3. Exculpatory Provisions ........................................... 45 SECTION 12.4. Reliance by Administrative Agent ................................. 46 SECTION 12.5. Notice of Default ................................................ 46 SECTION 12.6. Non-Reliance on Administrative Agent and Other Participants ...... 47 SECTION 12.7. Indemnification .................................................. 47 SECTION 12.8. Administrative Agent in Its Individual Capacity .................. 48 SECTION 12.9. Successor Administrative Agent ................................... 48ARTICLE XIII MISCELLANEOUS ............................................................. 48 SECTION 13.1. Survival of Agreements ........................................... 48 SECTION 13.2. No Broker, etc ................................................... 49 SECTION 13.3. Notices .......................................................... 49 SECTION 13.4. Counterparts ..................................................... 49 SECTION 13.5. Amendments ....................................................... 49 SECTION 13.6. Headings, etc .................................................... 51 SECTION 13.7. Parties in Interest .............................................. 51 SECTION 13.8. GOVERNING LAW .................................................... 51 SECTION 13.9. Severability ..................................................... 51 SECTION 13.10. Liability Limited ............................................... 51 SECTION 13.11. Further Assurances .............................................. 52 SECTION 13.12. SUBMISSION TO JURISDICTION ...................................... 52 SECTION 13.13. Setoff .......................................................... 53 SECTION 13.14. WAIVER OF JURY TRIAL ............................................ 53 SECTION 13.15. Cooperation in Minimizing Certain Taxes ......................... 53 SECTION 13.16. Intent .......................................................... 53 SECTION 13.17. Amounts Due Under Lease ......................................... 54 -iii- 5 SCHEDULESAPPENDIX A DefinitionsSCHEDULE I Notice Information, Wire Instructions, and Funding OfficesSCHEDULE II Commitments EXHIBITSEXHIBIT A-1 Form of Advance RequestEXHIBIT B-1 Form of Tranche A NotesEXHIBIT B-2 Form of Tranche B NotesEXHIBIT C Security Interest Filing JurisdictionsEXHIBIT D Assignment of Notes -iv- 6 PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT (this "Participation Agreement"), dated asof December 29, 2000, is entered into by and among APEX TRAILER LEASING &RENTALS, L.P., a Delaware limited partnership, as the Lessee (in such capacity,together with its permitted successors, the "Lessee"); WABASH NATIONALCORPORATION, a Delaware corporation, as guarantor (the "Guarantor"); WABASHSTATUTORY TRUST - 2000, a Connecticut statutory trust, as Lessor (together withits permitted successors and assigns, the "Lessor"); STATE STREET BANK AND TRUSTCOMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity,except as set forth herein, but solely as Trustee (the "Trustee" and in itsindividual capacity, the "Trust Company"); FLEET CAPITAL CORPORATION, a RhodeIsland corporation, as the Tranche A Lender ("Fleet Capital", together with itspermitted successors and assigns, the "Tranche A Lender"); FLEET CAPITAL, as theTranche B Lender (together with its permitted successors and assigns, the"Tranche B Lender", and together with the Tranche A Lender, the "Lenders");FLEET CAPITAL, as the Owner Participant (in such capacity, the "OwnerParticipant", together with any successors and permitted assigns, the "OwnerParticipants", and together with the Lenders, the "Participants"); FLEETCAPITAL, as administrative agent for the Lenders (together with its permittedsuccessors and assigns in such capacity, the "Administrative Agent"); and FLEETCAPITAL as collateral agent for the Lenders (together with its permittedsuccessors and assigns in such capacity, the "Collateral Agent"). WITNESSETH: WHEREAS, Owner Participant and Trustee have entered into the TrustAgreement, whereby, among other things, Owner Participant appointed Trustee asLessor of the trust created thereby; WHEREAS, subject to the terms and conditions set forth herein, theparties hereto propose to effect a sale and lease of certain Units on eachClosing Date by taking the following actions: (i) Lessee proposes: (a) that it or an affiliated entity will sell such Unitdirectly to Lessor; and (b) to enter into with Lessor the Lease and a Lease Supplementsubjecting such Units to the Lease; and (ii) Owner Participant proposes to make the Equity Investment to Lessorfor each Unit purchased by Lessor on such Closing Date; (iii) Subject to the terms and conditions set forth in Article II andon the basis of the representations and warranties contained herein, each Lenderproposes to make a secured loan to Lessor in an aggregate principal amount equalto the respective Lender's Commitment for Units 7purchased and leased on such Closing Date against receipt of Notes in anaggregate principal amount equal to such amount; (iv) Collateral Agent proposes to enter into a Security AgreementSupplement with Lessor subjecting such Units to be purchased and leased byLessor on such Closing Date; (v) Lessor proposes: (a) to issue Notes under this Participation Agreement to theLenders as evidence of the making of secured loans by such Lenders to Lessor inan aggregate principal amount equal to such Lenders' Commitment for each suchUnits purchased by Lessor on such Closing Date; (b) to purchase such Units from the Lessee and the othersellers thereof and to pay the Equipment Cost for such Units; (c) to enter into with Lessee the Lease (if not previouslyentered into) and a Lease Supplement subjecting such Units to the Lease; (d) to execute and deliver a Security Agreement Supplementsubjecting the Units to be purchased by Lessor on such Closing Date to the Lienof the Security Agreement; and (e) to execute and deliver each of the other OperativeDocuments to which it is a party. WHEREAS, the parties hereto desire to set forth herein the terms andconditions agreed upon with respect to the above-described transactions. NOW THEREFORE, in consideration of the premises and the mutualagreements contained herein, the parties hereto intending to be legally boundagree as follows: ARTICLE I DEFINITIONS; INTERPRETATION SECTION 1.1. Definitions; Interpretation. Unless the context shallotherwise require, capitalized terms used and not defined herein shall have themeanings assigned thereto in Appendix A hereto for all purposes hereof (as suchAppendix A may be amended, supplemented, amended and restated or otherwisemodified from time to time, "Appendix A"); and the rules of interpretation setforth in Appendix A shall apply to this Participation Agreement. ARTICLE II CLOSING DATES; CONDITIONS SECTION 2.1. Closing Dates. (a) Subject to the terms and conditions set forth in this Article II,the transactions described hereinabove (each, a "Closing") shall occur at theoffices of Day, Berry & Howard -2- 8LLP, 260 Franklin Street, Boston, Massachusetts at 11:00 a.m. on (i) December29, 2000 (the "Initial Closing Date"), and (ii) subject to the provisions ofArticle III, such other closing dates as Lessee shall request; or in each casesuch other date agreed to by the parties to this Participation Agreement(together with the Initial Closing Date, each a "Closing Date"). (b) On the Initial Closing Date, the Tranche A Lender shall make aTranche A Loan to Lessor in the amount of $25,940,019 evidenced by the Tranche ANote, and the Tranche B Lender shall make a Tranche B Loan to the Lessor in theamount of $3,883,236 evidenced by the Tranche B Note. (c) On the Initial Closing Date, the Owner Participant shall make anEquity Investment in the amount of $1,242,636, evidenced by the TrustCertificate. SECTION 2.2. Initial Closing Date Conditions. (a) Agreements. The following documents (together with all schedules,exhibits and attachments thereto, the "Operative Documents") shall have beenduly authorized, executed and delivered by the parties thereto and shall be inform and substance satisfactory to the Participants. (i) Participation Agreement. (ii) Lease and Lease Supplement. (iii) Guaranty. (iv) Security Agreement and Security Agreement Supplement. (v) Trust Agreement, (vi) Tranche A Note, (vii) Tranche B Note, (viii) Trust Certificate, (ix) Security Interest Filings, (x) Bills of Sale, (xi) Syndication Agreement, (xii) Limited Power of Attorney. (b) Trust Documents of Lessor. Each Participant, shall have receivedcopies of the certificate of trust of Lessor certified to be true and completeas of a recent date by the appropriate governmental authority of the State ofConnecticut and a copy of the certificate of the Secretary of State of the Stateof Connecticut as to the existence of the Lessor. -3- 9 (c) Opinions. The following opinions shall be received by the partiesindicated thereto, dated as of the Initial Closing Date, in form and substancereasonably satisfactory to the such parties: (i) Opinion of Day, Berry & Howard LLP, special counsel to theParticipants, addressed to each Participant. (ii) Opinion of Gambs, Mucker & Bauman, Special Counsel tothe, Lessee and Guarantor, addressed to each Participant, the AdministrativeAgent, and the Lessor. (iii) Opinion of Bingham Dana LLP Counsel to the Trustee andTrust Company, addressed to each Participant, and the Administrative Agent. (d) Corporate Documents. The corporate (or partnership) or charterdocuments, including incumbency certificates, authorizations and good standingcertificates (where applicable) for the following entities shall have beenreceived by the Participants: (i) Lessee. (ii) Guarantor. (iii) Collateral Agent. (iv) Trust Company. (e) Authorized Officer's Certificates. Each Participant shall havereceived an Authorized Officer's Certificate of each of the Lessee and theGuarantor, in each case in a form satisfactory to the Participants, dated as ofthe Closing Date, stating that (a) each and every representation and warranty ofsuch Obligor contained in each Operative Document to which it is a party is trueand correct in all respects on and as of the Closing Date; (b) no UnmaturedLease Default, or Lease Event of Default has occurred and is continuing underany Operative Document to which such Obligor is a party with respect to it; (c)each Operative Document to which such Obligor is a party is in full force andeffect with respect to it; and (d) such Obligor has duly performed and compliedwith all conditions contained herein or in any other Operative Document requiredto be performed or complied with by it on or prior to the Closing Date. (f) Evidence of Insurance. Each Participant shall have receivedevidence reasonably satisfactory to them that the insurance maintained, orarranged on behalf of the Lessor, satisfies the requirements set forth inSection 10.1 of the Lease, setting forth the respective coverage, limits ofliability, carrier, policy number and period of coverage. (g) Delivery of Financial Statements. Each Participant shall havereceived copies of the financial statements described in Section 6.1(e) of theParticipation Agreement. (h) Advance Request. The Lessee shall have delivered an Advance Requestto the Lessor and to the Administrative Agent in accordance with Section 3.4(a)of this Participation Agreement. -4- 10 (i) Litigation. On the Closing Date, there shall not be any actions,suits or proceedings pending or, to the knowledge of the Lessee or theGuarantor, threatened, with respect to the Lessee, the Guarantor, the Equipment,the Operative Documents, or the transactions contemplated by the OperativeDocuments: (i) to set aside, restrain, enjoin or prevent the full performance ofthis Participation Agreement, the other Operative Documents or the transactionscontemplated hereby or thereby or (ii) that question or challenge the validityof the Operative Documents or the rights or remedies of the Lessor or the otherParticipants with respect to any Obligor, the Equipment or other CollateralEstate under the Operative Documents. (j) Taxes. All taxes, fees and other charges in connection with theexecution, delivery, recording, filing and registration of the OperativeDocuments shall have been paid or provisions for such payment shall have beenmade by the Lessee to the reasonable satisfaction of the Administrative Agent,the Owner Participants and the Lenders. (k) Representations and Warranties. On the Initial Closing Date, therepresentations and warranties of the Lessee, the Guarantor, the Lessor and theTrustee set forth in the Operative Documents (or in certificates deliveredpursuant thereto) executed by any thereof shall be true and correct in allrespects as though made on and as of such date, except to the extent suchrepresentations or warranties relate solely to an earlier date, in which casesuch representations and warranties shall have been true and correct in allrespects on and as of such earlier date. (l) No Default. No Unmatured Lease Default or Lease Event of Defaultshall have occurred and be continuing on the Initial Closing Date unless suchUnmatured Lease Default, or Lease Event of Default, as the case may be, shallhave been waived in accordance with the Operative Documents. (m) Closing Fee. Lessee shall have paid to Placement Agent, the closingfee described in the Syndication Agreement. SECTION 2.3. Closing Conditions for Each Closing Date. The obligationof each Participant to perform its agreements on each Closing Date (includingthe Initial Closing Date) with respect to any Equipment shall be subject to thefulfillment to the reasonable satisfaction of, or the waiver in writing by, suchParticipant of the following conditions precedent on or prior to such ClosingDate (except that the obligation of any party hereto shall not be subject tosuch party's own performance or compliance): (a) Closing Proceedings. All proceedings taken in connection with suchClosing Date and all documents and instruments to be delivered thereon orrelating thereto shall be reasonably satisfactory to such Participant and itscounsel, and such Participant and its counsel shall have received copies of suchdocuments as such Participant or its counsel may reasonably request inconnection therewith, all in form and substance reasonably satisfactory to suchParticipant and its counsel. (b) Bring-down Certificates. Each party who received an incumbencycertificate pursuant to Section 2.2 (d) hereof shall each have received asimilar certificate dated such Closing Date. -5- 11 (c) Advance Request. The Participants, Administrative Agent and Lessorshall each have received an Advance Request in accordance with Section 3.4(a)hereof with respect to such Closing Date, and except with respect to the initialClosing Date, not less than ten (10) Business Days prior to the Closing Date. (d) Execution of Agreements. On or before such Closing Date, the LeaseSupplement and the Security Agreement Supplement relating to such Equipmentshall have been duly executed and delivered by the parties thereto and suchagreements and the other Operative Documents shall be in full force and effectand no default shall exist in the performance by any party of any of itsobligations under the Operative Documents. (e) Recordation and Filing. On or before such Closing Date, (i) theLessee shall have delivered to the Administrative Agent all Security InterestFilings necessary or reasonably requested by the applicable secured party toperfect the interests of the Lessor and Collateral Agent in the Equipment andall Collateral Estate with respect thereto in accordance with the SecurityAgreement and (ii) the Lease Supplement and Security Agreement Supplementrelating to such Equipment (or appropriate memoranda thereof) and anotherfilings shall have been filed, recorded and deposited in conformity with allApplicable Laws. (f) Opinions of Counsel. Each Participant, Lessor and theAdministrative Agent shall have received the favorable written opinions, in formand scope satisfactory to the Participants of counsel to the Lessor, Lessee andGuarantor confirming the matters set forth in the opinions such firm deliveredpursuant to Section 2.2(c) hereof, as they relate to the documents delivered onsuch Closing Date. (g) Bills of Sale. There shall have been delivered to Lessor a Bill ofSale for such Units signed by Lessee and, subject to the Limited Power ofAttorney, endorsed certificates of title for that portion of the Equipmentconsisting of motor vehicles for which certificates of title have been issued,transferring to Lessor title to such Units and warranting to Lessor that Lesseehad legal title thereto and good and lawful right to sell the same and that asof such Closing Date (immediately prior to the transfer of title to Lessor)title thereto was free and clear of all Liens arising from, through or underLessee. (h) Representations and Warranties. The representations and warrantiesof each of the parties contained in this Participation Agreement and in any ofthe other Operative Documents shall be true and correct in all material respectson such Closing Date with the same effect as though made on and as of suchClosing Date, and an officer's certificate, dated the Closing Date, of each ofsuch parties (other than the Participants) to that effect shall have beendelivered to such Participant (it being understood that in the case of theParticipants, the purchase of the Note or Trust Certificate to be purchased byit pursuant hereto shall be deemed to constitute a confirmation by it that itsrepresentations and warranties contained herein are true and correct in allmaterial respects on such Closing Date). (i) No Default. No Unmatured Lease Default, Lease Event of Default,Unmatured Security Agreement Default or Security Agreement Event of Defaultshall exist as of such Closing Date. -6- 12 (j) No Event of Loss. No Event of Loss or event which with the passageof time would constitute a Event or Loss shall have occurred with respect tosuch Units. (k) Taxes. All Taxes payable on or prior to such Closing Date inconnection with (i) the execution, delivery, recording or filing of any of theOperative Documents, (ii) the issuance and sale of the Notes to be purchased onsuch Closing Date, (iii) the Equity Investment to be made by Owner Participanton such Closing Date, and (iv) the Units shall have been paid in full. All salestaxes and duties related to the transactions contemplated by the OperativeDocuments have been paid or otherwise provided for by Lessee. (l) Delivery of Notes. Lessor shall have issued and sold to the Lenderstheir respective Tranche A Notes or Tranche B Notes, as the case may be, to bepurchased by such Lenders pursuant to this Participation Agreement on suchClosing Date. (m) Governmental Actions. All Governmental Actions of third parties(including Governmental Authorities) required in connection with the execution,delivery and performance of the Operative Documents by the parties thereto shallhave been received and shall be in full force and effect on such Closing Date. (n) No Proceedings. No Governmental Action shall have been institutednor shall any Governmental Action be threatened before any GovernmentalAuthority, nor shall any order, judgment or decree have been issued or proposedto be issued by any Governmental Authority at the time of such Closing Date, toset aside, restrain, enjoin or prevent the completion and consummation of thisParticipation Agreement or the transactions contemplated hereby. (o) Funding of Commitments. Each of the parties hereto shall have madethe Advances and executed and delivered the documents and instruments that suchparty is required to execute or deliver on or prior to such Closing Date. (p) Purchase Permitted by Applicable Law, etc. On each Closing Date,each Participant's purchase of its Notes shall be permitted by Applicable Laws(including, without limitation, Regulation T, U or X of the Board of Governorsof the Federal Reserve System) and shall not subject the Participants to anytax, penalty, liability or other onerous condition under or pursuant to anyApplicable Law. If requested by any Participant, it shall have received anOfficer's Certificate by Lessee certifying as to such matters of fact as it mayreasonably specify to enable it to determine whether such purchase is sopermitted. (q) Additional Collateral; Letter of Credit. (i) In addition to theUnits of Equipment that are the subject of an Advance, as additional securityfor the benefit of the Lenders, on each Closing Date at the time of an Advance,subject to Clause (ii) below, Lessee shall transfer to Lessor additionalcollateral acceptable to the Participants ("Additional Collateral") with a netbook value equal to at least 25% of the Equipment Cost with respect to theAdvance to be made on such Closing Date. Such Additional Collateral (i) shallnot be eligible for an Advance, (ii) shall be pledged and assigned to theCollateral Agent pursuant to the Operative Documents, and (iii) shall beconsidered "Equipment" for all purposes (other than an Advance) under theOperative Documents, but shall not be included in the "Total Equipment Cost". Onthe initial Closing Date and thereafter so long as the Tranche A Notes have notbeen syndicated pursuant to -7- 13the Syndication Agreement, in lieu of the Additional Collateral, Lessee shallmaintain to Collateral Agent, the Letter of Credit. (r) Transaction Expenses. All Transaction Expenses and Commitment Feesshall have been paid. (s) Equipment Approval. Lessor shall have approved all of the Equipmentset forth in the Advance Request provided pursuant to Section 3.4(a) hereof. ARTICLE III FUNDING OF ADVANCES; NOTES SECTION 3.1. Advances. (a) Subject to the conditions and terms hereof, the Lessor shall takethe following actions at the written request of the Lessee from time to timeduring the Initial Lease Term: (i) on the Initial Closing Date, the Lessor shall make an Advance (using funds provided by the Owner Participant and the Lenders) hereunder to the Lessee in the amount of $31,065,891, the proceeds of which shall be paid to Lessee for the purpose of paying Equipment Costs as specified in the Advance Request; and (ii) on each Closing Date during the Initial Lease Term, the Lessor shall make Advances (out of funds provided by the Owner Participants and the Lenders) to the Lessee or to such payees designated in writing by the Lessee for the purpose of paying (or reimbursing the Lessee for) Equipment Costs. (b) Limitation on Advances. Notwithstanding any other provision hereof,(i) the Lessor shall not be obligated to make any Advance if, after givingeffect thereto, (x) the aggregate outstanding amounts of the Tranche A Loanswould exceed the aggregate Tranche A Loan Commitments, the aggregate outstandingamounts of the Tranche B Loans would exceed the aggregate Tranche B LoanCommitments, or the aggregate outstanding amount of the Equity Investment wouldexceed the aggregate Owner Participants' Commitments, (y) the Total EquipmentCost would exceed the Aggregate Commitment Amount or (z) the net book value ofthe Additional Collateral shall be less than 25% of the Total Equipment Cost,(ii) no Advance shall be made (x) after the Commitment Termination Date or (y)with respect to Additional Collateral. (c) Acknowledgment of Advances. Each of the Lessee, the Lessor and theGuarantor hereby acknowledges and agrees, for the benefit of each Participant,that: (i) each Advance made hereunder is made for the benefit of, and at therequest of, the Lessee, (ii) the entire amount of each Advance made hereunder isallocable to the Equipment and shall constitute part of the Equipment Cost and(iii) the Lessee shall pay in full on the Termination Date all of itsobligations under the Lease and under all of the other Operative Documents,which obligations are intended to equal the aggregate outstanding amount ofAdvances made (or deemed made) hereunder, subject to the limitations on recourseset forth in Article XVII of the Lease. -8- 14 SECTION 3.2. Owner Participant's Commitment. Subject to the conditionsand terms hereof, each Owner Participant shall make available to the Lessee(through the Lessor) at the request of the Lessee from time to time during theInitial Lease Term on any Closing Date an amount (each, an "Equity Investment")in immediately available funds equal to such Owner Participant's ApplicableEquity Percentage of the amount of the Advance being funded on such ClosingDate. Notwithstanding any other provision hereof, no Owner Participant shall beobligated to make available any Equity Investment if, after giving effect to theproposed Equity Investment, the aggregate outstanding Equity Investment of suchOwner Participant shall exceed such Owner Participant's Commitment. SECTION 3.3. Loan Commitment. (a) Subject to the conditions and terms hereof, each Tranche A Lendershall make a Loan to the Lessor at the request of the Lessee, from time to timeduring the Initial Lease Term on any Closing Date (including, withoutlimitation, on the Initial Closing Date) in a principal amount in immediatelyavailable funds equal to such Tranche A Lender's Applicable Loan Percentage ofthe amount of the Advance being funded on such Closing Date; provided that noTranche A Lender shall be obligated to make any Tranche A Loan on a Closing Dateif, after giving effect to such Tranche A Loan, the aggregate outstanding amountof the Equity Investment (including any Equity Investment to be made on suchClosing Date) would be less than four percent (4%) of the sum of all Loans andEquity Investment outstanding at such time. Notwithstanding any other provisionhereof, no Tranche A Lender shall be obligated to make any Tranche A Loan if,after giving effect to the proposed Tranche A Loan, the aggregate outstandingamount of the Tranche A Loans made by such Tranche A Lender would exceed suchTranche A Lender's Loan Commitment. (b) Subject to the conditions and terms hereof, each Tranche B Lendershall make a Loan to the Lessor at the request of the Lessee, from time to timeduring the Initial Lease Term on any Closing Date (including, withoutlimitation, on the Initial Closing Date) in a principal amount in immediatelyavailable funds equal to such Tranche B Lender's Applicable Loan Percentage ofthe amount of the Advance being funded on such Closing Date; provided that noTranche B Lender shall be obligated to make any Tranche B Loan on a Closing Dateif, after giving effect to such Tranche B Loan, the aggregate outstanding amountof the Equity Investment (including any Equity Investment to be made on suchClosing Date) would be less than four percent (4%) of the sum of all Loans andEquity Investment outstanding at such time. Notwithstanding any other provisionhereof, no Tranche B Lender shall be obligated to make any Tranche B Loan if,after giving effect to the proposed Tranche B Loan, the aggregate outstandingamount of the Tranche B Loans made by such Tranche B Lender would exceed suchTranche B Lender's Loan Commitment. SECTION 3.4. Procedures for Advances. (a) General Procedures. With respect to each Advance made on a ClosingDate, the Lessee shall give the Administrative Agent an Advance Requestsubstantially in the form of Exhibit A-1 hereto (an "Advance Request") whichAdvance Request (except for the Advance Request with respect to the initialClosing Date) shall be delivered to the Administrative Agent, not later than12:00 noon, New York time, ten (10) Business Days prior to the proposed Closing -9- 15Date, specifying: (i) the proposed Closing Date, (ii) the amount of Advancerequested, (iii) the proposed use of the proceeds of such Advance and (iv) adetailed list describing each Unit of Equipment to be financed on such ClosingDate, provided that with respect to the Advance Request relating to the initialClosing Date, such Advance Request shall be delivered no later than the initialClosing Date. The Administrative Agent shall calculate the amounts of the EquityInvestment, Tranche A Loans and Tranche B Loans required to fund the requestedAdvance. Each Advance Request delivered by the Lessee shall be irrevocable andbinding on the Obligors. (b) Amount of Advance; Closing Dates. Each Advance shall be in anamount not less than $10,000,000 per Advance. There shall be no more than oneAdvance in any calendar quarter during the Initial Lease Term. (c) Use of Proceeds of Advances. Except as the parties may otherwiseagree in writing, Advances shall be made solely to provide the Lessee with fundswith which to pay or reimburse itself for Equipment Costs. SECTION 3.5. Repayment of Loans, Notes and Evidence of Debt. The Lessor's obligation to repay (i) the Tranche A Loans shall beevidenced by the Tranche A Notes and (ii) the Tranche B Loans shall be evidencedby the Tranche B Notes. The Lessor shall repay all such Loans to theAdministrative Agent for the benefit of the Lenders, together with all accruedand unpaid interest thereon, at the times and in the manner set forth in theNotes and this Participation Agreement. The Lessor shall pay and prepay theNotes in accordance with Article V hereof and such payments and prepaymentsshall be applied to the Loans in the manner set forth in Article III of theSecurity Agreement. ARTICLE IV EQUITY RETURN; INTEREST; FEES SECTION 4.1. Calculation of Basic Rent. (a) Basic Rent shall be payable from time to time on each Payment Datein an amount equal to the sum of (a) all interest then due on the Loans, ascalculated in accordance with Section 4.2 together with principal amortizationas set forth in Schedule A to each such Note and (b) all Equity Return then dueon the Equity Investment, as calculated in accordance with Section 4.3. (b) In calculating such interest and Equity Return, the Tranche ALoans, the Tranche B Loans and Equity Investment made in connection with theAdvances shall bear interest and Equity Return, as the case may be, using anAdjusted Eurodollar Rate plus the Applicable Margin. If any Loan and/or EquityInvestment is to bear interest or Equity Return by reference to the AdjustedEurodollar Rate and the Administrative Agent is unable to obtain an AdjustedEurodollar Rate for the Interest Period, the Owner Participant and the Lendersshall make available Equity Investment and Loans, as the case may be, as BaseRate Loans/Equity Investment. Such Equity Investment and Loans shall bemaintained as Base Rate Loans/Equity Investment until the date on which theAdministrative Agent shall be able to obtain an Adjusted -10- 16Eurodollar Rate for such Equity Investment and the Loans for such InterestPeriod, at which time such Base Rate Loans/Equity Investment shall convert toEurodollar Loans/Equity Investment. SECTION 4.2. Interest on Loans. (a) Each Tranche A Loan shall accrue interest during each InterestPeriod at a rate per annum equal to the then applicable Interest Rate for suchType of Loan. Each Tranche B Loan shall accrue interest during each InterestPeriod at a rate per annum equal to the then applicable Interest Rate for suchType of Loan. Subject to Section 4.1(b), all Loans shall be made and continued,subject to Sections 8.3 and 8.4, as Eurodollar Loans/Equity Investment. (b) If all or a portion of (i) the principal amount of any Loan, (ii)any interest payable on any Loan or (iii) any other amount payable to theLenders hereunder (whether in respect of interest, fees or other amounts) shallnot be paid when due (whether at the stated maturity thereof, by acceleration orotherwise), then such overdue amount shall bear interest, payable on demand, ata rate per annum which is equal to the Overdue Rate (or if no rate isapplicable, whether in respect of interest, fees or other amounts, then the sumof (x) 2.00% plus (y) the Base Rate). Without duplication of the foregoing, uponthe occurrence and during the continuance of any Lease Event of Default, theprincipal of and, to the extent permitted by law, interest on the Loans and anyother amounts owing hereunder or under the other Operative Documents shall bearinterest, payable on demand, at a per annum rate of 2% greater than the ratewhich would otherwise be applicable (or if no rate is applicable, whether inrespect of interest, fees or other amounts, then at the Base Rate plus a marginof 2% per annum). (c) The Administrative Agent shall from time to time promptly providenotice to the Lessee of any change in the Interest Rate applicable to all or anyof the Loans. SECTION 4.3. Equity Return. (a) The amount of the Equity Investment outstanding from time to timeshall accrue yield ("Equity Return") at a rate per annum equal to the EquityReturn Rate. Subject to Sections 4.1(b), 8.3 and 8.4, all Equity Investmentshall be made and continued as Eurodollar Loans/Equity Investment. (b) If all or a portion of (i) any Equity Investment, (ii) any EquityReturn payable on any Equity Investment or (iii) any other amount payable to theOwner Participants hereunder (whether in respect of interest, fees or otheramounts) shall not be paid when due (whether at the stated maturity thereof, byacceleration or otherwise), then such overdue amount shall bear interest,payable on demand, at a rate per annum which is equal to the Overdue Rate (or ifno rate is applicable, whether in respect of interest, fees or other amounts,then the sum of (x) 2.00% plus (y) the Base Rate). Without duplication of theforegoing, upon the occurrence and during the continuance of any Lease Event ofDefault, the Equity Investment and, to the extent permitted by law, EquityReturn on Equity Investment and interest on any other amounts owing hereunder orunder the other Operative Documents shall bear interest, payable on demand, at aper annum rate of 2% greater than the rate which would otherwise be applicable(or if no rate is applicable, whether in respect of interest, fees or otheramounts, then at the Base Rate plus a margin of 2% per annum). -11- 17 SECTION 4.4. Computation of Interest and Equity Return. Interest on theLoans and Equity Return on the Equity Investment shall be calculated on thebasis of a 360-day year for the actual days elapsed at all times that theInterest Rate and Equity Return Rate are determined by reference to the AdjustedEurodollar Rate and, at all other times, on the basis of a 365- (or 366-, as thecase may be) day year for the actual days elapsed. Each determination of theInterest Rate or Equity Return Rate by the Administrative Agent pursuant to anyprovision of this Participation Agreement or any other Operative Document shallbe binding on the Obligors and the Participants in the absence of manifesterror. SECTION 4.5. Payment of Unused Commitment Fees. The Lessee agrees topay to the Owner Participants and Lenders, during the Initial Lease Term for theperiod commencing on the second Closing Date and continuing through theCommitment Termination Date, a commitment fee (collectively, the "UnusedCommitment Fees") at a per annum rate equal to 25 basis points times the sum ofthe average daily unused portion of the Owner Participant's Commitments and LoanCommitments, respectively, for such Owner Participant and Lender, which feesshall be payable to each Owner Participant and Lender pro rata in accordancewith its Owner Participant's Commitment or Loan Commitment, as the case may be.The Unused Commitment Fees shall be payable by the Lessee in arrears on eachPayment Date occurring after the second Closing Date and ending on theCommitment Termination Date. The Unused Commitment Fees shall be computed on thebasis of the actual number of days (including the first day but excluding thelast day) occurring during the period for which such Unused Commitment Fees arepayable over a year of 360 days. ARTICLE V THE NOTES SECTION 5.1. Form of Notes. The Tranche A Notes and Tranche B notesshall each be substantially in the forms of Exhibits B-1 and B-2, respectively,hereto. SECTION 5.2. Terms of Notes. (a) The Tranche A Notes shall be issued in one or more series("Series") in an aggregate principal amount of $91,850,000 each such seriescorresponding to a Closing Date and designated with a letter for the Series anda number for the number of the Note in such Series (e.g. "A-1"). Each Tranche ANote shall have a stated maturity of the Maturity Date. On each Closing Date,subject to satisfaction of the conditions precedent in Article II of theParticipation Agreement, one or more Tranche A Notes (as may be specified by theTranche A Lender) shall be issued to and registered in the name of theinstitution (or its nominee) named on Schedule II to the Participation Agreementand identified therein as the Tranche A Lender in the aggregate principal amountset forth therein. The Tranche B Notes shall be issued in one or more series inan aggregate principal amount of $13,750,000 each such series corresponding to aClosing Date and designated with a letter for the Series and a number for thenumber of the Note in such Series (e.g. "B-1"). Each Tranche B Note shall have astated maturity of the Maturity Date. On each Closing Date, subject tosatisfaction of the conditions precedent in Article II of the ParticipationAgreement, one or more Tranche B Notes (as the case may be specified by theTranche B Lender) shall be issued to and registered in the name of theinstitution (or its -12- 18nominee) named on Schedule II to the Participation Agreement and identifiedtherein as the Tranche B Lender in the aggregate principal amount set forththerein. (b) The principal amount of each Note shall be due and payable ininstallments, payable on Payment Dates, as set forth on Schedule A attached toeach thereof, provided, however, that, in all cases, the monthly installments ofBasic Rent due pursuant to the Lease with respect to the Equipment shall besufficient to pay the monthly installments of principal and interest due on theNotes issued in respect of the Equipment (provided, further, however, that thefinal principal payment for each Note shall in any and all events equal the thenoutstanding principal balance thereof). (c) Each Note shall bear interest at the applicable Interest Rate onthe unpaid principal amount thereof from time to time outstanding from andincluding the date thereof until such principal is paid in full, all as setforth in Article IV hereof. Accrued interest on each Note shall be payable inarrears on each Payment Date and on the date such Note is paid in full provided,however, that in the event that an Advance is made on a date other than aPayment Date, accrued interest on the Note with respect thereto shall be payablein arrears on the second succeeding Payment Date following the date of suchAdvance, rather than the first Payment Date following the date of such Advance.Notwithstanding the foregoing, each Note shall bear interest at the Overdue Rateon any principal thereof and, to the extent permitted by applicable law, on anyinterest or other amounts due thereunder, not paid when due (whether at statedmaturity, by acceleration or otherwise), payable on demand by the Lenderthereof. (d) The Notes shall be executed on behalf of Lessor by one of itsAuthorized Officers. SECTION 5.3. Taxes; Withholding. (a) Subject to the directions contained in clause (b) of this Section2.04(b), Administrative Agent agrees, to the extent required by applicable law,to withhold from each payment due hereunder or under any Note, United Stateswithholding taxes at the appropriate rate, and, on a timely basis, to depositsuch amounts with an authorized depository and make such reports, filings andother reports in connection therewith, and in the manner, required underapplicable law. Upon any such withholding, Administrative Agent shall forthwithnotify the affected Lender, Lessor and Lessee of such withholding.Administrative Agent shall promptly furnish to each Lender (but in no eventlater than the date thirty (30) days after the due date thereof, a U.S. TreasuryForm 1042S (or similar forms as at any relevant time in effect), if applicable,indicating payment in full of any Taxes withheld from any payments byAdministrative Agent to such Persons together with all such other informationand documents reasonably requested by the affected Lender and necessary orappropriate to enable such Lender to substantiate a claim for credit ordeduction with respect thereto for income tax purposes of the country where suchLender is located. (b) If any Person that is a "United States person" and that is entitledto be paid any amount by Administrative Agent pursuant to this Indenture (i) isan exempt recipient, or (ii) is not an exempt recipient and has furnished aproperly completed and currently effective U.S. Treasury Form W-9 (or suchsuccessor U.S. Treasury Form as may be required by the United -13- 19States Treasury Department to avoid withholding of United States federal incometax), no amount shall be withheld by Administrative Agent in respect of UnitedStates federal income tax. (c) If any Person that is a Non-U.S. Person and that is entitled to bepaid any amount by Administrative Agent pursuant to this Indenture (i) hasfurnished to Administrative Agent a properly completed and currently effectiveU.S. Treasury Form 4224, in duplicate, or Form W8ECI (or such successor U.S.Treasury Form as may be required by the United States Treasury Department toavoid withholding of United States federal income tax) during the calendar year,in which and prior to the date on which, such amount is to be paid and (ii) hasnot notified Administrative Agent of the inaccuracy or expiration of such U.S.Treasury Form, no portion of that amount shall be withheld by AdministrativeAgent in respect of United States federal income tax. (d) Notwithstanding the provisions of paragraph (c) of this Section5.3, if any Person that is a Non-U.S. Person and that is entitled to be paid anyamount by Administrative Agent pursuant to this Participation Agreement (i) hasfurnished to Administrative Agent a properly completed and currently effectiveU.S. Treasury Form 1001 or Form W-8BEN (or such successor U.S. Treasury Form asmay be required by the United States Treasury Department to reduce or eliminatethe amount of United States federal income tax otherwise required to be heldfrom such amount) and (ii) has not notified Administrative Agent of theinaccuracy or expiration of such U.S. Treasury Form, only the reduced portion,if any, of that amount required by applicable law or treaty shall be withheld byAdministrative Agent in respect of United States federal income tax. SECTION 5.4. Payments from Trust Estate Only. Except as expresslyprovided herein or in the Security Agreement, all payments to be made by Lessorunder the Notes shall be made only from the income and the proceeds from theTrust Estate and only to the extent that Lessor shall have sufficient income orproceeds from the Trust Estate to enable Lessor to make payments in accordancewith the terms hereof. Each Lender, by its acceptance of such Note, agrees thatit will look solely to the income and proceeds from the Trust Estate to theextent available for distribution to it as herein provided and that none ofOwner Participant, Lessor nor Administrative Agent is personally liable to itfor any amounts payable or any liability under the Security Agreement or suchNote, except as expressly provided herein or in the Security Agreement. SECTION 5.5. Method of Payment. Principal and interest and otheramounts due hereunder or under the Notes shall be payable in immediatelyavailable funds on the due date thereof, to Administrative Agent at FleetNational Bank, ABA # 011500010, Account Name: Fleet Capital Leasing, Account #015552776700101, Attention: Leslie Tordoff, Reference: Wabash StatutoryTrust-2000 (or such other account at such other financial institution asAdministrative Agent may so specify from time to time to Lessor and Lessee) andAdministrative Agent shall remit all such amounts so received by it to suchaddress and in such manner (by wire transfer of immediately available funds ifnot otherwise specified) as set forth in Schedule II to this ParticipationAgreement (or as each Lender shall at any time otherwise specify in writing toAdministrative Agent). If the payment was received prior to 12:00 P.M. Bostontime by Administrative Agent on any Business Day, Administrative Agent shallmake -14- 20such payment on such Business Day; otherwise, Administrative Agent shall makepayment promptly, but not later than 12:00 noon Boston time on the nextsucceeding Business Day. If any sum payable hereunder to any Lender falls due ona day which is not a Business Day, then such sum shall be payable on the nextBusiness Day and (so long as payment is timely made on such next Business Day)no interest shall accrue on the amount of such payment from and after thescheduled date of payment to such next Business Day. Prior to the duepresentment for registration of transfer of any Note, Lessor, AdministrativeAgent and Lessee may deem and treat the Person in whose name any Note isregistered on the Note Register as the absolute owner and holder of such Notefor the purpose of receiving payment of all amounts payable with respect to suchNote and for all other purposes and neither Lessor, Administrative Agent norLessee shall be affected by any notice to the contrary. SECTION 5.6. Application of Payments. Each payment of principal andinterest or other amounts due on each Note shall be applied, in accordance withthe provisions of Article III of the Security Agreement. SECTION 5.7. Registration. Transfer and Exchange of Notes.Administrative Agent agrees with Lessor that Administrative Agent shall keep aregister (herein sometimes referred to as the "Note Register") in whichprovisions shall be made for the registration of Notes and the registration oftransfers of Notes. The Note Register shall be kept at the Corporate TrustOffice of Administrative Agent, and Administrative Agent is hereby appointed"Note Registrar" for the purpose of registering Notes and transfers of Notes asherein provided. Upon surrender for registration of transfer of any Note at theCorporate Trust Office, Lessor shall execute, and Administrative Agent shallauthenticate and deliver, in the name of the designated transferee ortransferees, one or more new Notes of a like aggregate principal amount and ofthe same series and the Notes so surrendered shall be canceled. At the option ofany Lender, Notes held by such holder may be exchanged for other Notes of thesame series of any authorized denominations, of like aggregate principal amount,upon surrender of the Notes to be exchanged at the Corporate Trust Office. Eachnew Note delivered upon transfer or exchange shall be in a principal amount ofat least $500,000 (or such lesser amount as shall equal the entire outstandingprincipal amount of all Notes held by any Lender) and dated the date of thesurrendered Note. Whenever any Notes are so surrendered for exchange, Lessorshall execute, and Administrative Agent shall authenticate and deliver, theNotes which the Lender making the exchange is entitled to receive. All Notesissued upon any registration of transfer or exchange of Notes shall be the validobligations of Lessor evidencing the same respective obligations, and entitledto the same security and benefits under this Indenture, as the Notes surrenderedupon such registration of transfer or exchange. Every Note presented orsurrendered for registration of transfer or exchange, shall (if so required byAdministrative Agent) be duly endorsed, or be accompanied by a writteninstrument of transfer in form satisfactory to Administrative Agent dulyexecuted by the holder thereof or his attorney duly authorized in writing.Administrative Agent shall make a notation on each new Note of the amount of allpayments of principal previously made on the old Note or Notes with respect towhich such new Note is issued and the date to which interest on such old Note orNotes has been paid. Lessor shall not be required to exchange any surrenderedNotes as above provided during the three calendar day period preceding the duedate of any payment on such Note. -15- 21 SECTION 5.8. Mutilated, Destroyed, Lost or Stolen Notes. If any Noteshall become mutilated, destroyed, lost or stolen, Lessor shall, upon thewritten request of the affected Lender, execute and Administrative Agent shallauthenticate and deliver, in replacement thereof, a new Note of the same seriesin the same principal amount, dated the date of the Note being replaced andissued under this Indenture. If the Note being replaced has become mutilated,such Note shall be surrendered to Administrative Agent, a photocopy thereofshall be furnished to Lessor by Administrative Agent and such Note shall becanceled by Administrative Agent. If the Note being replaced has been destroyed,lost or stolen, the affected Lender shall furnish to Lessor, Lessee andAdministrative Agent such security or indemnity as may be required by them tohold Lessor, Lessee and Administrative Agent harmless and evidence satisfactoryto Lessor, Lessee and Administrative Agent of the destruction, loss or theft ofsuch Note and of the ownership thereof, provided, however, that if any Lender,any Affiliate of Lender, or any other institutional investor, or a nominee ofany thereof is the owner of any such lost, stolen, destroyed, or mutilated Note,then the affidavit of the president, vice president, treasurer or assistanttreasurer of such holder setting forth the fact of loss, theft, destruction ormutilation and of its ownership of the Note at the time of such loss, theft,destruction or mutilation shall be accepted as satisfactory evidence thereof andno security or indemnity shall be required as a condition to execution anddelivery of a new Note other than the written agreement of such holder toindemnify Lessor and Administrative Agent for any claims or actions against andresulting from the issuance of such new Note. SECTION 5.9. Payment of Expenses on Transfer. Upon the issuance of anew Note or Notes pursuant to Section 5.7 or 5.8 hereof, Lessor and/orAdministrative Agent may require from the party requesting such new Note orNotes, without any right of reimbursement under any Operative Document, paymentof a reasonable sum to reimburse Lessor and/or Administrative Agent for, or toprovide funds for, the payment of any tax or other governmental charge inconnection therewith by Lessor or Administrative Agent. SECTION 5.10. The New Notes. (a) Each new Note (herein, in this Section 5.10, called a "New Note")issued pursuant to Sections 5.7 and 5.8 hereof in exchange for or insubstitution or in lieu of an outstanding Note (herein, in this Section 5.10,called an "Old Note") shall be dated the date of such Old Note. AdministrativeAgent shall mark on each New Note (i) the date to which principal and interesthave been paid on such Old Note, (ii) all payments and prepayments of principalpreviously made on such Old Note which are allocable to such New Note, and (iii)the amount of each installment payment payable on any such New Note. Eachinstallment payment payable on such New Note on any date shall bear the sameproportion to the installment payment payable on such Old Note on such date asthe original principal amount of such New Note bears to the original principalamount of such Old Note. Interest shall be deemed to have been paid on such NewNote to the date on which interest shall have been paid on such Old Note, andall payments and prepayments of principal marked on such New Note, as providedin clause (ii) above, shall be deemed to have been made thereon. (b) All New Notes issued in exchange for or in substitution or in lieuof Old Notes shall be valid obligations of Lessor evidencing the same aggregateamount of debt as the Old -16- 22Notes and shall be entitled to the benefits and security of this Indenture tothe same extent as the Old Notes. (c) Upon the issuance of any Note pursuant to this ParticipationAgreement, Administrative Agent shall prepare two copies of an amortizationschedule with respect to such Note setting forth the amount of the installmentpayments to be made on such Note after the date of issuance thereof and theunpaid principal balance of such Note after each such installment payment.Administrative Agent shall deliver, or send by first-class mail, postageprepaid, one copy of the applicable schedule to each Lender. SECTION 5.11. Prepayments. Notes shall not be subject to prepaymentexcept as provided in this Section 5.11, as follows: (a) Voluntary Prepayments. The Lessee shall have the right to prepay anamount equal to the outstanding amount of the Notes and Equity Investment inwhole at any time pursuant to the exercise of purchase option permitted underArticle XVII of the Lease at a price equal to the outstanding amount of theNotes and Equity Investment, together with accrued and unpaid interest andEquity Return and (until the third anniversary of the commencement of theInitial Lease Term) a premium in an amount as set forth in the SyndicationAgreement; provided, however, that the Lessee shall also pay all Break Costs inconnection with any such prepayment and all other amounts due and payable underand pursuant to the Operative Documents. (b) Mandatory Prepayments. (i) If at any time the sum of the aggregate amount of outstanding Loans and Equity Investment shall exceed the Aggregate Commitment Amount, the Lessee shall immediately make payment on the Notes or Equity Investment in an amount sufficient to eliminate such excess. Such payments shall be applied to Base Rate Loans/Equity Investment, then to Eurodollar Loans/Equity Investment, and with respect to each Type of Loans in direct order of their Interest Period maturities (if applicable). (ii) The Tranche A Notes, Tranche B Notes of the series issued on a Closing Date, together with the related Equity Investment for any Unit shall be prepaid in whole or in part, together with accrued interest and Equity Return thereon to the date of prepayment upon the occurrence of an Event of Loss with respect to such Unit of Equipment (a "Casualty Unit") (unless pursuant to Section 10.2 of the Lease, a new Unit shall have been substituted for such Casualty Unit), on the date specified for payment of Termination Value with respect to such Event of Loss in Section 10.3 of the Lease, in an aggregate amount equal to the sum of (A) an amount equal, as to principal thereof, to the product obtained by multiplying the aggregate unpaid principal amount of the Tranche A Notes and Tranche B Notes of such series outstanding, together with the related Equity Investment as of such date by a fraction, the numerator of which shall be the Termination Value of such Casualty Unit and the denominator of which shall be the aggregate Termination Value of all Units of Equipment that were included in the Trust Estate immediately prior to such payment date assuming such Event of Loss had not occurred, (B) the aggregate amount of interest and Equity Return accrued and unpaid to such date on the principal amounts of the Tranche A Notes and Tranche B Notes and Equity -17- 23 Investment being prepaid and (C) all other amounts due and payable to the Lenders and Owner Participant hereunder or pursuant to any of the Operative Documents with respect to such Unit or Units. (iii) If Lessee shall exercise its option under Article XVII of the Lease to purchase all but not less than all of the Equipment on the Expiration Date, then on such date, the Notes and the Equity Investment, together with accrued and unpaid interest and Equity Return and all other amounts due and owing the Participants under the Operative Documents, shall be paid. (iv) If the "Syndication Period" (as defined in the Syndication Agreement) shall terminate for any reason set forth in Section 1(b) of the Syndication Agreement, other than clause (iii) of Section 1(b), then on the date of such termination, the Notes and the Equity Investment, together with accrued and unpaid interest and Equity Return, shall be paid. (c) Prepayments Generally. (i) In the event of any prepayment of less than the entire principal amount of Notes then outstanding pursuant to Section 5.11(b), (X) Lessor shall deposit, in immediately available funds in the account of Administrative Agent at the place and by the time and otherwise in the manner provided in Section 5.5 hereof, the respective amounts set forth in Section 5.11(b), (Y) Lessor will allocate the principal amount so to be prepaid among all outstanding Tranche A Notes, Tranche B Notes and Equity Investment pro rata according to the respective unpaid principal amounts of the Notes and Equity Investment and (Z) the amount required to be paid pursuant to Section 5.2 hereof in respect of the Tranche A Notes and Tranche B Notes shall be reduced on each Payment Date subsequent to the date of such prepayment by an amount equal to the product of (A) the principal amount of Tranche A Notes and Tranche B Notes which would be due and payable on each Payment Date had such prepayment not been made and (B) a fraction, the numerator of which shall be the aggregate principal amount of the Tranche A Notes and Tranche B Notes so prepaid and the denominator of which shall be the entire principal amount of the Tranche A Notes and Tranche B Notes outstanding immediately prior to such prepayment. (ii) No prepayment of any Notes or any purchase by Lessor of any Notes may be made except to the extent and in the manner expressly permitted by Article V of this Participation Agreement. (iii) In the case of any prepayment of the Notes, notice thereof in writing to the Lenders to be prepaid shall be sent by Lessee by United States certified mail, postage prepaid, and received by each Lender and Administrative Agent at its address set forth in the Note Register, at least ten (10) days prior to the date fixed for prepayment. Such notice shall specify the date fixed for prepayment, the provision hereof under which such prepayment is being effected and that on the date fixed for prepayment there will become due and payable upon each Note or portion thereof so to be prepaid, at the place where the principal of the Notes to be prepaid is payable, the specified amount of principal -18- 24 thereof, together with the accrued interest to such date, and all other amounts due to the Lenders under the Operative Documents as is payable thereon, and after such date interest thereon shall cease to accrue. (iv) On the date of any partial prepayment of any Note, Administrative Agent shall prepare two (2) copies of an amortization schedule with respect to such Note setting forth the amount of the installment payments to be made on such Note after the date of such partial prepayment and the unpaid principal balance of such Note after each such installment payment. Administrative Agent shall deliver, or send by first-class mail, postage prepaid, one such copy of the applicable schedule to each Lender. ARTICLE VI COVENANTS SECTION 6.1. Covenants of Obligors. Each Obligor covenants and agreeswith Owner Participant, each Lender, Lessor and Collateral Agent that during theTerm: (a) (i) Each Obligor shall at all times maintain its corporate existence except as permitted by paragraph (ii) hereof. Each Obligor shall do or cause to be done all things necessary to preserve and keep in full force and effect its full corporate power and authority to perform its obligations under each Operative Document to which it is or will be a party; (ii) Guarantor shall not (A) consolidate with or merge with or into any other Person (a "Merger") or (B) transfer, directly or indirectly, by sale, exchange, lease or other disposition, or pledge or otherwise encumber, or become the subject of, or engage in a leveraged buy-out (or any other form of corporate reorganization, consolidation or combination), in any single transaction or series of transactions to one or more Persons (a "Transfer"), all or substantially all of its assets without the consent of Owner Participant and, if the Lien of the Security Agreement shall not have been discharged pursuant to the terms thereof, Collateral Agent and the Lenders, unless: (1) the Person that results from such Merger, if such Person is not Guarantor, or the Person to which such Transfer is made has assumed in writing all obligations of Guarantor, including the due and punctual performance and observance of each covenant and condition of this Participation Agreement and the other Operative Documents to be performed or observed by Lessee which assumption shall be in form and substance reasonably satisfactory to the Participants; (2) immediately after giving effect to such Merger or Transfer, no Unmatured Lease Default or Lease Event of Default shall have occurred and be continuing; and (3) the entity that results from such Merger or the entity to which such Transfer is made is a Solvent corporation that is organized under the laws of a state of the United States or the District of Columbia. -19- 25 (b) Each Obligor shall furnish to Owner Participant, Lessor and (untilthe Lien of the Security Agreement shall have been discharged pursuant to theterms thereof) Collateral Agent, notice on or before the 30th day prior to anyrelocation of its chief executive office or any change in its name. (c) Each Obligor shall, at its own expense (except where the expensethereof is expressly required to be paid by another party hereto), promptly andduly execute and deliver such further documents and assurances and take suchfurther action as any party to this Participation Agreement may from time totime reasonably request in order to more effectively carry out the intent andpurpose of this Participation Agreement and the other Operative Documents and toestablish and protect the rights and remedies created or intended to be createdin favor of any such Person hereunder and under the other Operative Documents. (d) Upon reasonable prior notice to Lessee or Guarantor, as the casemay be, such Obligor agrees to permit Owner Participant or any Lender (or suchPersons as or Owner Participant or any Lender may designate), at theirrespective sole cost, expense and risk, at any time during normal business hoursto discuss (subject to reasonable confidentiality arrangements and customaryexceptions) such Obligor's financial condition and business affairs (subject toany restrictions on selective disclosure or disclosure of non-public informationunder the Securities Exchange Act of 1934 and related laws, after giving effectto any confidentiality arrangements accepted by such Person) and the status ofthe Equipment with appropriate officers of such Obligor, all at such times andas often as Owner Participant or any Lender may reasonably request, providedthat during the continuance of an Unmatured Lease Default under Section 13.1(a), (b), (i), or (g) of the Lease or any Lease Event of Default, such meetingsshall be at Lessee's cost and expense. (e) During the term of the Lease, Guarantor will furnish to theParticipants, Lessor and Collateral Agent the following: (i) as soon as available and in any event within 60 days after the end of each quarterly period, except the last, of each fiscal year, a copy of Guarantor's filing with the Securities and Exchange Commission for such quarterly period on Form 10Q, or if such filing is not made with the Securities and Exchange Commission, the consolidated balance sheet of Guarantor and its consolidated Subsidiaries as at the end of such period, together with the related consolidated statement of income of Guarantor and its Subsidiaries for the period beginning on the first day of such fiscal year and ending on the last day of such quarterly period, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year, all in reasonable detail and certified by the chief financial officer or corporate controller of Guarantor as being complete and correct, prepared in accordance with generally accepted accounting principles and fairly presenting Guarantor's financial condition and results of operations; (ii) as soon as available and in any event within 120 days after the last day of each fiscal year, a copy of Guarantor's filing with the Securities and Exchange Commission for such annual period on Form 10K, or if such filing is not made with the Securities and Exchange Commission, the consolidated balance sheet, and related consolidated statements of income, retained income and cash flows, of Guarantor and its -20- 26 consolidated subsidiaries for such fiscal year, prepared and certified by Guarantor's nationally recognized external auditors setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, and certified by the chief financial officer or corporate controller of Guarantor as being complete and correct, prepared in accordance with generally accepted accounting principles and fairly presenting Guarantor's financial condition and results of operations; (iii) within the period provided in subparagraph (ii) above, a certificate, signed by Authorized Officer of Guarantor, to the effect that the signer thereof is familiar with the terms and provisions of the Lease and Guaranty and that at the date of said certificate the signer is not aware, after due inquiry, of any default in compliance by Lessee or Guarantor with any of the covenants, terms or provisions of the Lease and each other Operative Document to which either is a party, or if the signer is aware of any such default, he shall disclose in such certificate the nature thereof and the nature of the action Lessee is taking or proposes to take with respect thereto; (iv) such additional information as any Participant may reasonably request concerning the business or financial condition of Lessee or relating to the Equipment; and (v) written notice specifying any condition which constitutes a Unmatured Lease Default or Lease Event of Default, and the nature and status thereof, promptly after any Authorized Officer of Lessee or Guarantor, as the case may be, acquires actual knowledge thereof. (f) Minimum Consolidated Tangible Net Worth. Guarantor shall at alltimes maintain Consolidated Tangible Net Worth at an amount not less than thesum of (i) $250,000,000 plus (ii) 25% of Consolidated Net Income computed on acumulative basis for each of the elapsed fiscal quarters ending after December31, 2000 plus (iii) 50% of the amount of net proceeds to Guarantor of any publicor private offering of equity securities of Guarantor after the date hereof(other than pursuant to Guarantor's employee stock plans); provided thatnotwithstanding that Consolidated Net Income for any such elapsed fiscal quartermay be a deficit figure, no reduction as a result thereof shall be made withrespect to the sum to be maintained pursuant hereto. (g) Maximum Leverage Ratio. Guarantor shall not permit the ratio("Leverage Ratio") of its Consolidated Funded Debt to Consolidated TotalCapitalization at any time to exceed 0.60 to 1. (h) Modifications to Covenants. If any of Guarantor's credit agreementswhich contain covenants similar to the covenants set forth in Sections 6.1(f)and (g) hereof are amended such that such corresponding covenants in such creditagreements become more restrictive than the covenant set forth in Sections6.1(f) and (g) hereof, Lessee shall promptly notify each of the parties heretoof such amendment and hereby agrees that it shall promptly enter into anamendment of this Participation Agreement at the request of Required Lenders,satisfactory in all respect to the parties hereto (other than Lessee), whichamendment shall amend Sections 6.1(f) and (g) and any other applicableprovisions so that such provisions are as restrictive as the correspondingprovisions in such credit agreements. -21- 27 SECTION 6.2. Covenants of Owner Participant. Owner Participantcovenants and agrees with Lessee, each Lender, Lessor and Collateral Agent asfollows: (a) No Termination of Trust. During the Term, without the prior writtenconsent of Lessee and (unless the Lien of the Security Agreement shall have beendischarged pursuant to the terms thereof) Lenders and Collateral Agent, OwnerParticipant shall not terminate the Trust Agreement or the trust createdpursuant thereto. (b) Removal of Liens. Owner Participant will not directly or indirectlycreate, incur, assume or suffer to exist any Lessor Liens attributable to it onthe Equipment, the Trust Estate or the Collateral Estate and, subject to aPermitted Contest, it will, at its own cost and expense, promptly take suchaction as may be necessary to discharge fully any such Lessor Liens. SECTION 6.3. Covenants of Collateral Agent. Collateral Agent covenantsand agrees with Lessee, the Lenders, Owner Participant and Lessor that (a) itwill not directly or indirectly create, incur, assume or suffer to exist anyLiens on the Equipment, the Trust Estate or the Collateral Estate that resultfrom any act, failure to act or claim against Collateral Agent and not relatedto the transactions contemplated by this Participation Agreement or any of theother Operative Documents, (b) it will, at its own cost and expense, promptlytake such action in its individual capacity as may be necessary to dischargefully any such Liens on the Collateral Estate, and (c) it will not sell,transfer or otherwise dispose of all or any part of the Trust Estate where suchsale, transfer or disposition would violate the Lease or the Security Agreement. SECTION 6.4. Covenants of Trust Company. Trust Company covenants andagrees with Lessee, the Note Purchaser, Owner Participant and Collateral Agentthat (a) it will not directly or indirectly create, incur, assume or suffer toexist any Lessor Liens attributable to it on the Equipment, the Trust Estate orthe Collateral Estate, (b) it will, in its individual capacity and at its owncost and expense, promptly take such action in its individual capacity as may benecessary to discharge fully such Lessor Liens arising by, through or under itin its individual capacity on the Trust Estate, and (c) during the Term, it willnot sell, transfer, assign or otherwise dispose of all or any part of the TrustEstate except to a successor trust company acting as trustee under the TrustAgreement. SECTION 6.5. Covenant of Lessor. Lessor shall furnish to Lessee and(until the Lien of the Security Agreement shall have been discharged pursuant tothe terms thereof) Collateral Agent and each Lender, notice on or before the30th day prior to any name change or relocation of its chief executive office orprincipal place of business or regarding the books and records relating to theEquipment or the Trust Estate. ARTICLE VII GENERAL INDEMNITY SECTION 7.1. Indemnity. (a) Indemnified Claims. Lessee hereby agrees to assume liability for,and does hereby agree to defend, indemnify, protect, save and keep harmless onan After-Tax Basis each Indemnitee from and against any and all liabilities,obligations, losses, damages, penalties, claims (including claims by anyemployee of Lessee or any of its contractors), actions, suits and -22- 28related costs, claims and disbursements, including reasonable legal fees andclaims and costs of investigation, of whatsoever kind and nature (for purposesof this Section collectively called "Claims"), imposed on, asserted against orincurred by any Indemnitee, in any way based on, relating to or arising out of: (i) this Participation Agreement, the Lease (including any Lease Supplement) or any other Operative Document, or the transactions contemplated thereby (including any misrepresentation or breach of warranty or covenant by Lessee contained herein or therein or in any other document or certificate delivered by Lessee pursuant hereto) or any waivers, modifications, supplemental, or amendments thereto, or the enforcement thereof against Lessee; (ii) the Equipment or any Unit or part thereof, or the selection, rejection, location, construction, design, manufacture, financing, acceptance, rejection, installation, ownership, purchase, delivery, non-delivery, lease, sub-leasing, transportation, possession, use, operation, condition substitution, sale, return or disposition of the Equipment or any Unit or part thereof (including, without limitation, latent and other defects, whether or not discoverable by the Indemnitee or Lessee, and any claim for patent, trademark or copyright infringement and any claim arising under any strict liability doctrine in tort); (iii) any Environmental Claims in connection with, or alleged to be in connection with (whether or not in compliance with the terms of the Lease) the operation, use, possession, storage, abandonment or return of any Unit of Equipment, and any Environmental Claims (including Environmental Claims related to real property) in connection with, or alleged to be in connection with (whether or not in compliance with the terms of the Lease) the treatment, recycling, use, storage, transportation, disposal, presence, discharge, spillage, release or escape of any commodity loaded, stored or transported in any Unit prior to its return empty to Lessor in accordance with and in the condition required by the Lease; (iv) the offer, sale, delivery, resale or holding of the Notes or interests in the Trust Estate as contemplated by and pursuant to the terms of the Participation Agreement; (v) any violation of law, rule, regulation or order by the Lessee or any of Person in connection with the use or operation of the any Unit; or (vi) the acquisition or holding of any Notes being deemed to result in a "prohibited transaction" under ERISA or the Code. (b) Lessee's Claims Excluded. The following are excluded from Lessee'sagreement to indemnify under this Section 7.1: (i) Claims with respect to any Unit to the extent attributable to acts or events occurring after (A) in the case of the exercise by Lessee of any purchase option with respect to such Unit, or the occurrence of a Event of Loss with respect to such Unit, the payment of all amounts due in connection with any such event and the discharge of the -23- 29 Security Agreement or (B) in all other cases with respect to any Unit, the later to occur of (x) the earlier to occur of the termination of the Lease and the expiration of the Lease Term, (y) the return of such Unit to the Lessor in accordance with the terms of Articles XII and XIV of the Lease or (z) the discharge of the Lien of the Security Agreement; (ii) any Taxes (other than amounts in respect of Taxes necessary to hold such Indemnitee harmless on an After-Tax Basis and other than with respect to claims arising from a violation of ERISA), it being agreed that the indemnity for Taxes is in Section 8.1; (iii) with respect to a particular Indemnitee, claims only to the extent resulting from the willful misconduct or gross negligence of such Indemnitee (other than gross negligence or willful misconduct imputed as a matter of law to such Indemnitee solely by reason of its interest in the Equipment) the inaccuracy of any representation made by such Indemnitee in the Operative Documents or any certificate delivered in connection therewith or the breach by such Indemnitee of its express obligations under the Operative Documents (other than any breach imputed as a matter of law to such Indemnitee solely by reason of its interest in the Equipment or as a result of Lessee's acts); (iv) with respect to a particular Indemnitee, any Claim to the extent attributable to the offer, sale, disposition or transfer (voluntary or involuntary) by or on behalf of such Indemnitee of any interest in the Equipment, any Operative Document, the Trust Estate or the Notes or any similar security, other than a transfer by such Indemnitee of its interests in any Unit in connection with Article XI of the Lease or a transfer to the Lessee pursuant to Article XVII of the Lease or a transfer pursuant to Article XIII or XIV of the Lease arising by reason of Lease Event of Default; (v) any cost, fee or expense expressly payable by a Person other than Obligor pursuant to the Lease or any other Operative Document; (vi) with respect to a particular Indemnitee, Claims resulting from any prohibited transaction, within the meaning of ERISA or section 4975(c)(l) of the Code, other than, in case of the Owner Participant and a Note Purchaser, arising from the purchase and holding by the Owner Participant or a Note Purchaser, as the case may be, of its respective interest in the Trust Estate or the Notes in accordance with its representations and covenants under the Operative Documents; and (vii) as to any Indemnitee that is a Lender, Claims resulting from any breach of a fiduciary duty under ERISA by such Indemnitee. (c) Procedure. The Lessee shall notify each Indemnified Party of anyclaim or liability that is, or is likely to result in, a Claim indemnifiableunder this section of which it has actual knowledge. If any Indemnitee shallhave knowledge of any Claim, it shall give prompt written notice thereof toLessee; provided, however, that the failure of such Indemnitee to give suchnotice shall relieve Lessee of its obligations hereunder only if and to theextent such failure precludes a contest by Lessee hereunder. Lessee may, at itselection and at its expense, in good faith and by appropriate legal proceedings,contest or defend an asserted claim or liability for which it is indemnifyingunder this Section 7.1 so long as, in the reasonable opinion of the -24- 30Indemnitee, such defense is being diligently conducted by Persons reasonablysatisfactory to the affected Indemnified Parties; provided, however, that Lesseeshall have no such right (i) unless the Lessee shall deliver to the relevantIndemnified Party a written acknowledgment of the Lessee's obligation toindemnify such Indemnified Party with respect to such Claim, or (ii) if anyUnmatured Lease Default or Lease Event of Default shall have occurred and becontinuing; or (iii) if such Claim involves a possible imposition of anycriminal liability or penalty or civil penalty on such Indemnified Party or (iv)if such proceedings will involve a material risk of the sale, forfeiture or lossof, or the creation of any Lien (other than a Permitted Lien) on the Equipment,the Trust Estate or any part of any thereof unless the Lessee shall haveprovided security for the Lessee's obligations under this Section with respectto such Claim reasonably satisfactory to the relevant Indemnified Parties withrespect to such risk. Settlement of any dispute or Claim or action in the nameof an Indemnitee shall not be finalized without such Indemnitee's prior writtenconsent, which consent shall not be unreasonably withheld. The Lessee willprovide the Indemnified Party with such information not within the control ofsuch Indemnified Party, as is in the Lessee's control or is reasonably availableto Lessee, which such Indemnified Party may reasonably request and shallotherwise cooperate with such Indemnified Party so as to enable such IndemnifiedParty to fulfill its obligations under this Section 7.1. Where the Lessee, orthe insurers under a policy of insurance maintained by the Lessee, undertakesthe defense of an Indemnified Party with respect to a claim, no additional legalfees or other expenses of such Indemnified Party in connection with the defenseof such Claim shall be indemnified hereunder unless: (A) such fees or expenseswere incurred at the request of the Lessee or (B) in the written opinion ofindependent counsel to such Indemnified Party an actual or potential conflict ofinterest exists where it is advisable for such Indemnified Party to berepresented by separate counsel. In any of the above cases, the reasonable feesand expenses of such separate counsel shall be borne by the Lessee. Subject to the requirements of any policy of insurance an IndemnifiedParty may participate at its own expense in any judicial proceeding controlledby the Lessee pursuant to the preceding provisions. (d) Payment, Survival. Any amount payable to an Indemnified Partypursuant to this Section shall be paid within thirty (30) days after receipt ofa written demand therefor from such Indemnified Party accompanied by a writtenstatement describing in reasonable detail the Claims which are the subject ofand basis for such indemnity and the computation of the amount so payable.Nothing in the foregoing sentence shall imply any excuse of the Lessee'sobligations under this section to protect, defend, assume liability for, saveand keep harmless the Indemnified Parties for the Claims herein provided. Allthe indemnities contained in this Section 6.1 shall continue in full force andeffect, notwithstanding the expiration or other termination of the Lease, withrespect to events occurring prior to return of the Units to Lessor pursuant tothe Lease and are expressly made for the benefit of, and shall be enforceableby, each Indemnitee. (e) Waiver of Certain Claims. Lessee hereby waives and releases anyClaim now or hereafter existing against any Indemnitee arising out of death orpersonal injury to personnel of Lessee, loss or damage to property of Lessee, orthe loss of use of any property of Lessee, which may result from or arise out ofthe condition, use or operation of the Equipment during the Lease Term,including without limitation any latent or patent defect whether or notdiscoverable. -25- 31 (f) Conflicting Provisions. The general indemnification provisions ofthis Section 7.1 are not intended to waive or supersede any specific provisionsof, or any rights, obligations or remedies of Lessee under the Lease, thisParticipation Agreement or any other Operative Document. SECTION 7.2. No Impairment. Notwithstanding anything herein to thecontrary, the actions or omissions of any Indemnitee not constituting grossnegligence or willful misconduct shall not, in any way, impair the right of anyother Indemnitee to indemnification under this Article. ARTICLE VIII GENERAL TAX INDEMNITY; OTHER INDEMNITIES SECTION 8.1. Indemnity. (a) Indemnity. Lessee agrees to pay, and indemnify and hold harmlesseach Indemnitee from, all license and registration fees and all taxes,assessments, rates, excises, permit fees, inspection fees, levies, imposts,duties, charges or withholdings of any nature whatsoever, including, sales,gross receipts, transfer, property, stamp, use, value-added, general and othertaxes, together with any penalties, fines or interest thereon imposed againstany Indemnitee, Lessee, the Equipment or any Unit or part thereof or interesttherein by any federal, state or local government or taxing authority in theUnited States or by any foreign country or subdivision thereof, or by anyinternational organization, upon or with respect to the Equipment or any Unit orpart thereof, or the construction, manufacture, financing, acceptance,installation, ownership, purchase, delivery, lease, sub-leasing, rental,transportation, possession, use, operation, improvement, modification,substitution, replacement, maintenance, condition substitution, sale, return ordisposition of the Equipment or any Unit or part thereof or interest therein orupon the rentals or upon, or with respect to the Lease, the Rent or other sumspayable by Lessee under the Operative Documents or with respect to the otherOperative Documents, any payment made pursuant to any such agreement, or theproperty, the income or other proceeds received with respect to any item ofEquipment or otherwise on or with respect to the transactions contemplated bythe Operative Documents (all such fees, taxes, assessments, rates, excises,levies, imposts, duties, charges and withholdings, and all penalties, additionsto tax and interest imposed in connection therewith being hereinafter called"Taxes"); provided, however, that the foregoing indemnity shall not apply to: (i) Taxes measured by net income (including any minimum or alternative minimum income taxes and any income taxes on or measured by items of tax preference), capital or net worth, and withholding in respect of any thereof, other than Taxes in the nature of or in lieu of sales, property, license, use or rental taxes and other than to the extent imposed by any foreign government or taxing authority as a result of (A) the operation, presence or registration in such jurisdiction of such Units, (B) the presence in such jurisdiction of a permanent establishment or fixed place of business of Lessee or any affiliate of Lessee, (C) the residence, nationality or place of management and control of Lessee or any affiliate of Lessee, (D) the payment from such jurisdiction by any Lessee or any affiliate of Lessee of any amount due by Lessee under any of the Operative -26- 32 Documents or (E) any combination of factors (A) - (D) above (hereinafter referred to as "Income Taxes"); (ii) Taxes imposed on an Indemnitee resulting from a voluntary sale, assignment, transfer or other disposition by such Indemnitee of any Unit of Equipment, the Trust Estate or interest therein or any interest in any trust holding such Equipment except if a Lease Event of Default shall have occurred and be continuing or due to the performance of an act under Articles VII, X, XII, XVI and XVII of the Lease or an act otherwise required by any Operative Document; (iii) Taxes imposed on an Indemnitee resulting from an involuntary sale, assignment, transfer or other disposition by such Indemnitee of any Unit of Equipment, the Trust Estate or interest therein or any interest in any trust holding such Equipment if such involuntary sale, assignment, transfer or other disposition shall occur as a result of the bankruptcy or dissolution of such Indemnitee, except if a Lease Event of Default shall have occurred and be continuing and such bankruptcy or dissolution is attributable to such Lease Event of Default; (iv) Taxes in respect of any period after the expiration or early termination of this Lease so long as Lessee shall have discharged all its obligations under this Lease; (v) Taxes that have been included in the cost of the Equipment and paid to the appropriate taxing authority; (vi) Taxes in the nature of interest, penalties, fines or additions to tax resulting from the failure of an Indemnitee to timely provide notification of a Claim pursuant to Section 8.1(e) hereof, provided, however, that the failure of such Indemnitee to give such notice shall relieve Lessee of its obligations hereunder only if and to the extent such failure precludes a contest by Lessee hereunder; and (vii) Taxes with respect to Claims arising under ERISA or section 4975 of the Code, it being agreed that indemnity for such Claims is in Section 7.1. (b) Reports. In the event any reports with regard to Taxes (other thanIncome Taxes) are required to be made with respect to the Equipment or any Unitthereof, Lessee will, where permitted to do so under applicable rules orregulations, make and timely file such reports in such a manner as to show theinterest of Lessor and any other Indemnitee therein as shall be reasonablysatisfactory to each thereof or, where not so permitted, will, as soon as Lesseehas knowledge thereof, notify Lessor and any other Indemnitee of suchrequirement and will assist in preparation of such reports by Lessor or anyother Indemnitee in such manner as shall be reasonably satisfactory to eachthereof. Unless otherwise required by law, Lessee shall be responsible forreporting the Equipment for ad valorem property tax purposes in the applicablestates or localities and, unless otherwise required by law, no Indemnitee shallinclude the Equipment in any ad valorem or other similar tax returns filed by itin such states or localities. (c) After-Tax Basis. Lessee further agrees that, with respect to anypayment or indemnity to an Indemnitee under this Article VIII, andnotwithstanding the proviso in Section 8.1(a), Lessee's indemnity obligationsshall include any amount necessary to hold such -27- 33Indemnitee harmless on an After-Tax Basis from all Taxes required to be paid bysuch Indemnitee with respect to such payment or indemnity (including anypayments under this Section 8.1(c)). Payment shall be made by Lessee inimmediately available funds no later than one (1) Business Day prior to the dateon which the Indemnitee must transfer funds to pay such Taxes. (d) Payment; Survival. All amounts payable by Lessee pursuant to thisSection 8.1 shall be payable directly to the Indemnitee except to the extentpaid to a governmental agency or taxing authority. All the indemnities containedin this Section 8.1 and the obligation, if any, of Lessee to make payments toeach Indemnitee pursuant to this Section 8.1, shall continue in full force andeffect, notwithstanding the expiration or other termination of the Lease inwhole or in part, as to matters arising prior to the return of the Units ofEquipment to Lessor in accordance with the Lease until all such obligations ofLessee and each Indemnitee have been met and such liabilities have been paid infull and are expressly made for the benefit of, and shall be enforceable by,each Indemnitee. Lessee's obligations under this Section 8.1 shall be that ofprimary obligor irrespective of whether the Indemnitee shall also be indemnifiedwith respect to the same matter under some other agreement by another Person. (e) Contest. If any claim is made against any Indemnitee, bycommencement of proceedings against the Indemnitee or otherwise, for any Taxesas to which Lessee has an indemnity obligation pursuant to this Section 8.1,such Indemnitee shall promptly notify Lessee of such claim in writing; provided,however, the failure to give such notice shall relieve Lessee of its obligationshereunder only if such failure precludes a contest by Lessee hereunder. Lesseemay, at its sole cost and expense, in good faith and by appropriate legalproceedings, contest or defend an asserted claim or liability for which it isindemnifying under this Section 8.1 (and has acknowledged liability in writingto the relevant Indemnified Parties) so long as in the reasonable opinion of theIndemnified Person, such defense is being diligently conducted by Personsreasonably satisfactory to the affected Indemnitees; provided, however, if therehas been a material adverse change in the business, assets, operations,prospects or condition (financial or otherwise) of Lessee, Lessee may onlyconduct such contest upon providing a letter of credit, bond or other securitysatisfactory in all respects to Lessor to cover the potential Taxes involved insuch contest; and provided further, however, that Lessee may not conduct anycontest or defense (i) involving Taxes not indemnified by Lessee hereunder or(ii) if such Indemnitee or Owner Participant shall have reasonably determinedthat the conduct of such contest or defense will result in any material dangerof sale, forfeiture or loss of, or the creation of any Lien (except if Lesseeshall have adequately bonded such Lien or otherwise made provision to protectthe interests of such Indemnitee and Owner Participant in a manner reasonablysatisfactory to them) on the Equipment or any Unit of Equipment or may otherwiseinterfere with timely payments of Rent. (f) Verification. At the Lessee's request, the amount of any indemnitypayment by the Lessee or any payment by an Indemnitee to the Lessee pursuant tothis Section 8.1 shall be verified and certified by an independent publicaccounting firm mutually acceptable to the Lessee and such Indemnitee. The costsof such verification shall be borne by the Lessee unless such verification shallresult in an adjustment in the Lessee's favor of the lesser of (i) $50,000 or(ii) 20 percent of the payment as computed by such Indemnitee, in which casesuch fee shall be paid by such Indemnitee. In no event shall the Lessee have theright to review such Indemnitee's -28- 34tax returns or receive any other confidential information from such Indemniteein connection with such verification. Any information provided to suchaccountants by any Person shall be and remain the exclusive property of suchPerson and shall be deemed by the parties to be (and the accountants willconfirm in writing that they will treat such information as) the private,proprietary and confidential property of such Person, and no Person other thansuch Person and the accountants shall be entitled thereto and all such materialsshall be returned to such Person. Such accounting firm shall be requested tomake its determination within 30 days of the Lessee's request for verificationsand the computations of the accounting firm shall be final, binding andconclusive upon the Lessee and such Indemnitee. The parties agree that the soleresponsibility of the independent public accounting firm shall be to verify theamount of a payment pursuant to the Lease and that matters of interpretation ofthe Lease are not within the scope of the independent accounting firm'sresponsibilities. (g) Tax Ownership. Each Indemnitee represents and warrants that it willnot, prior to the termination of the Lease, claim ownership of (or any taxbenefits, including depreciation, predicated upon ownership of) the Equipmentfor any income tax purposes, it being understood that the Lessee is and willremain the owner of the Equipment for such income tax purposes until thetermination of the Lease. If, notwithstanding the income tax intentions of theparties as set forth herein, any Indemnitee actually receives any income taxdeductions, reductions in income tax or other income tax benefit as a result ofany claim for, or recharacterization requiring such party to take, any taxbenefits attributable to ownership of the Equipment for income tax purposes, andprovided that no Lease Event of Default in continuing, such Indemnitee shall payto the Lessee, together with an amount equal to any reduced Taxes payable bysuch Indemnitee as a result of such payment, the amount of such income taxsavings actually realized by such Indemnitee (less the amount of any increase inincome tax that is currently payable as a result of such claim orrecharacterization), provided that the Lessee shall agree to reimburse suchIndemnitee for any subsequent increase in such Indemnitee's income taxesresulting from such claim or recharacterization not taken into account in thepayment made to the Lessee, up to the net amount paid to the Lessee by eachIndemnitee. The parties agree that this Section 8.1(g) is intended to require apayment to the Lessee if and only if each Indemnitee shall have actuallyreceived an unanticipated tax savings with respect to the Equipment that wouldnot have been received if each Indemnitee had advanced funds to the Lessee inthe form of a loan secured by the Equipment in an amount equal to the EquipmentCost. Nothing in this Section 8.1 shall be construed to require any Indemniteeto take any affirmative action to realize any Tax savings or Tax benefit if inits reasonable judgment such action may have an adverse effect on suchIndemnitee (including such action or Tax position being or being viewed asinconsistent with any other action or Tax position claimed by such Indemniteefor the relevant period or periods). (h) Delivery of Forms. On or before the date hereof or, if later, thedate on which it acquires the rights and obligations of an Indemnitee pursuantto the Operative Documents, each Indemnitee which is not a United States person(within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986)will deliver to the Guarantor and the Administrative Agent a fully completed andduly executed copy of the appropriate United States Internal Revenue ServiceForm W-8 confirming that such Indemnitee is entitled under Section 1442 of theInternal Revenue Code or any other applicable provision thereof or under anyapplicable tax treaty or convention to receive payments under the OperativeDocuments without deduction or withholding of United States federal income tax.So long as the Commitments are outstanding -29- 35and until the obligations of the Obligors under the Operative Documents havebeen paid and performed in full, each Indemnitee shall also deliver a furthercopy of such Form W-8 or any successor forms thereto to the Guarantor upon theexpiration, if any, of the form previously delivered by such Indemniteehereunder, unless any change in law or regulation of the United States or anytaxing authority thereof has occurred prior to the date on which such deliverywould otherwise be required which renders such form inapplicable or which wouldprevent such Indemnitee from completing and delivering such form.Notwithstanding anything to the contrary in the Operative Documents, the Lesseeand the Obligors shall not be required to gross-up any payment for withholdingtaxes imposed on any Indemnitee which has failed to comply with its obligationsunder this Section 8.1(h) if such compliance would have avoided such withholdingtaxes and the Lessee and the Obligors shall be entitled to withhold from anypayments to such Indemnitee under this Agreement any such withholding taxes. SECTION 8.2. Indemnity Payments in Addition to Lease Obligations. TheLessee acknowledges and agrees that the Lessee's obligations to make indemnitypayments under this Article VIII are separate from, in addition to, and do notreduce, the Lessee's obligation to pay under the Lease that portion of theEquipment Cost constituting the Maximum Lessee Risk Amount. SECTION 8.3. Eurodollar Rate Lending Unlawful. Notwithstanding anyother provision herein, if the adoption of or any change in any Applicable Lawor in the interpretation or application thereof occurring after the Closing Dateshall make it unlawful for a Participant to make or maintain EurodollarLoan(s)/Equity Investment(s) as contemplated by the Operative Documents (i) suchParticipant shall promptly give written notice of such circumstances to theLessee and the other Participants (which notice shall be withdrawn whenever suchcircumstances no longer exist), (ii) the commitment of such Lenders or OwnerParticipant, as the case may be, hereunder to make Eurodollar Loan(s)/EquityInvestment(s) shall forthwith be canceled and, until such time as it shall nolonger be unlawful for such Participant to make or maintain EurodollarLoan(s)/Equity Investment(s), such Participant shall then have a commitment onlyto make a Base Rate Loan/Equity Investment when a Eurodollar Loan/EquityInvestment is requested and (c) such Participant's Loans and Equity Investmentthen outstanding as Eurodollar Loan(s)/Equity Investment(s), if any, shall beconverted automatically to Base Rate Loan(s)/Equity Investment(s) on therespective last days of then current Interest Periods with respect to such Loansand Equity Investment or within such earlier period as required by law. If anysuch conversion of Eurodollar Loan(s)/Equity Investment(s) occurs on a day whichis not the last day of then current Interest Period with respect thereto, theLessee shall pay to such Participant such amounts, if any, as may be requiredpursuant to Section 8.6. In any such case, interest and principal (if any) shallbe payable contemporaneously with the related Eurodollar Loan(s)/EquityInvestment(s) of the other applicable Participants. SECTION 8.4. Deposits Unavailable. If any of the Participants shallhave determined that: (a) Dollar deposits in the relevant amount and for the relevantInterest Period are not available to such Participant in its relevant market; or -30- 36 (b) by reason of circumstances affecting such Participant's relevantmarket, adequate means do not exist for ascertaining the interest rate or Yield,as the case may be, applicable to such Participant's Loans or Equity Investment, then, upon notice from such Participant to the Lessee and the otherParticipants (i) the obligations of the Participants to make Loans or EquityInvestment, as the case may be, shall be suspended and (ii) each outstandingLoan or Equity Investment, as the case may be, shall begin to bear interest oraccrue Yield at the Base Rate on the last day of the then current InterestPeriod applicable thereto. SECTION 8.5. Increased Costs, Etc. (a) If the adoption of or any change in any Applicable Law or in theinterpretation or application thereof applicable to any Indemnitee, orcompliance by any Indemnitee with any request or directive (whether or nothaving the force of law) from any central bank or other Governmental Authority,in each case made subsequent to the Initial Closing Date (or, if later, the dateon which such Indemnitee becomes an Indemnitee): (i) shall subject such Indemnitee to any Tax (other than withholding taxes) of any kind whatsoever with respect to any Eurodollar Loan(s)/Equity Investment(s), made or purchased by it or its obligation to make Eurodollar Loan(s)/Equity Investment(s) or maintain its commitment to make (or purchase) undivided interests in Eurodollar Loan(s)/Equity Investment, or change the basis of taxation of payments to such Indemnitee in respect thereof (except for excluded Taxes and changes in taxes measured by or imposed upon the overall gross or net income, franchise or other taxes (imposed in lieu of such net income tax), of such Indemnitee or its applicable lending office, branch, or any affiliate thereof); or (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, Loans, Equity Investment, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Indemnitee which is not otherwise included in the determination of the Adjusted Eurodollar Rate hereunder; or (iii) shall impose on such Indemnitee any other condition (excluding any Tax of any kind) whatsoever in connection with the Operative Documents;and the result of any of the foregoing is to increase the cost to suchIndemnitee of making or maintaining Eurodollar Loan(s)/Equity Investment(s) orto reduce any amount receivable hereunder in respect thereof, then, in any suchcase, upon notice to the Lessee from such Indemnitee, the Lessee shall pay tosuch Indemnitee any additional amounts necessary to compensate such Indemniteefor such increased cost or reduced amount receivable. All payments required bythis Section 8.5(a) shall be made by the Lessee within ten (10) Business Daysafter demand by the affected Indemnitee. Notwithstanding anything to thecontrary contained herein, Lessee shall not be obligated to compensate anyIndemnitee for any amounts pursuant to this Section 8.5 attributable to a periodof time more than 90 days prior to the giving of notice by such Indemnitee ofits intention to seek compensation under this Section 8.5. If any -31- 37Indemnitee becomes entitled to claim any additional amounts pursuant to thissubsection, it shall provide prompt notice thereof to the Lessee, certifying (x)that one of the events described in this clause (a) has occurred and describingin reasonable detail the nature of such event, (y) as to the increased cost orreduced amount resulting from such event and (z) as to the additional amountdemanded by such Indemnitee and a reasonably detailed explanation of thecalculation thereof. Such a certificate as to any additional amounts payablepursuant to this clause submitted by any Indemnitee to the Lessee shall beconclusive in the absence of manifest error. In determining any such amount,such Indemnitee may use any method of averaging and attribution that it (in itssole and absolute discretion) shall deem applicable. This covenant shall survivethe termination of this Participation Agreement and the payment of the Loans andEquity Investment. (b) Each Indemnitee shall use its reasonable efforts to reduce oreliminate any claim for compensation pursuant to this Section 8.5, including,without limitation, a change within the United States in the office of suchIndemnitee at which its obligations related to this Participation Agreement aremaintained if such change will avoid the need for, or reduce the amount of, suchcompensation and will not, in the reasonable judgment of such Indemnitee, beotherwise disadvantageous to it. SECTION 8.6. Funding Losses. During the Term of the Lease andthereafter, the Lessee agrees to indemnify each Indemnitee and to hold eachIndemnitee harmless from any loss or expense which such Indemnitee may sustainor incur (other than through such Person's own gross negligence or willfulmisconduct) as a consequence of (i) default by the Lessee in making a borrowingof, conversion into or continuation of Loans or Equity Investment which areEurodollar Loan(s)/Equity Investment(s) after the Lessee has delivered anAdvance Request in accordance with the provisions of this ParticipationAgreement, (ii) default by the Lessee in making any prepayment of a Loan orEquity Investment which is a Eurodollar Loan/Equity Investment after the Lesseehas given a notice thereof in accordance with the provisions of thisParticipation Agreement or (iii) the making of a prepayment of Loans or EquityInvestment which are Eurodollar Loan(s)/Equity Investment(s) on a day which isnot the last day of an Interest Period with respect thereto. Suchindemnification may include an amount equal to the excess, if any, of (x) theamount of interest which would have accrued on the amount so prepaid, or not soborrowed, converted or continued, for the period from the date of suchprepayment or of such failure to borrow, convert or continue to the last day ofthe applicable Interest Period (or, in the case of a failure to borrow, convertor continue, the Interest Period that would have commenced on the date of suchfailure) in each case at the applicable rate of interest for such Loan or EquityInvestment which is a Eurodollar Loan/Equity Investment provided for herein(excluding, however, the Applicable Margin included therein, if any) over (y)the amount of interest (as reasonably determined by such Indemnitee) which wouldhave accrued to such Indemnitee on such amount by placing such amount on depositfor a comparable period with leading banks in the interbank eurodollar market.This covenant shall survive the termination of this Participation Agreement orany other Operative Document and the payment of the Loans, Equity Investment andall other amounts payable under the Operative Documents. SECTION 8.7. Capital Adequacy. (a) If the adoption of any applicable law, rule or regulation regardingcapital adequacy, or any change therein, or any change in the interpretation oradministration thereof by -32- 38any Governmental Authority, central bank or comparable agency charged with theinterpretation or administration thereof, or compliance by any Indemnitee withany request or directive regarding capital adequacy (whether or not having theforce of law) of any such authority, central bank or comparable agency, in eachcase made subsequent to the Initial Closing Date (or, if later, the date onwhich such Indemnitee becomes an Indemnitee pursuant to this ParticipationAgreement) has or will have the effect of reducing the rate of return on eitherIndemnitee's or its parent company's capital by an amount such Indemnitee deemsto be material, as a consequence of its commitments or obligations hereunder toa level below that which such Indemnitee or its parent company could haveachieved but for such adoption, effectiveness, change or compliance (taking intoconsideration such Indemnitee's or its parent company's policies with respect tocapital adequacy), then, upon notice from such Indemnitee, the Lessee shall payto such Indemnitee such additional amount or amounts as will compensate suchIndemnitee and its parent company for such reduction (it being understood thatsuch parent company shall not be reimbursed to the extent its subsidiaryIndemnitee is reimbursed by the Lessee in connection with the same or a similarlaw, rule, regulation, change, request or directive applicable to suchIndemnitee). All payments required by this Section 8.7 shall be made by theLessee within 10 Business Days after demand by the affected Indemnitee.Notwithstanding anything to the contrary contained herein, Lessee shall not beobligated to compensate any Indemnitee for any amounts pursuant to this Section8.7 attributable to a period of time more than 90 days prior to the giving ofnotice by such Indemnitee of its intention to seek compensation under thisSection 8.7. If any Indemnitee becomes entitled to claim any additional amountspursuant to this clause, it shall provide prompt notice thereof to the Lesseecertifying (x) that one of the events described in this clause (a) has occurredand describing in reasonable detail the nature of such event, (y) as to theincreased cost or reduced amount resulting from such event and (z) as to theadditional amount demanded by such Indemnitee and a reasonably detailedexplanation of the calculation thereof (including the method by which suchIndemnitee allocated such amounts to the Lessee). Such a certificate as to anyadditional amounts payable pursuant to this clause submitted by such Indemniteeto the Lessee shall be conclusive in the absence of manifest error; provided,however, that the method by which such Indemnitee allocated such amount to theLessee must have been applied in good faith and must have been a methodgenerally used by such Indemnitee for such purpose. This covenant shall survivethe termination of this Participation Agreement or any other Operative Documentand the payment of the Loans, Equity Investment and all other amounts payableunder the Operative Documents. (b) Each Indemnitee shall use its commercially reasonable efforts toreduce or eliminate any claim for compensation pursuant to this Section 8.7,including, without limitation, a change in the office of such Indemnitee atwhich its obligations related to the Operative Documents are maintained if suchchange will avoid the need for, or reduce the amount of, such compensation andwill not, in the reasonable judgment of such Indemnitee, be otherwisedisadvantageous to it. ARTICLE IX REPRESENTATIONS AND WARRANTIES SECTION 9.1. Representations and Warranties of the Obligors. Each ofthe Guarantor, and the Lessee represents and warrants to each Participant thatas of the Initial Closing Date: -33- 39 (a) Corporate or Partnership Existence and Standing. Each of theGuarantor and Lessee is duly organized, validly existing and in good standingunder the laws of its jurisdiction of organization and is in good standing andhas all requisite authority to conduct its business in each jurisdiction inwhich its business is conducted, except where failure to have such good standingor authority would not have a Material Adverse Effect. (b) Authorization and Validity. Each of the Guarantor and the Lesseehas the power and authority to execute and deliver the Operative Documents towhich it is or will be a party and to perform its obligations thereunder. Theexecution and delivery by the Guarantor and the Lessee of the OperativeDocuments to which it is or will be a party and the performance of itsobligations thereunder have been duly authorized by proper proceedings, and theOperative Documents constitute legal, valid and binding obligations of theGuarantor and the Lessee, enforceable against such Persons in accordance withtheir terms, except as enforceability may be limited by bankruptcy, insolvencyor similar laws affecting the enforcement of creditors' rights generally. (c) No Conflict; Government Consent. The execution, delivery andperformance by each of the Guarantor and the Lessee of the Operative Documentsto which it is or will be a party will not violate any law, rule, regulation,order, writ, judgment, injunction, decree or award binding on it, or conflictwith any organizational document or Material Agreement of it, or require anygovernment approval except where such violation, conflict or lack of approvalwould not have a Material Adverse Effect or result in the creation or impositionof any Lien in, of or on the Property of it or any of its Subsidiaries pursuantto the terms of any such Material Agreement. (d) Financial Statements. The September 30, 2000 consolidated financialstatements of the Guarantor and its Subsidiaries were prepared in accordancewith GAAP in effect on the date such statements were prepared and fairly presentthe consolidated financial condition and operations of the Guarantor and itsSubsidiaries at such date and the consolidated results of their operations forthe period then ended. (e) Material Adverse Change. As of the Initial Closing Date there hasbeen no change since September 30, 2000 in the business, Property, financialcondition or results of operations of the Guarantor and its Subsidiaries whichcould reasonably be expected to have a Material Adverse Effect other thancertain restructuring charges to be taken in the fourth calendar quarter of 2000up to $50,000,000 on a pre-tax basis. (f) Taxes. The Guarantor and its Subsidiaries have filed all UnitedStates federal tax returns and all other tax returns or reports which arerequired to be filed and have paid all taxes due pursuant to said returns orpursuant to any assessment received by the Guarantor or any of its Subsidiaries,except such taxes, if any, as are being contested in good faith and as to whichadequate reserves have been provided. No tax liens have been filed and no claimsare being asserted with respect to any such taxes which could reasonably beexpected to have a Material Adverse Effect. The charges, accruals and reserveson the books of the Guarantor and its Subsidiaries in respect of any taxes orother governmental charges are adequate in all material respects. The Guarantorknows of no pending investigation of the Guarantor or any of its -34- 40Subsidiaries by any taxing authority, nor of any pending but unassessed taxliability which, in either case, could reasonably be expected to have a MaterialAdverse Effect. (g) Litigation and Contingent Obligations. Except as disclosed in theGuarantor's most recent Form 10-K or 10-Q, or Form 8-K filed subsequent to itsmost recent Form 10-K or 10-Q filed with the SEC, there is no litigation,arbitration, governmental investigation, proceeding or inquiry pending or, tothe knowledge of an officer of the Guarantor, threatened against or affectingthe Guarantor or any of its Subsidiaries (including, without limitation, anysuch action involving Environmental Laws) which, in either case, couldreasonably be expected to have a Material Adverse Effect. (h) ERISA. The Unfunded Liabilities of all Single Employer Plans do notin the aggregate exceed $100,000,000. Neither the Guarantor nor any other memberof the Controlled Group has incurred, or is reasonably expected to incur, anywithdrawal liability to Multiemployer Plans in excess of $100,000,000 in theaggregate. Except for such matters as would not singly or in the aggregate haveor reasonably be expected to have a Material Adverse Effect, each SingleEmployer Plan complies in all material respects with all applicable requirementsof law and regulations, no Reportable Event has occurred with respect to anySingle Employer Plan, neither the Guarantor nor any other members of theControlled Group has withdrawn from any Multiemployer Plan with respect to whichit has any unsatisfied liability or initiated steps to do so, and no steps havebeen taken to reorganize or terminate any Single Employer Plan. (i) Regulation U. Margin stock (as defined in Regulation U) constitutesless than 25% of those assets of the Guarantor and its Subsidiaries which aresubject to any limitation on sale, pledge, or other restriction hereunder. TheGuarantor is not engaged principally, and does not as one of its importantactivities engage, in the business of extending credit for the purpose ofpurchasing or carrying margin stock (within the meaning of Regulations U or X ofthe Board of Governors of the Federal Reserve System), and no part of theproceeds of any extension of credit under this Agreement will be used topurchase or carry any such margin stock or to extend credit to others for thepurpose of purchasing or carrying any such margin stock other than the purchaseof margin stock from time to time in connection with transactions (i) authorizedby the board of directors of the Guarantor, (ii) either (a) authorized by theboard of directors or other governing body of the Person which stock is beingacquired or (b) involving less than 5% of the stock of any Person and (iii)which would not cause the Guarantor to fail to be in compliance with thefollowing sentence. Neither the Guarantor nor any Person acting on its behalfhas taken or will take any action which could reasonably be expected to causethis Agreement or any of the Notes to violate any of said Regulations U or X, orany other regulation of the Board of Governors of the Federal Reserve System orto violate the Securities Exchange Act of 1934, in each case as now in effect oras the same may hereafter be in effect. (j) Environmental Matters. The Guarantor, each of its Subsidiaries, andtheir respective Properties are in compliance with all Environmental Laws exceptwhere the failure to be in compliance could not reasonably be expected to have aMaterial Adverse Effect and neither the Guarantor nor any of its Subsidiaries issubject to any liability or obligation for remedial action thereunder or inconnection therewith which could reasonably be expected to have a MaterialAdverse Effect. There are no Hazardous Materials located on or under any of the -35- 41Property of the Guarantor or any of its Subsidiaries (other than petroleumproducts which are located thereon in the ordinary course of business and in amanner which does not constitute a violation of applicable Environmental Law)which could reasonably be expected to have a Material Adverse Effect. Neitherthe Guarantor nor any of its Subsidiaries has caused or permitted any HazardousMaterial to be disposed of on or under or released from any of its Propertieswhich disposal or release could reasonably be expected to have a MaterialAdverse Effect. (k) Investment Company Act. None of the Guarantor nor any PrincipalSubsidiary thereof is an "investment company" or a company "controlled" by an"investment company", within the meaning of the Investment Company Act of 1940,as amended. (l) Public Utility Holding Company Act. Each of the Guarantor and eachof its Principal Subsidiaries is not subject to, or is exempt from, regulationas a "holding company", a "subsidiary company" of a "holding company", or an"affiliate" of a "holding company", in each case as such terms are defined inPUHCA. (m) Full Disclosure. All information heretofore furnished by theGuarantor and the Lessee to the Administrative Agent or any Participant forpurposes of or in connection with this Participation Agreement or any of theother Operative Documents or any transaction contemplated hereby or thereby,taken as a whole is, and all such information hereafter furnished by theGuarantor and the Lessee to the Administrative Agent or any Participant, takenas a whole, will be, true and accurate in all material respects on the date asof which such information is stated or certified. (n) Use of Equipment. The Equipment and the contemplated use thereof bythe Lessee and its agents, assignees, employees, lessees, licensees and tenantswill comply in all material respects with all Applicable Law (including, withoutlimitation, Environmental Laws) and all Insurance Requirements, except for suchApplicable Law as the Lessee shall be contesting in good faith by appropriateproceedings that do not involve (i) any material risk of (a) foreclosure, sale,forfeiture or loss of, or imposition of any material Lien on, the Equipment orany part thereof, (b) the impairment of the ownership, use, operation ormaintenance of the Equipment or any part thereof or (c) any civil liabilitybeing incurred by any Participant or the Administrative Agent or (ii) any riskof criminal liability being incurred by any Participant or the AdministrativeAgent. (o) No Proceedings with Respect to Equipment. There is no action, suitor proceeding (including any proceeding with respect to a condemnation or underany Environmental Law) pending or, to the best of its knowledge, threatened withrespect to the Guarantor, the Lessee or any Unit which adversely affects theuse, operation, title to or value of such Unit. (p) Licenses, Approvals, Necessary Permits, etc. All licenses,approvals, authorizations, consents, permits including proof and dedication,applicable to the Lessee required for: (x) the acquisition of the Equipment and(y) the operation of the Equipment, have, in each case, either been obtainedfrom the appropriate Governmental Authorities having jurisdiction or fromprivate parties, as the case may be, or will be obtained from the appropriate -36- 42Governmental Authorities having jurisdiction or from private parties, as thecase may be, prior to commencing any such construction, use or operation forwhich such license, approval, authorization, consent or permit is required. (q) Perfection of Liens; Transfer of Title. The Security Agreementcreates a valid and enforceable Lien on the Collateral Estate in favor of theCollateral Agent, for the ratable benefit of the Lenders, and, upon the filingof the Security Interest Filings in the offices set forth on Exhibit C heretoand each other office specified in an Advance Request, and the filing ofapplications for new certificates of title as set forth herein, the CollateralAgent will have a first priority perfected Lien on the Collateral Estate. Nofiling, recording, registration or notice to any Governmental Authority will benecessary to establish, perfect and give record notice of the Lien on theCollateral Estate in favor of the Collateral Agent, as applicable, in each case,except for the filing of the Security Interest Filings described in thepreceding sentence. There are no fees payable to any Governmental Authority withrespect to the filing and recordation described in this clause (q), except forthose fees which the Lessee has described hereinabove. Each Bill of Saletransfers to Lessor valid title to the Equipment described on the scheduleattached thereto free and clear of any all encumbrances, liens, charges ordefects. With respect to all Units of Equipment with respect to whichcertificates of title have been issued, such certificates of title shall beamended in accordance with Applicable Law to show Lessee as the owner of suchEquipment and to show Collateral Agent as lienholder thereof specifically asfollows: "Fleet Capital Corporation, as Collateral Agent for the Lenders, as assignee of Wabash Statutory Trust-2000 One Financial Plaza 2nd Floor RI DE 03702C Providence, RI 02903 Attn: Steve Aalvik, Senior Vice President"No filing or recordation must be made, no notice must be given, and no otheraction must be taken with respect to any state or local jurisdiction or anyperson in order to preserve to Lessor the rights transferred by the Bill ofSale. (r) Patents, Trademarks. There are no patents, patent rights,trademarks, service marks, trade names, copyrights, licenses or otherintellectual property rights with respect to the Equipment that are necessaryfor the operation of the Equipment, except to the extent that the Lessee has, orcan obtain in the ordinary course of business as and when needed, rights inrespect thereof without payment of royalties or other licensing payments (otherthan those made in the ordinary course of business) which rights may be freelyleased, licensed or otherwise provided to, or obtained by, the Lessor or anysuccessor owner, lessee, user or operator of the Equipment or any part thereof. (s) Subjection to Government Regulation. None of the AdministrativeAgent or any Participant will become subject to ongoing regulation of itsoperations by any other Governmental Authority solely by reason of entering intothe Operative Documents or the consummation or performance of the transactionscontemplated thereby, except for regulation -37- 43the applicability of which depends upon the existence of facts in addition tothe ownership of, or the holding of any interest in, the Equipment. (t) Insolvency. None of the Guarantor or the Lessee is entering intothe Operative Documents with the actual intent to hinder, delay or defraud itscurrent or future creditors, nor does the Guarantor or the Lessee intend to orbelieve that it will incur, as a result of entering into this ParticipationAgreement and the transactions contemplated hereby, debts beyond its ability torepay. Neither the Guarantor nor the Lessee is as of the date of thisParticipation Agreement "insolvent" as that term is defined in 11 U.S.C. Section101(34), nor will the consummation of the transactions contemplated by thisParticipation Agreement render any Obligor insolvent (giving effect to the fairvaluation of its assets) or result in any Obligor having unreasonably smallcapital for the conduct of its business. (u) No Transfer Taxes. No sales, use, excise, transfer or other tax,fee or imposition shall result from the sale, transfer, lease, sublease orpurchase of any portion of the Equipment and other Equipment, except such taxes,fees or impositions that will have been paid in full on or prior to the eachClosing Date related thereto or which are covered under the indemnity providedby the Lessee herein. (v) No Casualty. No fire or other casualty with respect to theEquipment or any Unit has occurred which fire or other casualty has materiallyand adversely affected the use, value, operation or useful life of the Equipmentor any Unit and no Event of Loss has occurred with respect to any Unit. (w) Insurance. The Lessee or the Guarantor has obtained or arranged onbehalf of the Lessor, insurance coverage covering the Equipment which meets therequirements of the Lease, and such coverage is in full force and effect. TheGuarantor carries insurance with reputable insurers or maintains a program ofself-insurance in respect of its material assets, in such manner, in suchamounts and against such risks as is customarily maintained by other Persons ofsimilar size engaged in similar business. (x) Liens. The Equipment is free and clear of all Liens other thanPermitted Equipment Liens. (y) Consent to Transactions. Each of the Lessee and the Guarantorconsent to (i) assignments by Lessor to the Collateral Agent of the Lease andthe Guaranty contained in the Security Agreement and (ii) the other transactionscontemplated hereby and by the Operative Documents. (z) Location of Principal Place of Business and Chief Executive Office.The principal place of business and chief executive office of Lessee is at thefollowing address: Apex Trailer Leasing & Rentals, L.P. 12913 Flushing Meadows Drive St. Louis, MO 63131 -38- 44Lessee keeps or will keep its company records concerning the Equipment and theOperative Documents at such chief executive office or, after thirty (30) daysprior written notice to Administrative Agent, as such other office specified insuch notice. SECTION 9.2. Representations and Warranties of Lessor. Lessorrepresents and warrants to each of the other parties hereto as of the InitialClosing Date as follows: (a) Due Organization, etc. Lessor is a duly organized and validlyexisting "Statutory Trust" as such term is defined in Section 34-501(2) of theStatutory Trust Act (as such term is defined in the Trust Agreement) under thelaws of the State of Connecticut, is in good standing under the laws of theState of Connecticut and has the power and authority to carry on its business asnow conducted and to enter into and perform its obligations under thisParticipation Agreement, each Operative Document to which it is a party and eachother agreement, instrument and document executed and delivered prior to theClosing Date in connection with, or as contemplated by, each such OperativeDocument. (b) Authorization; No Conflict. The execution, delivery and performanceof each Operative Document to which it is a party has been duly authorized byall necessary action on its part and neither the execution and delivery thereofby Lessor, nor the consummation of the transactions contemplated thereby byLessor, nor compliance by it with any of the terms and provisions thereof (i)requires or will require any approval (which approval has not been obtained) ofany party or approval or consent of any trustee or holders of any indebtednessor obligations of Lessor, (ii) contravenes or will contravene any Applicable Lawapplicable to or binding on it as of the date hereof, (iii) does or willcontravene or result in any breach of or constitute any default under, or resultin the creation of any Lessor Lien upon any of the Equipment, the TrustAgreement, any indenture, mortgage, chattel mortgage, deed of trust, conditionalsales contract, bank loan or credit agreement or other agreement or instrumentto which it or its properties may be bound or (iv) does or will require anyaction by any Authority. (c) Enforceability, etc. Each Operative Document to which it is a partyhas been duly executed and delivered by it and constitutes, or upon executionand delivery will constitute, a legal, valid and binding obligation enforceableagainst it in accordance with the terms thereof (except as may be limited bybankruptcy, insolvency or other similar laws affecting the enforcement ofcreditors' rights generally and general principles of equity). (d) Litigation. No litigation, investigation or proceedings of orbefore any arbitrator or Governmental Authority is pending or, to its knowledge,threatened by or against Lessor (a) with respect to any of the OperativeDocuments or any of the transactions contemplated hereby or thereby, or (b)which could reasonably be expected to have a Material Adverse Effect withrespect to the Lessor. (e) Assignment. Lessor has not assigned or transferred any of itsright, title or interest in or under the Lease, any Operative Document or any ofthe Equipment, except in accordance with the Operative Documents. (f) No Default. No Security Agreement Default or Security AgreementEvent of Default attributable to it has occurred and is continuing. -39- 45 (g) Principal Place of Business. Lessor's principal place of business,chief executive office and office where the documents, accounts and recordsrelating to the transactions contemplated by this Agreement and each otherOperative Document are kept are located at c/o State Street Bank and TrustCompany of Connecticut, 225 Asylum Street, Goodwin Square, Hartford, Connecticut06103, Attention: Corporate Trust Department. (h) Lessor Liens. The Equipment is free and clear of all Lessor Liensattributable to Lessor. (i) Activities. Since the date of its formation, the Lessor has notengaged in any activity other than that contemplated by the Trust Agreement orany other Operative Document or entered into any commitment or incurred anyDebt, other than pursuant to the Operative Documents to which it is a party. (j) Assets and Subsidiaries. The Lessor has no assets other than theTrust Estate and has no subsidiaries. (k) Investment Company Act; Public Utility Holding Company Act. Lessoris not (i) an "investment company" or a company "controlled" by an "investmentcompany, " within the meaning of the Investment Company Act of 1940, as amended,(ii) a "holding company," a "public utility company" or a "subsidiary company"of a "holding company" within the meaning of PUHCA, or (iii) subject to anyother Applicable Law which purports to restrict or regulate its ability toborrow money. SECTION 9.3. Representations and Warranties of the Trustee and theTrust Company. The Trust Company (only with respect to representations andwarranties relating to the Trust Company) and the Trustee hereby severallyrepresent and warrant that, as of the Initial Closing Date: (a) Due Incorporation; etc. The Trust Company is a national bankingassociation duly organized, validly existing and in good standing under the lawsof the United States of America, has the corporate power and authority, as theTrustee and/or in its individual capacity to the extent expressly providedherein or in the Trust Agreement, to enter into and perform its obligationsunder the Trust Agreement, this Participation Agreement and each of the otherOperative Documents to which it is or will be a party. (b) Due Authorization, Enforceability, etc. (1) (i) The Trust Agreement has been duly authorized, executed and delivered by the Trust Company, and (ii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participants party thereto, the Trust Agreement constitutes the legal, valid and binding obligation of the Trust Company, enforceable against it in its individual capacity or as Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. -40- 46 (2) (i) This Participation Agreement has been duly authorized, executed and delivered by the Trustee and the Trust Company, and (ii) assuming the due authorization, execution and delivery of this Participation Agreement by each party hereto other than the Trustee and the Trust Company, this Participation Agreement constitutes a legal, valid and binding obligation of the Trustee and the Trust Company, enforceable against the Trust Company or the Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (3) (i) Each of the Operative Documents to which the Trust Company or the Trustee is or will be a party has been or when executed and delivered will be duly authorized, executed and delivered by the Trust Company or the Trustee, and (ii) assuming the due authorization, execution and delivery of each of the Operative Documents by each party thereto other than the Trust Company or the Trustee, each of the Operative Documents to which the Trust Company or the Trustee is or will be a party constitutes or when executed and delivered will constitute a legal, valid and binding obligation of the Trust Company or the Trustee, as the case may be, enforceable against the Trust Company or the Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. (c) Non-Contravention. The execution and delivery by the Trust Company,in its individual capacity or as Trustee, as the case may be, of the TrustAgreement, this Participation Agreement and the other Operative Documents towhich it is or will be a party, the consummation by the Trust Company, in itsindividual capacity or as Trustee, as the case may be, of the transactionscontemplated hereby and thereby, and the compliance by the Trust Company, in itsindividual capacity or as Trustee, as the case may be, with the terms andprovisions hereof and thereof, do not and will not (i) contravene any ApplicableLaw of the State of Connecticut or the United States governing the banking ortrust powers of the Trust Company, the Trust Agreement or the organizationaldocuments of the Trust Company, or (ii) contravene the provisions of, orconstitute a default by the Trust Company under, or result in the creation ofany Lessor's Lien attributable to it in its individual capacity and unrelated tothe transactions contemplated by the Operative Documents upon the Trust Estateunder any indenture, mortgage or other material contract, agreement orinstrument to which the Trust Company is a party or by which the Trust Companyor its property is bound. (d) Governmental Actions. Assuming the representations and warrantiesof Lessee contained in Sections 9.1 are true, no authorization or approval orother action by, and no notice to or filing or registration with, anyGovernmental Authority of the State of Connecticut or the United Statesgoverning the banking or trust powers of the Trust Company is required for thedue execution, delivery or performance by the Trust Company or the Trustee, asthe case may be, of the Trust Agreement, this Participation Agreement or theother Operative Documents to which -41- 47the Trust Company or the Trustee is or will be a party, other than any suchauthorization or approval or other action or notice or filing as has been dulyobtained, taken or given. (e) Litigation. There is no pending or, to the actual knowledge of theTrust Company, threatened, action, suit, investigation or proceeding against theTrust Company either in its individual capacity or as the Trustee, as the casemay be, before any Governmental Authority of the State of Connecticut or theUnited States governing its banking and trust powers which, if determinedadversely to it, would materially adversely affect the ability of the TrustCompany, in its individual capacity or as Trustee, as the case may be, toperform its obligations under the Trust Agreement, this Participation Agreementor the other Operative Documents to which it is or will be a party or wouldmaterially adversely affect the Equipment or any interest therein or which wouldquestion the validity or enforceability of any Operative Document to which theTrust Company, in its individual capacity or as the Trustee, is or will be aparty. (f) Liens. The Trust Estate is free of any Lessor Liens attributable tothe Trust Company or the Trustee. ARTICLE X PAYMENT OF CERTAIN EXPENSES SECTION 10.1. Payment of Costs and Expenses. (a) The Lessee shall pay, or cause to be paid, from time to time allTransaction Expenses in respect of each Closing Date from the proceeds ofAdvances or otherwise. (b) The Lessee shall pay or cause to be paid when due (i) the feesdescribed in Section 4.5 and in the Syndication Agreement, (ii) all reasonableout-of-pocket expenses of the Trustee, the Administrative Agent and theParticipants (including reasonable attorneys' fees and legal expenses of onespecial counsel representing the Administrative Agent, the Lessor, and theLenders, under this Participation Agreement and the other Operative Documents),(iii) all costs and expenses (including reasonable attorneys' fees and legalexpenses) incurred by the Administrative Agent, the Trustee, or any Participantin entering into any future amendments or supplements with respect to any of theOperative Documents, whether or not such amendments or supplements areultimately entered into, or giving of waivers of consents hereto or thereto,(iv) all costs and expenses (including reasonable attorneys' fees and legalexpenses) incurred by the Administrative Agent, the Trustee or any Participantin connection with any purchase or sale of any part of the Equipment by theLessee or the Lessor, respectively, or any other Person pursuant to the Lease,(v) all costs and expenses (including reasonable attorneys' fees and legalexpenses) incurred by the Administrative Agent, the Trustee or any Participantin connection with any substitution, exchange, purchase or sale of any Equipmentby the Lessee or the Lessor, respectively, or any other Person pursuant to theLease, and (vi) all costs and expenses (including reasonable attorneys' fees andlegal expenses) incurred by any of the other parties hereto in respect of (x)the enforcement of any of their rights or remedies against the Lessee, or theGuarantor under any of the Operative Documents or (y) the negotiation of anyrestructuring or "work-out" with the Lessee, or the Guarantor, whether or notconsummated, of any obligations of the Lessee, or the Guarantor under theOperative Documents. -42- 48 SECTION 10.2. Brokers' Fees and Stamp Taxes. The Lessee shall payduring the Term of the Lease any brokers' fees and any and all stamp, transferand other similar taxes, fees and excises, if any, including any interest andpenalties, which are payable in connection with the transactions contemplated bythis Participation Agreement and the other Operative Documents. SECTION 10.3. Related Obligations. The Lessee shall pay, withoutduplication of any other obligation of the Lessee to pay any such amount underthe Operative Documents, before the due date thereof, all costs, expenses andother amounts (other than principal and interest on the Loans which are payableto the extent otherwise required by the Operative Documents) required to be paidby the Lessor under the Operative Documents in respect of or attributable to theLoans or Equity Investment made in respect thereof. ARTICLE XI TRANSFERS OF PARTICIPANTS' INTERESTS SECTION 11.1. Assignments by Participants. (a) Assignment by the Lenders. Any Tranche A Lender or Tranche B Lendermay, without the consent of any Obligor, sell, assign or transfer all or part ofits rights and obligations under, this Participation Agreement and the otherOperative Documents to (x) any other Tranche A Lender or Tranche B Lender, asapplicable, or (y) any Affiliate of any Tranche A Lender or Tranche B Lender, asapplicable, that is a Qualified Financial Institution, or (z) any otherQualified Financial Institution. The parties to each such assignment shallexecute and deliver to the Administrative Agent, for its acceptance andrecording in the Note Register, an assignment in substantially the form ofExhibit E (an "Assignment of Notes"), together with a processing and recordationfee of $3,000. Upon its receipt of an Assignment of Notes executed by an assigningLender and by an assignee who is a Qualified Financial Institution, togetherwith the applicable processing and recordation fee, the Administrative Agentshall (i) accept such Assignment of Notes, (ii) record the information containedtherein in the Note Register, (iii) give prompt notice thereof to the Lessee andthe Lessor, and (iv) within five (5) Business Days after its receipt of suchnotice, the Lessor, at its own expense, shall execute and deliver to theassignee in exchange for the surrendered Tranche A Notes and Tranche B Notes anew Tranche A Note and Tranche B Note, respectively, to the order of suchassignee in an aggregate principal amount equal to the aggregate principalamount of such surrendered Tranche A Notes and Tranche B Notes, which shall bedated the effective date of such Assignment of Notes. The Administrative Agent shall maintain at its address a copy of eachAssignment of Notes delivered to and accepted by it in the Note Register. Theentries in the Note Register shall be conclusive and binding for all purposes,absent manifest error, and the Lessee, the Lessor, the Administrative Agent andthe Lenders shall treat each Person whose name is recorded in the Note Registeras a Tranche A Lender and/or a Tranche B Lender hereunder for all purposes ofthis Participation Agreement. The Note Register shall be available forinspection by the Lessee, the Lessor, the Lenders, the Administrative Agent, orthe Collateral Agent at any reasonable time and from time to time uponreasonable prior notice. -43- 49 (b) Assignments by the Owner Participants. Each Owner Participant maysell, assign or transfer all or part of its rights and obligations pursuant tothe Trust Certificates, this Participation Agreement and the other OperativeDocuments to which it is a party to a Qualified Financial Institution or anAffiliate of a Qualified Financial Institution (but only if such Affiliatesatisfies the requirements of clauses (a), (d) and (e) of the definition of"Qualified Financial Institution"). (c) Effectiveness of Assignments. Upon delivery to the Lessee, theLessor and the Administrative Agent of an assignment and assumption agreementpursuant to which the obligations and rights being assigned are accepted andassumed subject to the terms hereof, which agreement shall be in form andsubstance reasonably satisfactory to the Lessee and the Administrative Agent (an"Assignment Agreement"), and the receipt of any applicable consents requiredhereunder in connection therewith, from and after the effective date specifiedin each Assignment Agreement, the assignee thereunder shall be a party heretoand, to the extent of the interest assigned by such Assignment Agreement, havethe rights and obligations of a Participant under this Participation Agreementand the other Operative Documents, and the assigning Participant shall, to theextent of the interest assigned by such Assignment Agreement release and bereleased from its rights and obligations under this Participation Agreement andthe other Operative Documents. (d) Disclosure of Information. Any Lender or Owner Participant may, inconnection with any assignment or participation or proposed assignment ofparticipation pursuant to this Section 11.1, disclose to the assignee orparticipant or proposed assignee or participant, any information relating to theLessee, or the Guarantor furnished to such Person (as the case may be) by or onbehalf of the Lessee, or the Guarantor; provided, that prior to any suchdisclosure of any confidential information relating to the Lessee, or theGuarantor, the assignee or participant or proposed assignee or participant shallagree in writing with the Lessee, Guarantor and the Administrative Agent topreserve the confidentiality of any confidential information relating to theLessee, or the Guarantor, or the transactions contemplated by this ParticipationAgreement (including, without limitation, the general structure of thistransaction) received by it from such assignee or participant (as the case maybe). Notwithstanding the foregoing, any Lender or Owner Participant may discloseany confidential information relating to the Lessee, or the Guarantor as may berequired by an order of any court or administrative agency or by any statute,rule, regulation or order of any governmental authority or pursuant to therequest of any regulatory or other governmental authority (but in such case suchLender or Owner Participant shall make commercially reasonable efforts to givethe Lessee at least one (1) Business Day's notice before making suchdisclosure), or to any auditors, advisors or counsel of such Lender or OwnerParticipants or the Lessor and otherwise as may be agreed to by Lessee. SECTION 11.2. Participants. The Participants may, at any time, sell toone or more financial institutions (each, a "Sub-Participant") participatinginterests in all or a portion of its rights and obligations under thisParticipation Agreement, its Notes or its Equity Investments; provided, however,that (a) no participation contemplated in this Section 11.2 shall relieve theapplicable Participant from any of its obligations hereunder or under the otherOperative Documents; (b) the Participant shall remain solely responsible for theperformance of its obligations hereunder and under the other OperativeDocuments; (c) the Obligors and the other parties hereto shall continue to dealsolely and directly with the Participant in connection with -44- 50their respective obligations hereunder and under the other Operative Documents;(d) no Sub-Participant (unless such Sub-Participant is also a Participant) shallbe entitled to require the Participant to take or refrain from taking any actionhereunder or under the other Operative Documents, except that such Participantmay agree with any Sub-Participant that such Participant will not, without theSub-Participant's consent, take any actions of the type described in Section13.5(b)(vi) or agree to any amendment, waiver or modification that would (x)reduce the principal amount of any Loan or Equity Investments, or the InterestRate or Equity Return Rate applicable to or fees payable in respect of, suchLoan or Equity Investments participated in by such Sub-Participant or (y) extendthe Maturity Date; and (e) the Lessee shall not be required to pay any amountunder this Participation Agreement that is greater than the amount which itwould have been required to pay had no participating interest been sold. SECTION 11.3. Pledge Under Regulation A. Anything in this Article XI tothe contrary notwithstanding, each Participant may without the consent of theLessee assign and pledge all or any portion of its Notes or Equity Investment,as applicable, held by it to any Federal Reserve Bank or to the United StatesTreasury as collateral security pursuant to Regulation A of the Board ofGovernors of the Federal Reserve System and any operating circular issued by theFederal Reserve System and/or the Federal Reserve Bank or otherwise. ARTICLE XII THE ADMINISTRATIVE AGENT SECTION 12.1. Appointment. Each Participant hereby irrevocablydesignates and appoints the Administrative Agent as the agent of suchParticipant under this Participation Agreement and the other OperativeDocuments, and each such Participant irrevocably authorizes the AdministrativeAgent, in such capacity, to take such action on its behalf under the provisionsof this Participation Agreement and the other Operative Documents and toexercise such powers and perform such duties as are expressly delegated to theAdministrative Agent by the terms of this Participation Agreement and the otherOperative Documents, together with such other powers as are reasonablyincidental thereto. Notwithstanding any provision to the contrary elsewhere inthis Participation Agreement, the Administrative Agent shall not have any dutiesor responsibilities, except those expressly set forth herein and in the otherOperative Documents, or any fiduciary relationship with any Participant or anyother party to the Operative Documents, and no implied covenants, functions,responsibilities, duties, obligations or liabilities shall be read into thisParticipation Agreement or any other Operative Document or otherwise existagainst the Administrative Agent. SECTION 12.2. Delegation of Duties. The Administrative Agent mayexecute any of its duties under this Participation Agreement and the otherOperative Documents by or through agents or attorneys-in-fact and shall beentitled to advice of counsel concerning all matters pertaining to such duties.The Administrative Agent shall not be responsible for the negligence ormisconduct of its agents or attorneys-in-fact selected by it with reasonablecare. SECTION 12.3. Exculpatory Provisions. Neither the Administrative Agent(in its capacity as such) nor any of its officers, directors, employees, agents,attorneys-in-fact or Affiliates shall be (a) liable for any action lawfullytaken or omitted to be taken by it or such Person under or in connection withthis Participation Agreement or any other Operative Document, except for its orsuch Person's own willful misconduct or gross negligence (or negligence in thehandling of funds) or (b) responsible in any manner to any of the Participantsor any other party to the Operative Documents for any recitals, statements,representations or warranties made by any Obligor or the Lessor or any officerof any Obligor or the Lessor contained in this Participation Agreement or anyother Operative -45- 51Document or in any certificate, report, statement or other document referred toor provided for in, or received by the Administrative Agent under or inconnection with, this Participation Agreement or any other Operative Document,or for the value, validity, effectiveness, genuineness, enforceability orsufficiency of this Participation Agreement or any other Operative Document orfor any failure of any Obligor or the Lessor to perform its obligationshereunder or thereunder. The Administrative Agent shall not be under anyobligation to any Participant or any other party to the Operative Documents toascertain or to inquire as to the observance or performance of any of theagreements contained in, or conditions of, this Participation Agreement or anyother Operative Document, or to inspect the properties, books or records of anyObligor or the Lessor. SECTION 12.4. Reliance by Administrative Agent. The AdministrativeAgent shall be entitled to rely, and shall be fully protected in relying, uponany Note, writing, resolution, notice, consent, certificate, affidavit, letter,facsimile message, statement, order or other document or other writtencommunication believed by it to be genuine and correct and to have been signed,sent or made by the proper Person or Persons and upon advice and statements oflegal counsel (including, without limitation, counsel to the Obligors),independent accountants and other experts selected by the Administrative Agent.The Administrative Agent may deem and treat the payee of any Note as the ownerthereof for all purposes unless a written notice of assignment, negotiation ortransfer thereof shall have been delivered to the Administrative Agent inaccordance with Section 11.1(c). The Administrative Agent shall be fullyjustified in failing or refusing to take any action under this ParticipationAgreement or any other Operative Document unless it shall first receive theadvice or concurrence of the Required Participants, or it shall first beindemnified to its satisfaction by the applicable Participants against any andall liability and expense which may be incurred by it by reason of taking orcontinuing to take any such action. The Administrative Agent shall in all casesbe fully protected in acting, or in refraining from acting, under thisParticipation Agreement and the other Operative Documents in accordance with arequest of the Required Participants, and such request and any action taken orfailure to act pursuant thereto shall be binding upon all the Participants andall future holders of the applicable Notes or Certificates. SECTION 12.5. Notice of Default. The Administrative Agent shall not bedeemed to have knowledge or notice of the occurrence of any Unmatured CAADefault, Unmatured Lease Default, CAA Event of Default or Lease Event of Defaultunless the Administrative Agent has received notice from a Participant or theLessor referring to this Participation Agreement, describing such Default orEvent of Default and stating that such notice is a "notice of default". In theevent that the Administrative Agent receives such a notice, the AdministrativeAgent shall promptly give notice thereof to the Participants, the Lessor and theLessee. Subject to the Excepted Rights, the Administrative Agent shall take suchaction with respect to such Default or Event of Default as shall be directed bythe Required Participants; provided, however, that unless and until theAdministrative Agent shall have received such directions, the AdministrativeAgent may (but shall not be obligated to) take such action, or refrain fromtaking such action, with -46- 52respect to such Default or Event of Default as it shall deem advisable in thebest interests of the Participants. SECTION 12.6. Non-Reliance on Administrative Agent and OtherParticipants. Each Participant expressly acknowledges that neither theAdministrative Agent nor the Lease Arranger, nor any of their respectiveofficers, directors, employees, agents, attorneys-in-fact or Affiliates, hasmade any representations or warranties to it and that no act by theAdministrative Agent or the Lease Arranger hereinafter taken, including anyreview of the affairs of any Obligor or the Lessor, shall be deemed toconstitute any representation or warranty by the Administrative Agent or theLease Arranger to any Participant. Each Participant represents to theAdministrative Agent and the Lease Arranger that it has, independently andwithout reliance upon the Administrative Agent, the Lease Arranger or any otherParticipant, and based on such documents and information as it has deemedappropriate, made its own appraisal of and investigation into the business,operations, property, financial and other condition and creditworthiness of theObligors and the Lessor and made its own decision to enter into thisParticipation Agreement. Each Participant also represents that it will,independently and without reliance upon the Administrative Agent, the LeaseArranger or any other Participant, and based on such documents and informationas it shall deem appropriate at the time, continue to make its own creditanalysis, appraisals and decisions in taking or not taking action under thisParticipation Agreement and the other Operative Documents, and to make suchinvestigation as it deems necessary to inform itself as to the business,operations, property, financial and other condition and creditworthiness of theObligors and the Lessor. Except for notices, reports and other documentsexpressly required to be furnished to the Participants by the AdministrativeAgent hereunder, neither the Administrative Agent nor the Lease Arranger shallhave any duty or responsibility to provide any Participant with any credit orother information concerning the business, operations, property, condition(financial or otherwise), prospects or creditworthiness of the Obligors or theLessor which may come into the possession of the Administrative Agent, the LeaseArranger or any of their respective officers, directors, employees, agents,attorneys-in-fact or Affiliates. SECTION 12.7. Indemnification. Other than with respect toindemnification provided to the Administrative Agent in accordance with Section12.4, the Administrative Agent agrees that any claim for indemnification by anyParticipant which may arise hereunder or under any other Operative Documentshall be limited to such amounts that such Participant receives from theObligors with respect to such claim. -47- 53 SECTION 12.8. Administrative Agent in Its Individual Capacity. EachParticipant acknowledges that Fleet Capital Corporation is acting asAdministrative Agent hereunder. Fleet Capital Corporation and its Affiliates maymake loans to, issue letters of credit for the account of, accept deposits from,acquire equity interests in and generally engage in any kind of banking, trust,financial advisory, underwriting or other business with the Obligors, the Lessorand their respective Affiliates as though it was not the Administrative Agenthereunder and under the other Operative Documents and without notice to orconsent of the Participants. Each Participant acknowledges that, pursuant tosuch activities, Fleet Capital Corporation or its Affiliates may receiveinformation regarding the Obligors, the Lessor or their respective Affiliates(including information that may be subject to confidentiality obligations infavor of the Obligors, the Lessor or such Affiliates) and acknowledges that suchPersons shall be under no obligation to provide such information to them. SECTION 12.9. Successor Administrative Agent. The Administrative Agentmay resign at any time by giving written notice thereof to the Participants andthe Lessee and may be removed at any time with or without cause by the RequiredParticipants. Upon any such resignation or removal, the Required Participantsshall have the right to appoint a successor Administrative Agent. If nosuccessor Administrative Agent shall have been so appointed by the RequiredParticipants, and shall have accepted such appointment, within thirty (30) daysafter the retiring Administrative Agent's giving of notice of resignation or theRequired Participants' removal of the retiring Administrative Agent, then theretiring Administrative Agent may, on behalf of the Participants, appoint asuccessor Administrative Agent, which shall be a Qualified Financial Institutionor be otherwise acceptable to the Lessee and the Required Participants. Upon theacceptance of any appointment as Administrative Agent hereunder by a successorAdministrative Agent, such successor Administrative Agent shall thereuponsucceed to and become vested with all the rights, powers, privileges and dutiesof the retiring Administrative Agent, and the retiring Administrative Agentshall be discharged from its duties and obligations under this ParticipationAgreement. After any retiring Administrative Agent's resignation or removalhereunder as Administrative Agent, the provisions of this Article XII shallinure to its benefit as to any actions taken or omitted to be taken by it whileit was Administrative Agent under this Agreement. So long as no Unmatured LeaseDefault or Lease Event of Default shall have occurred and be continuing, then nosuccessor Administrative Agent shall be appointed under this Section 12.9without the prior written consent of the Lessee, which consent shall not beunreasonably withheld or delayed. ARTICLE XIII MISCELLANEOUS SECTION 13.1. Survival of Agreements. The representations, warranties,covenants, indemnities and agreements of the parties provided for in theOperative Documents, and the parties' obligations under any and all thereof,shall survive the execution and delivery of this Participation Agreement, thetransfer of any or all of the Equipment to the Lessor, any disposition of anyinterest of the Lessor or any Participant in the Equipment and the payment ofthe Notes and Equity Investment and any disposition thereof and shall be andcontinue in effect notwithstanding any investigation made by any party and thefact that any party may waive compliance with any of the other terms, provisionsor conditions of any of the Operative -48- 54Documents. Except as otherwise expressly set forth herein or in the otherOperative Documents, the indemnities of the parties provided for in theOperative Documents shall survive the expiration or termination of any thereoffor a period not to exceed one year after the later of (x) the Expiration Dateand (y) the payment in full in cash of the entire Equipment Cost. SECTION 13.2. No Broker, etc. Each of the parties hereto represents tothe others that it has not retained or employed any broker, finder or financialadviser to act on its behalf in connection with this Participation Agreement orthe transactions contemplated herein or in the other Operative Documents, norhas it authorized any broker, finder or financial adviser retained or employedby any other Person so to act. Any party who is in breach of this representationshall indemnify and hold the other parties harmless from and against anyliability arising out of such breach of this representation. SECTION 13.3. Notices. Unless otherwise specifically provided herein,all notices, consents, directions, approvals, instructions, requests and othercommunications required or permitted by the terms hereof to be given to anyPerson shall be given in writing by United States mail, by nationally recognizedcourier service and any such notice shall become effective five (5) BusinessDays after being deposited in the mails, certified or registered return receiptrequested with appropriate postage prepaid or one Business Day after delivery toa nationally recognized courier service specifying overnight delivery and shallbe directed to the address of such Person as indicated on Schedule II. From timeto time any party may designate a new address for purposes of notice hereunderby written notice to each of the other parties hereto in accordance with thisSection. SECTION 13.4. Counterparts. This Participation Agreement may beexecuted by the parties hereto in separate counterparts, each of which when soexecuted and delivered shall be an original, but all such counterparts shalltogether constitute but one and the same instrument. SECTION 13.5. Amendments. (a) The provisions of this Participation Agreement may from time totime be amended, modified or waived, provided, however, that such amendment,modification or waiver is in writing and consented to by the Lenders, the OwnerParticipants, the Lessor, and the Lessee. (b) Neither any Operative Document nor any of the terms thereof may beterminated (except upon payment in full of the Equipment Cost and accrued BasicRent and all other amounts due and owing by the Obligors under the OperativeDocuments, or effective exercise and consummation of the Lessee's return of theEquipment in accordance with Article XVII of the Lease and payment in full ofall amounts due in accordance therewith), amended, supplemented, waived ormodified without the written agreement or consent of the Required Participants(regardless of whether the Lenders and the Owner Participants are partiesthereto); provided, however, that: (i) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant (a) modify any of the provisions of this Section 13.5, change the definition of "Required Participants" or -49- 55 modify or waive any requirement under any Operative Document that any particular action be taken by all Participants or (b) extend the Maturity Date or Expiration Date; (ii) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of the Lenders modify or waive any requirement under any Operative Document that any particular action be taken by the Lenders, no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of the Owner Participants modify or waive any requirement under any Operative Document that any particular action be taken by or consented to by the Owner Participants and no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of the Lessor modify or waive any requirement under any Operative Document that any particular action be taken by or consented to by the Lessor; (iii) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant amend, modify, waive or supplement any of the provisions of Article V of this Participation Agreement and Article III of the Security Agreement; (iv) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each affected Participant reduce, modify, amend or waive any Commitment Fees, other fees or indemnities in favor of any Participant, including without limitation amounts payable pursuant to Articles VII and VIII (except that any Person may consent to any reduction, modification, amendment or waiver of any Commitment Fee or other fee or indemnity payable to it); (v) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each affected Participant (a) modify, postpone, reduce or forgive, in whole or in part, any payment of Rent (other than pursuant to the terms of any Operative Document), any Loan or Equity Investment, the Equipment Cost, Maximum Lessee Risk Amount, Termination Value, amounts due pursuant to Article VII of the Lease, interest or Equity Return or, subject to clause (iv) above, any other amount payable under the Lease, or this Participation Agreement or (b) modify the definition or method of calculation of Rent (other than pursuant to the terms of any Operative Document), Loans or Equity Investment, Equipment Cost, Maximum Lessee Risk Amount, Commitment Fees or any other definition which would affect the amounts to be advanced or which are payable under the Operative Documents; (vi) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant (a) release the Lessee from its Obligations under the Operative Documents or permit any assignment of the Lease by the Lessee releasing the Lessee from its Obligations under the Operative Documents or changing the absolute and unconditional character of such obligations, in each case, except as expressly permitted by the Operative Documents, (b) release the Guarantor from its obligations under the Guaranty or (d) except as expressly permitted or required under the Operative Documents, release the Equipment from the Lien of the Security Agreement or release or terminate any Security Interest Filings covering the Equipment; -50- 56 (vii) no such termination, amendment, supplement, waiver or modification shall, without the written agreement or consent of the Lessor and Owner Participant, be made to the definitions of "Excluded Amounts" or "Excepted Rights"; (viii) no such termination, amendment, supplement, waiver or modification that would increase the obligations of the Lessee thereunder or deprive the Lessee of any of its rights thereunder or alter the rights of the Lessee to its detriment shall be effective against the Lessee without the written agreement or consent of the Lessee; (ix) no such termination, amendment, supplement, waiver or modification shall be made to any provision of Article XII without the written agreement or consent of the Administrative Agent;notwithstanding the foregoing, so long as no Event of Default shall haveoccurred and be continuing, no such termination, amendment, supplement, waiveror modification shall be made to the Lease, the Guaranty or this Agreement whichwould have a material adverse effect on the interests of the Lessor or of anyOwner Participant in and to the Collateral Estate without the prior writtenagreement or consent of the Lessor and Owner Participants; SECTION 13.6. Headings, etc. The Table of Contents and headings of thevarious Articles and Sections of this Participation Agreement are forconvenience of reference only and shall not modify, define, expand or limit anyof the terms or provisions hereof. SECTION 13.7. Parties in Interest. Except as expressly provided herein,none of the provisions of this Participation Agreement is intended for thebenefit of any Person except the parties hereto. The Lessee shall not assign ortransfer any of its rights or obligations under the Operative Documents exceptin accordance with the terms and conditions thereof. SECTION 13.8. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALLRESPECTS BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDINGANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATIONOF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OFCONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION 13.9. Severability. Any provision of this ParticipationAgreement that is prohibited or unenforceable in any jurisdiction shall, as tosuch jurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof, and anysuch prohibition or unenforceability in any jurisdiction shall not invalidate orrender unenforceable such provision in any other jurisdiction. SECTION 13.10. Liability Limited. (a) The parties hereto agree that except as specifically set forthherein or in any other Operative Document, the Trustee shall have no personalliability whatsoever to any other Participant, the Lessee, the Guarantor ortheir respective successors and assigns for any claim or obligation based on orin respect hereof or any of the other Operative Documents (including, withoutlimitation, the repayment of the Loans) or arising in any way from thetransactions -51- 57contemplated hereby or thereby and recourse, if any, shall be solely had againstthe Trust Estate (it being acknowledged and agreed by each party hereto that allsuch personal liability of the Trustee is expressly waived and released as acondition of, and as consideration for, the execution and delivery of theOperative Documents by the Trustee); provided, however, that the Trustee shallbe liable in its individual capacity (a) for its own willful misconduct or grossnegligence, (b) breach of any of its representations, warranties or covenantsunder the Operative Documents, or (c) for any Tax based on or measured by anyfees, commission or compensation received by it for acting as the Trustee ascontemplated by the Operative Documents. It is understood and agreed that theTrustee shall have no personal liability under any of the Operative Documents asa result of acting pursuant to and consistent with any of the OperativeDocuments. (b) No Participant shall have any obligation to the other Participantor to the Lessee, or the Guarantor with respect to transactions contemplated bythe Operative Documents, except those obligations of such Participant expresslyset forth in the Operative Documents or except as set forth in the instrumentsdelivered in connection therewith, and no Participant shall be liable forperformance by any other party hereto of such other party's obligations underthe Operative Documents except as otherwise so set forth. SECTION 13.11. Further Assurances. The parties hereto shall promptlycause to be taken, executed, acknowledged or delivered, at the sole expense ofthe Lessee, all such further acts, conveyances, documents and assurances as theother parties may from time to time reasonably request in order to carry out andpreserve the security interests and liens (and the priority thereof) intended tobe created pursuant to this Participation Agreement, the other OperativeDocuments, and the transactions thereunder (including, without limitation, thepreparation, execution and filing of any and all Uniform Commercial Codefinancing statements and other filings or registrations which the parties heretomay from time to time request to be filed or effected); provided, however, thatthe Lessee shall not be required to pay expenses pursuant to this Section to theextent arising from a breach or alleged breach by the Lenders or the OwnerParticipants of any agreement entered into in connection with the assignment orparticipation of any Loan or Equity Investment. The Lessee, at its own expenseand without need of any prior request from any other party, shall take suchaction as may be necessary (including any action specified in the precedingsentence), or as so requested, in order to maintain and protect all securityinterests provided for hereunder or under any other Operative Document. SECTION 13.12. SUBMISSION TO JURISDICTION. THE LESSEE HEREBY SUBMITS TOTHE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THEDISTRICT OF THE COMMONWEALTH OF MASSACHUSETTS FOR PURPOSES OF ALL LEGALPROCEEDINGS ARISING OUT OF OR RELATING TO THIS PARTICIPATION AGREEMENT OR ANY OFTHE OTHER OPERATIVE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. THELESSEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTIONWHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCHPROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDINGBROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. -52- 58 SECTION 13.13. Setoff. Each Participant, the Administrative Agent andthe Collateral Agent shall, upon the occurrence of any Lease Event of Default,have the right to appropriate and, apply to the payment of the Lessee'sobligations under the Lease as security for the payment of such obligations, anyand all balances, credits, deposits, accounts or moneys of the Lessee then orthereafter maintained with such Participant, the Administrative Agent or theCollateral Agent. The rights of the Participants, Administrative Agent andCollateral Agent under this Section are in addition to other rights and remedies(including other rights of setoff under applicable law or otherwise) which suchPerson may have. SECTION 13.14. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY ANDINTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OFANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,THIS PARTICIPATION AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OFCONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OFANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOTSEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH AJURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 13.14HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NOEXCEPTIONS. EACH OBLIGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL ANDSUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACHOTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS AMATERIAL INDUCEMENT FOR EACH OF THE LESSOR AND THE LENDERS ENTERING INTO THISPARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT. SECTION 13.15. Cooperation in Minimizing Certain Taxes. The Lessor, theAdministrative Agent and the Owner Participants hereby agree to take suchactions as Lessee may reasonably request from time to time to minimize any salesor related taxes with respect to the Equipment, including, to the extentcommercially reasonable, obtaining resale certificates from applicable taxingauthorities. The Lessor shall execute and deliver powers of attorney grantingthe Lessee the power to file state sales and related tax returns and formsrelating to the Equipment. None of the Lessor, the Administrative Agent or theOwner Participants shall be obligated to incur any out-of-pocket expenses inconnection with the matters described in this Section 13.15. Nothing containedin this Section 13.15 shall negate, limit or supersede the provisions of Section8.1; provided that none of such Persons shall be required to take any actionthat, in such Person's sole discretion, would be adverse to it. SECTION 13.16. Intent. It is the intent of the parties that: (a) theLease constitutes an operating lease from the Lessor to the Lessee for purposesof the Lessee's financial reporting, (b) the Lease and other transactionscontemplated hereby will result in the Lessee being recognized as the owner ofthe Equipment for Federal and state income tax and bankruptcy purposes, (c) theSecurity Agreement grants to the Lessor a Lien on all of the Lessee's interestin the Equipment, which Lien shall, upon the recording of the FinancingStatements, create a valid first priority security interest in and Lien in favorof the Lessor on all of the right, title and interest of the Lessee in theEquipment securing the payment of all Obligations, subject only to -53- 59Permitted Equipment Liens, (d) each Participant shall be treated for Federal andstate income tax purposes and bankruptcy purposes as having lent directly to theLessee amounts provided by each to fund each Advance, and (e) the obligations ofthe Lessee to pay Basic Rent and any part of the Equipment Cost shall be treatedas payments of interest and principal, respectively, for Federal and stateincome tax and bankruptcy purposes. Each of the parties hereto agrees that itwill not, nor will it permit any Affiliate to at any time, take any action orfail to take any action with respect to the preparation or filing of any incometax return, including an amended income tax return, to the extent that suchaction or such failure to take action would be inconsistent with the intentionof the parties expressed in this Section 13.16. Specifically, without limiting the generality of the foregoing, theparties hereto intend and agree that in the event of any insolvency orreceivership proceedings or a petition under the United States bankruptcy lawsor any other applicable insolvency laws or statute of the United States ofAmerica or any State or Commonwealth thereof affecting the Lessee, the Guarantoror any Participant or any collection actions, the transactions evidenced by theOperative Documents shall be regarded as loans made by the Participants to theLessee. SECTION 13.17. Amounts Due Under Lease. Anything else herein orelsewhere to the contrary notwithstanding, it is the intention of the Lessee,the Lessor, the Owner Participants and the Lenders that: (i) the amount andtiming of installments of Basic Rent due and payable from time to time from theLessee under the Lease shall be equal to the aggregate payments due and payableas interest on the Loans and Equity Return on the Equity Investment on eachPayment Date; (ii) if the Lessee elects or becomes obligated to purchase theEquipment under the Lease, then the Loans, the Equity Investment, all accruedand unpaid interest, Equity Return and fees thereon and all other obligations ofthe Lessee owing to the Owner Participants and the Lenders shall be due andpayable in full by the Lessee as provided in the or the Lease; and (iii) if theLessee properly elects to return all of the Equipment under Article XVII of theLease, the Lessee shall only be required to pay to the Lessor the proceeds ofthe sale of the Equipment, the Maximum Lessee Risk Amount and any amounts duepursuant to Articles VII and VIII hereof and Article XVII of the Lease. [Remainder of page intentionally left blank; signature pages follow] -54- 60 IN WITNESS WHEREOF, the parties hereto have caused this ParticipationAgreement to be duly executed by their respective officers thereunto dulyauthorized as of the day and year first above written. APEX TRAILER LEASING & RENTALS, L.P., as Lessee By: Wabash National Corporation, General Partner By: ---------------------------- Name: Title: WABASH NATIONAL CORPORATION, as Guarantor By: ------------------------------------- Name: Title: WABASH STATUTORY TRUST - 2000 By: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but solely in its capacity as trustee By: ------------------------------------- Name: Title: -55- 61 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except as provided herein, but solely as Trustee By: ------------------------------------- Name: Title: FLEET CAPITAL CORPORATION, as Tranche A Lender By: ------------------------------------- Name: Title: FLEET CAPITAL CORPORATION, as Tranche B Lender By: ------------------------------------- Name: Title: FLEET CAPITAL CORPORATION, as Owner Participant By: ------------------------------------- Name: Title: FLEET CAPITAL CORPORATION, as Administrative Agent By: ------------------------------------- Name: Title: -56- 62 FLEET CAPITAL CORPORATION, as Collateral Agent By: ------------------------------------- Name: Title: -57- 63 SCHEDULE I TO PARTICIPATION AGREEMENT NOTICE INFORMATION, WIRE INSTRUCTIONS AND FUNDING OFFICESLESSEE:Apex Trailer Leasing & Rental, L.P.Attn: Mark Old12913 Flushing Meadows DriveSt. Louis, MO 63131with a copy to:Gambs Mucker & Bauman10 North Fourth StreetP.O. Box 1608Lafayette, IN 47902Attn: Bob BaumanWire Transfer Instructions:Bank One, Chicago, ILABA #071000013Account #56-90021For the account of Wabash National CorporationREF: Wabash Statutory Trust - 2000ADMINISTRATIVE AGENT:Fleet Capital CorporationOne Financial Plaza, 2nd Floor RI DE 03702CProvidence, RI 02903Attn: Steve Aalvik, Senior Vice PresidentWire Transfer Instructions:Fleet Capital CorporationABA #: 011500010Account Name: Fleet Capital LeasingAccount #: 01552 776700101Attn: Leslie TordoffREF: Wabash Statutory Trust - 2000 64LESSOR:Wabash Statutory Trust - 2000c/o State Street Bank and Trust Company of Connecticut,National Association,225 Asylum StreetGoodwin SquareAttn: Corporate Trust DepartmentWire Transfer Instructions:State Street Bank and Trust CompanyABA#: 011-000-028Account #: 9903-990-1Attn: Peter MurphyRef: APEX/Wabash Statutory Trust - 2000TRANCHE A LENDER:Fleet Capital CorporationOne Financial Plaza, 2nd Floor RI DE 03702CProvidence, RI 02903Attn: Steve Aalvik, Senior Vice President Bank: Fleet Capital Corporation ABA Number: 011500010 Account Name: Fleet Capital Leasing Account Number: 01552 776700101 Attn: Leslie Tordoff Ref: Wabash Statutory Trust - 2000TRANCHE B LENDER:Fleet Capital CorporationOne Financial Plaza, 2nd Floor RI DE 03702CProvidence, RI 02903Attn: Steve Aalvik, Senior Vice PresidentWire Transfer Instructions: Bank: Fleet Capital Corporation ABA Number: 011500010 Account Name: Fleet Capital Leasing Account Number: 01552 776700101 Ref: Wabash Statutory Trust - 2000 Schedule I -2- 65OWNER PARTICIPANT:Fleet Capital CorporationOne Financial Plaza, 2nd Floor RI DE 03702CProvidence, RI 02903Attn: Steve Aalvik Senior Vice PresidentFacsimile No.: (401) 278-8022Wire Transfer Instructions Bank: Fleet Capital Corporation ABA Number: 011500010 Account Name: Fleet Capital Leasing Account Number: 01552 776700101 Ref: Wabash Statutory Trust - 2000COLLATERAL AGENT:Fleet Capital CorporationOne Financial Plaza, 2nd Floor RI DE 03702CProvidence, RI 02903Attn: Steve Aalvik, Senior Vice PresidentWire Transfer InstructionsBank: Fleet Capital CorporationABA Number: 011500010Account Name: Fleet Capital LeasingAccount Number: 01552 776700101Attn: Leslie TordoffRef: Wabash Statutory Trust - 2000 Schedule I -3- 66 SCHEDULE II TO PARTICIPATION AGREEMENT COMMITMENTSPARTICIPANT TRANCHE A LOAN COMMITMENT TRANCHE B LOAN COMMITMENT OWNER PARTICIPANT'S COMMITMENT Fleet Capital Corporation 25,940,019 3,883,236 1,242,636 Tranche A Lenders' Percentage: 83.5% Tranche B Lenders' Percentage: 12.5% Equity Percentage: 4% 67 EXHIBIT A-1 FORM OF ADVANCE REQUESTTO: WABASH STATUTORY TRUST - 2000, as LessorRe: Lease Financing for Apex Trailer Leasing & Rentals, LP This Advance Request is delivered to you pursuant to Section 3.4(a) ofthe Participation Agreement dated as of December 29, 2000 (as amended,supplemented, amended and restated or otherwise modified from time to time, the"Participation Agreement"), among APEX TRAILER LEASING & RENTALS, LP, as Lessee,WABASH NATIONAL CORPORATION, as Guarantor, WABASH STATUTORY TRUST - 2000, asLessor, STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONALASSOCIATION, not in its individual capacity, except as provided therein, butsolely as Trustee, FLEET CAPITAL CORPORATION as Tranche A Lender, Tranche BLender, Owner Participant, Collateral Agent and Administrative Agent. Capitalized terms used but not otherwise defined herein have therespective meanings specified in Appendix A to the Participation Agreement. The Lessee hereby notifies you that the Lessee requests the making ofan Advance in the amount of $__________ (the "Advance Amount") on ____________,2000 (the "Proposed Closing Date"). In connection with the requested Advance, the Lessee hereby represents,warrants and certifies to you as follows: (a) The Advance Amount represents the Equipment Cost of the Equipment to be financed on the Proposed Closing Date. (b) Set forth on Schedule A hereto is a detailed list describing (i) each Unit of Equipment to be financed or constituting Additional Collateral, if any, on the Proposed Closing Date and (ii) the Letter of Credit, if any, to be provided on the Proposed Closing Date. (c) No item for which payment is to be made from the proposed Advance has heretofore been paid or reimbursed to the Lessee from the proceeds of any prior Advance. (d) On the Proposed Closing Date (both immediately before and after giving effect to the making of such Advance and the application of the proceeds thereof), the representations and warranties of the Lessee contained in the Participation Agreement and in each of the other Operative Documents are true and correct. Exhibit A-1 68 (e) On the Proposed Closing Date, no Lease Event of Default has occurred and is continuing and no Unmatured Lease Default of which the Lessee has knowledge and that has not been previously disclosed to the Participants has occurred and is continuing. No Unmatured Lease Default or Lease Event of Default will occur as a result of, or after giving effect to, the Advance requested hereby. (f) The Advance requested hereby will comply with the limitations on Advances set forth in Section 3.1(b) of the Participation Agreement. (g) All of the conditions precedent set forth in Article II of the Participation Agreement applicable to the Advance requested hereby have been satisfied or waived. (h) The Lessee has delivered to the Administrative Agent all Security Interest Filings relating to the Equipment necessary or desirable to perfect the interests of the Lessor, the Administrative Agent, the Collateral Agent and the Participants under the Security Agreement, and Schedule C attached hereto represents a complete list of the jurisdictions in which Security Interest Filings have been made up until the date of this notice. Please wire transfer the proceeds of the Advance to the accounts specified on Schedule B attached hereto or as otherwise notified by the Lessee in written notice to the Administrative Agent. [Signature page follows] Exhibit A-1 -2- 69 The Lessee has caused this Advance Request to be executed and deliveredby its duly Authorized Officer as of this _____ day of ___________, 2000. APEX TRAILER LEASING & RENTALS, L.P. By: __________________, its general partner By:________________________________________ Name: Title: Exhibit A-1 -3- 70 SCHEDULE A TO ADVANCE REQUESTDetailed List of Each Unit of Equipment to be financed on Proposed Closing Date: Schedule A 71 SCHEDULE B TO ADVANCE REQUEST PAYMENT INSTRUCTIONS Bank One, Chicago, IL ABA #071000013 Account #56-90021 For the account of Wabash National Corporation Ref: Wabash Statutory Trust-2000 Schedule B 72 SCHEDULE C TO ADVANCE REQUEST JURISDICTIONS OF SECURITY INTEREST FILINGS Secretary of State of Missouri Secretary of State of Connecticut Secretary of State of Indiana Secretary of State of Missouri Schedule C 73 EXHIBIT B-1 Series [A-1] TRANCHE A NOTEU.S. $________________ December ___, 2000 FOR VALUE RECEIVED, the undersigned WABASH STATUTORY TRUST - 2000, aConnecticut statutory trust (the "Lessor"), promises to pay to the order of_______________________ ("Tranche A Lender") pursuant to that certainParticipation Agreement dated as of December ___, 2000 among Lessor, WABASHNATIONAL CORPORATION, a Delaware corporation, STATE STREET BANK AND TRUSTCOMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity butsolely as Trustee, FLEET CAPITAL CORPORATION, a Delaware corporation, in itscapacity as Collateral Agent ("Collateral Agent"), Fleet, in its capacity asTranche B Lender, Fleet, in its capacity as Owner Participant, Fleet, in itscapacity as Administrative Agent ("Administrative Agent") (as amended, modifiedor supplemented from time to time, the "Participation Agreement") on theMaturity Date the principal sum of _________________ U.S. DOLLARS (U.S.$________) or, if less, the aggregate unpaid principal amount of all Tranche ALoans made by Tranche A Lenders pursuant to the Participation Agreement. Lessor also promises to pay interest on the unpaid principal amounthereof from time to time outstanding from the date hereof until the MaturityDate (whether by acceleration or otherwise) and, after the Maturity Date, untilpaid, at the rates per annum and on the dates specified in the ParticipationAgreement and to make payments of principal in arrears, on the Payment Dates andin the amount set forth on the amortization schedule attached hereto as ExhibitA. Payments of both principal and interest are to be made without setoffor counterclaim in lawful money of the United States of America in same day orimmediately available funds to the account of Administrative Agent specified inSchedule I to the Participation Agreement (or to such other account asAdministrative Agent may from time to time designate in a written notice toLessor). This Tranche A Note is one of the Tranche A Notes referred to in, andevidences Tranche A Loans made under, the Participation Agreement, to whichreference is made for a description of the security for this Tranche A Note andfor a statement of the terms and conditions on which Lessor is permitted andrequired to make prepayments and repayments of principal of the indebtednessevidenced by this Tranche A Note and on which such indebtedness may be declaredto be or automatically become immediately due and payable and is subject,without limitation, to the restrictions on recourse set forth in Section 13.10of the Participation Agreement. 74 Administrative Agent is authorized to endorse the schedule attachedhereto in accordance with the provisions of the Participation Agreement. Capitalized terms used but not otherwise defined herein have therespective meanings specified in Appendix A to the Participation Agreement. All parties hereto, whether as makers, endorsers, or otherwise,severally waive presentment for payment, demand, protest and notice of dishonor. All payments of principal amount, interest and other amounts hereunderto be made by Lessor shall be made only from the income and proceeds from theTrust Estate and only to the extent that Lessor shall have sufficient income orproceeds from the Trust Estate to make such payments in accordance with theterms of Article V of the Trust Agreement. Any judgment against Lessor withrespect to amounts due under this Tranche A Note shall be enforceable againstLessor only to the extent of the interest of Lessor in the Trust Estate and anysuch judgment shall not be enforceable by execution or be a Lien on any of theassets of Lessor or the Trustee other than the interest of Lessor in the TrustEstate. THIS TRANCHE A NOTE HAS BEEN DELIVERED IN BOSTON, MASSACHUSETTS ANDSHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OFTHE COMMONWEALTH OF MASSACHUSETTS. WABASH STATUTORY TRUST - 2000 By: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but solely in its capacity as Trustee By: _______________________________________ Name: Title: -2- 75 EXHIBIT A [Amortization Schedule] 76 TRANCHE A NOTE Amount of Loan Made Amount of Principal Repaid Unpaid Principal Balance ---------------------- -------------------------- ------------------------ Adjusted Interest Adjusted Adjusted Eurodollar Period (If Eurodollar Eurodollar NotationDate Base Rate Rate Applicable) Base Rate Rate Base Rate Rate Total Made By 77 EXHIBIT B-2 Series [A-1] TRANCHE B NOTEU.S. $________________ December ___, 2000 FOR VALUE RECEIVED, the undersigned WABASH STATUTORY TRUST - 2000, aConnecticut statutory trust (the "Lessor"), promises to pay to the order of_______________________ ("Tranche B Lender") pursuant to that certainParticipation Agreement dated as of December ___, 2000 among Lessor, WABASHNATIONAL CORPORATION, a Delaware corporation, STATE STREET BANK AND TRUSTCOMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity butsolely as Trustee, FLEET CAPITAL CORPORATION, a Delaware corporation, in itscapacity as Collateral Agent ("Collateral Agent"), Fleet, in its capacity asTranche A Lender, Fleet, in its capacity as Owner Participant, Fleet, in itscapacity as Administrative Agent ("Administrative Agent") (as amended, modifiedor supplemented from time to time, the "Participation Agreement") on theMaturity Date the principal sum of _________________ U.S. DOLLARS (U.S.$________) or, if less, the aggregate unpaid principal amount of all Tranche BLoans made by Tranche B Lenders pursuant to the Participation Agreement. Lessor also promises to pay interest on the unpaid principal amounthereof from time to time outstanding from the date hereof until the MaturityDate (whether by acceleration or otherwise) and, after the Maturity Date, untilpaid, at the rates per annum and on the dates specified in the ParticipationAgreement and to make payments of principal arrears, on the Payment Dates and inthe amount set forth on the amortization schedule attached hereto as Exhibit A. Payments of both principal and interest are to be made without setoffor counterclaim in lawful money of the United States of America in same day orimmediately available funds to the account of Administrative Agent specified inSchedule I to the Participation Agreement (or to such other account asAdministrative Agent may from time to time designate in a written notice toLessor). This Tranche B Note is one of the Tranche B Notes referred to in, andevidences Tranche B Loans made under, the Participation Agreement, to whichreference is made for a description of the security for this Tranche B Note andfor a statement of the terms and conditions on which Lessor is permitted andrequired to make prepayments and repayments of principal of the indebtednessevidenced by this Tranche B Note and on which such indebtedness may be declaredto be or automatically become immediately 78due and payable and is subject, without limitation, to the restrictions onrecourse set forth in Section 13.10 of the Participation Agreement. Administrative Agent is authorized to endorse the schedule attachedhereto in accordance with the provisions of the Participation Agreement. Capitalized terms used but not otherwise defined herein have therespective meanings specified in Appendix A to the Participation Agreement. All parties hereto, whether as makers, endorsers, or otherwise,severally waive presentment for payment, demand, protest and notice of dishonor. All payments of principal amount, interest and other amounts hereunderto be made by Lessor shall be made only from the income and proceeds from theTrust Estate and only to the extent that Lessor shall have sufficient income orproceeds from the Trust Estate to make such payments in accordance with theterms of Article V of the Trust Agreement. Any judgment against Lessor withrespect to amounts due under this Tranche B Note shall be enforceable againstLessor only to the extent of the interest of Lessor in the Trust Estate and anysuch judgment shall not be enforceable by execution or be a Lien on any of theassets of Lessor or the Trustee other than the interest of Lessor in the TrustEstate. THIS TRANCHE B NOTE HAS BEEN DELIVERED IN BOSTON, MASSACHUSETTS ANDSHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OFTHE COMMONWEALTH OF MASSACHUSETTS. WABASH STATUTORY TRUST - 2000 By: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but solely in its capacity as Trustee By: ___________________________________________ Name: Title: -2- 79 EXHIBIT A [Amortization Schedule] 80 TRANCHE B NOTE Amount of Loan Made Amount of Principal Repaid Unpaid Principal Balance ---------------------- -------------------------- ------------------------ Adjusted Interest Adjusted Adjusted Eurodollar Period (If Eurodollar Eurodollar NotationDate Base Rate Rate Applicable) Base Rate Rate Base Rate Rate Total Made By 81 EXHIBIT C SECURITY INTEREST FILING JURISDICTIONS Secretary of State of Missouri Secretary of State of Indiana Secretary of State of Connecticut Secretary of State of Delaware Exhibit C 82 EXHIBIT D FORM OF ASSIGNMENT OF NOTES ASSIGNMENT OF NOTES Dated __________, _____ Reference is made to the Participation Agreement dated as of December29, 2000 (as amended, supplemented, amended and restated or otherwise modifiedfrom time to time, the "Participation Agreement"), among APEX TRAILER LEASING &RENTALS, LP, as Lessee, WABASH NATIONAL CORPORATION, as Guarantor, WABASHSTATUTORY TRUST - 2000, as Lessor, STATE STREET BANK AND TRUST COMPANY OFCONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, except asprovided therein, but solely as Trustee, FLEET CAPITAL CORPORATION as Tranche ALender, Tranche B Lender, Owner Participant, Collateral Agent and AdministrativeAgent. Capitalized terms used herein and not otherwise defined shall have themeaning ascribed thereto in Appendix A to the Participation Agreement. ________________ (the "Assignor") and _______ (the "Assignee") agree asfollows: 1. The Assignor hereby sells and assigns, without recourse, tothe Assignee, and the Assignee hereby purchases and assumes from the Assignor,without recourse, a portion of the Assignor's rights and obligations under theParticipation Agreement and the other Operative Documents as of the EffectiveDate (as defined below) which portion represents the principal amount of theTranche A Notes and Tranche B Notes specified on Schedule 1 and thecorresponding rights and obligations of the Assignor under the ParticipationAgreement and the other Operative Documents (the "Assigned Interest"). Aftergiving effect to such sale and assignment, the principal amount of theAssignee's Tranche A Notes and Tranche B Notes and the amount of the Assignee'sundrawn Tranche A Loan Commitment and Tranche B Loan Commitment will be as setforth in Section 2 of Schedule 1. The effective date of this sale and assignmentshall be the date specified in Section 3 of Schedule 1 hereto (the "EffectiveDate"). 2. On the Effective Date, the Assignee will pay to theAssignor, in immediately available funds, at such address and account as theAssignor shall advise the Assignee, $_________, and the sale and assignmentcontemplated hereby shall thereupon become effective. From and after theEffective Date, the Assignor agrees that the Assignee shall be entitled, to theextent provided in the Participation Agreement, to all rights, powers andprivileges of the Assignor under the Participation Agreement, the Tranche ANotes and Tranche B Notes and the other Operative Documents to the extent of theAssigned Interest, including without limitation (i) the right to receive allpayments in respect of the Assigned Interest for the period from and after theEffective Date, whether on account of principal, interest, fees, indemnities inrespect of claims arising after the Effective Date, increased costs, additionalamounts or otherwise; (ii) the right to vote and to instruct the AdministrativeAgent, the Lessor, or the Collateral Agent under the Operative Documents basedon the Assigned Interest; and (iii) Exhibit D 83the right to receive notices, requests, demands and other communications. TheAssignor agrees that it will promptly remit to the Assignee any amount receivedby it in respect of the Assigned Interest (whether from the Lessor, theAdministrative Agent, the Collateral Agent or otherwise) in the same funds inwhich such amount is received by the Assignor. 3. The Assignor (i) represents and warrants that it is thelegal and beneficial owner of the interest being assigned by it hereunder andthat such interest and the collateral therefor are, at the time of thisassignment, free and clear of any adverse claim created by or arising as aresult of any claim against the Assignor and is not subject to any assignment ortransfer; (ii) makes no representation or warranty and assumes no responsibilitywith respect to any statements, warranties or representations made in or inconnection with the Participation Agreement or the other Operative Documents orthe execution, legality, validity, enforceability, genuineness, sufficiency orvalue of the Participation Agreement, the other Operative Documents or any otherinstrument or document furnished pursuant thereto; (iii) makes no representationor warranty and assumes no responsibility with respect to the financialcondition of the Lessee or the Guarantor, or the performance or observance bythe Lessee or the Guarantor of any of its obligations under the ParticipationAgreement, the other Operative Documents or any other instrument or documentfurnished pursuant thereto; and (iv) attaches its Tranche A Notes and Tranche BNotes and requests that the Lessor issue new Tranche A Notes and Tranche B Notesin accordance with the terms of the Participation Agreement. 4. The Assignee (i) confirms that it is a Qualified FinancialInstitution, and it has received a copy of the Participation Agreement and suchother documents and information as it has deemed appropriate to make its owncredit analysis and decision to enter into this Assignment of Notes; (ii) agreesthat it will, independently and without reliance upon the Administrative Agent,the Lessor, the Assignor or any other Purchaser and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit decisions in taking or not taking action under the ParticipationAgreement, the Tranche A Notes and Tranche B Notes and the other OperativeDocuments; (iii) appoints or authorizes the Administrative Agent to take suchactions as agent on its behalf and to exercise such powers under theParticipation Agreement and the other Operative Documents as are delegated tothe Administrative Agent by the terms thereof, together with such powers as areincidental thereto; (iv) agrees that it will perform in accordance with theirterms all of the obligations which by the terms of the Participation Agreement,the Tranche A Notes and Tranche B Notes and the other Operative Documents arerequired to be performed by it as a holder of Tranche A Notes and Tranche BNotes; (v) specifies as its purchasing offices (and address for notices) theoffices set forth beneath its name on the signature pages hereof; and (vi)attaches the forms prescribed by the Internal Revenue Service of the UnitedStates of America certifying as to the Assignee's status for purposes ofdetermining exemption from United States withholding taxes with respect to allpayments to be made to the Assignee under the Participation Agreement (and theother Operative Documents) or such other documents as are necessary to indicatethat all such payments are subject to such rates at a rate reduced by anapplicable tax treaty. 5. Following the execution of this Assignment of Notes, itwill be delivered to the Administrative Agent for acceptance and recording bythe Administrative Agent. Upon such acceptance and recording, as of theEffective Date, (i) the Lessor shall issue new Tranche A Notes and Tranche BNotes pursuant to Section 5.7 of the Participation Agreement, (ii) the Exhibit D -2- 84Assignee shall be a party to the Participation Agreement and, to the extentprovided in this Assignment of Notes, have the rights and obligations of aholder of Notes thereunder and the other Operative Documents and (iii) theAssignor shall, to the extent provided in this Assignment of Notes, relinquishits rights and be released from its obligations under the ParticipationAgreement, the Tranche A Notes and Tranche B Notes and the other OperativeDocuments.6. Upon such acceptance, recording and consent, from and after the EffectiveDate, the Administrative Agent shall make all payments under the OperativeDocuments in respect of the Assigned Interest (including, without limitation,all payments of principal or interest) to the Assignee. The Assignor andAssignee shall make all appropriate adjustments in payments under the OperativeDocuments for periods prior to the Effective Date directly between themselves.7. THIS ASSIGNMENT OF NOTES SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCEWITH THE LAWS OF THE STATE OF ____________________________ WITHOUT GIVING EFFECTTO ANY PROVISIONS RELATING TO CONFLICTS OF LAW. Exhibit D -3- 85 IN WITNESS WHEREOF, the parties hereto have caused this Assignment ofNotes to be executed by their respective officers thereunto duly authorized, asof the date first above written. [NAME OF ASSIGNOR], By: _____________________________________ Name: Title: [LENDING OFFICE (and address for notices): Address: ] [NAME OF ASSIGNEE], By: _____________________________________ Name: Title:Accepted this _______ day of_________________, ____.FLEET CAPITAL CORPORATION, as Administrative Agent underthe Participation AgreementBy: ____________________________________ Name: Title: Exhibit D -4- 86 Schedule 1 to Assignment of Notes Dated ___________________, ___ Section 1(a) Total Principal Amount of Assignor's Outstanding Tranche A Notes and Tranche B Notes prior to the Effective Date: $_________________(b) Amount of Assigned Interest with respect to Tranche A Notes and Tranche B Notes: $_________________ (c) Principal Amount of Tranche A Notes and Tranche B Notes Retained by the Assignor: $_________________ (d) Assignor's undrawn Tranche A Loan Commitment after giving effect to this Assignment of Notes $_________________ (e) Assignor's undrawn Tranche B Loan Commitment after giving effect to this Assignment of Notes $_________________ Section 2 (a) Total Principal Amount of Assignee's Outstanding Tranche A Notes and Tranche B Notes after giving effect to this Assignment of Notes: $_________________(b) Assignee's undrawn Tranche A Loan Commitment $_________________ (c) Assignee's undrawn Tranche B Loan Commitment $_________________ Section 3 Effective Date: ________, 20__ 87 EXECUTION COPYTHIS LEASE HAS BEEN ASSIGNED BY LESSOR TO FLEET CAPITAL CORPORATION, ASCOLLATERAL AGENT PURSUANT TO THAT SECURITY AGREEMENT, DATED AS OF DECEMBER 29,2000, FOR THE BENEFIT OF THE TRANCHE A LENDER AND THE TRANCHE B LENDER REFERREDTO THEREIN. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (ASSUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE IN ANY APPLICABLEJURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THETRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN COUNTERPART NO. 1. Equipment Lease Between WABASH STATUTORY TRUST - 2000, as Lessor and APEX TRAILER LEASING & RENTALS, L.P., as Lessee Dated as of December 29, 2000 This is Counterpart No. ______ 88 TABLE OF CONTENTS ARTICLE I LEASE AND DELIVERY OF EQUIPMENT; TERM 1 Section 1.1. Intent to Lease and Hire 1 Section 1.2. Lease Supplement 1 Section 1.3. Initial Term 2 Section 1.4. Renewal Terms 2 Section 1.5. Right, Title and Interest 2 Section 1.6. Delivery; Inspection And Acceptance By Lessee 2ARTICLE II RENT 3 Section 2.1. Rent 3 Section 2.2. Payment of Rent 3 Section 2.3. Supplemental Rent 3 Section 2.4. Method of Payment 3ARTICLE III NET LEASE 4ARTICLE IV OWNERSHIP AND MARKING OF EQUIPMENT 5 Section 4.1. Retention of Title 5 Section 4.2. Duty to Number and Mark Equipment 5 Section 4.3. Prohibition Against Certain Designations 6ARTICLE V DISCLAIMER OF WARRANTIES; QUIET ENJOYMENT 6 Section 5.1. Disclaimer of Warranties; Warranty Assignments 6 Section 5.2. Quiet Enjoyment 7ARTICLE VI SUBSTITUTION AND EXCHANGE OF UNITS OF EQUIPMENT 7ARTICLE VII RULES, LAWS AND REGULATIONS 10ARTICLE VIII USE AND MAINTENANCE OF EQUIPMENT 10 Section 8.1. Use and Maintenance of Equipment 10 Section 8.2. Additions and Improvements 12ARTICLE IX LIENS ON THE EQUIPMENT 12 Section 9.1. Liens on the Equipment 12 Section 9.2. Security Interest Filings; Certificates of Title; Lien Notations 13ARTICLE X INSURANCE; PAYMENT FOR EVENT OF LOSS 14 Section 10.1. Insurance Requirements 14 89 TABLE OF CONTENTS (CONTINUED) Page Section 10.2. Casualty 15 Section 10.3. Substitution or Payment of Termination Value upon an Event of Loss 16 Section 10.4. Rent Termination 16 Section 10.5. Disposition of Equipment 17 Section 10.6. Termination Value 17 Section 10.7. Risk of Loss 17 Section 10.8. Eminent Domain 17ARTICLE XI INSPECTION; REPORT 17ARTICLE XII RETURN OF THE EQUIPMENT UPON EXPIRATION OF TERM 18 Section 12.1. Return Conditions 18 Section 12.2. Inspection of Equipment 20 Section 12.3. Specific Performance 20ARTICLE XIII LEASE DEFAULT 20 Section 13.1. Events of Default 20 Section 13.2. Remedies 22 Section 13.3. Waivers 25 Section 13.4. Notice of Lease Event of Default 26ARTICLE XIV RETURN OF EQUIPMENT UPON DEFAULT 26 Section 14.1. Lessee's Duty to Return 26 Section 14.2. Lessor Appointed Lessee's Agent 27ARTICLE XV ASSIGNMENT BY LESSOR 27ARTICLE XVI ASSIGNMENTS BY LESSEE; USE AND POSSESSION 27 Section 16.1. Lessee's Rights to the Equipment & Sublease 27 Section 16.2. Additional Provisions Regarding Subleases 28ARTICLE XVII EARLY TERMINATION OPTION; END OF TERM OPTIONS 29 Section 17.1. Early Termination Option for all of the Equipment 29 Section 17.2. End of Term Options 30 Section 17.3. Lessee Marketing Obligations 30 -ii- 90 TABLE OF CONTENTS (CONTINUED) Page ARTICLE XVIII MISCELLANEOUS 33 Section 18.1. Payments to Lessor 33 Section 18.2. Right of Lessor to Perform 33 Section 18.3. Covenant of Quiet Enjoyment 34 Section 18.4. Estoppel Certificates 34 Section 18.5. No Merger 34 Section 18.6. Third-party Beneficiaries 34 Section 18.7. Execution in Counterparts 35 Section 18.8. Currency 35 Section 18.9. Notices 35 Section 18.10. Grant of Security Interest 35 Section 18.11. Headings, etc. 36 Section 18.12. GOVERNING LAW 36 Section 18.13. Severability 36 Section 18.14. Liability Limited 36 Section 18.15. Further Assurances 37 Section 18.16. SUBMISSION TO JURISDICTION 37 Section 18.17. WAIVER OF JURY TRIAL 37 Section 18.18. Nature of Transaction 38EXHIBIT A -- Form of Lease SupplementEXHIBIT B -- Form of Sublease -iii- 91 EQUIPMENT LEASE EQUIPMENT LEASE, dated as of December 29, 2000 (this "Lease"), betweenWABASH STATUTORY TRUST - 2000, a Connecticut statutory trust, as Lessor("Lessor"), and APEX TRAILER LEASING & RENTALS, L.P., a Delaware limitedpartnership, as Lessee ("Lessee"). RECITALS: WHEREAS, subject to the terms and conditions set forth herein and inthat certain Participation Agreement, dated as of December 29, 2000, amongLessee, Lessor, Wabash National Corporation, as Guarantor, State Street Bank andTrust Company of Connecticut, National Association, as Trustee, Fleet CapitalCorporation, as Owner Participant, Tranche A Lender and Tranche B Lender andFleet Capital Corporation, as Administrative Agent and Collateral Agent (asamended, modified, restated or supplemented from time to time, the"Participation Agreement"), Lessor wishes to purchase the Units of Equipmentfrom Lessee and to lease such Units of Equipment to Lessee and Lessee wishes tolease the Units of Equipment from Lessor on the Initial Closing Date and eachsubsequent Closing Date. WHEREAS, capitalized terms used in this Lease and not otherwise definedherein shall have the respective meanings indicated in Appendix A attached tothe Participation Agreement. Where any provision in this Lease refers to actionto be taken by any Person, or which such Person is prohibited from taking, suchprovision shall be applicable whether such action is taken directly orindirectly by such Person. NOW THEREFORE, in consideration of the foregoing, and other good andvaluable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows: ARTICLE I LEASE AND DELIVERY OF EQUIPMENT; TERM Section 1.1. Intent to Lease and Hire. Upon the purchase of each Unitof Equipment by Lessor from Lessee and the other sellers thereof pursuant to andsubject to the terms and conditions of the Participation Agreement, Lessorhereby agrees that it shall, commencing on the first day of the Initial LeaseTerm, lease and demise to Lessee such Unit to Lessee and Lessee hereby agreesthat it shall lease and let such Unit from Lessor for the Term of this Lease, onand subject to the terms and conditions set forth herein and in the applicableLease Supplement. Section 1.2. Lease Supplement. Lessee hereby agrees that Lessee'sexecution and delivery of a Lease Supplement, in the form attached hereto asExhibit A, with respect to any Unit shall conclusively establish that, asbetween Lessor and Lessee, but without limiting or otherwise affecting Lessee'sor Lessor's rights, if any, against any manufacturer of such Unit, such Unit isacceptable to and irrevocably accepted by Lessee under this Lease and shall beevidence that such Unit has been subjected to this Lease pursuant to the termshereof, notwithstanding any defect with respect to design, manufacture,condition or in any other 92respect, and that such Unit (i) is in good order and condition and conforms tothe specifications applicable thereto and to all Applicable Laws, and (ii) toLessee's knowledge, is in compliance with all manufacturing specifications andwarranties. By its execution and delivery of any Lease Supplement, Lesseerepresents and warrants to Lessor and each Participant that it has inspected theEquipment to which such Lease Supplement relates and that it has no knowledge ofany defect in any Unit covered thereby. Lessor hereby appoints Lessee as itsagent for acceptance of each of the Units of Equipment. Lessor shall not beliable to Lessee for any failure or delay in obtaining any Unit of Equipment ormaking delivery thereof. Section 1.3. Initial Term. The base term of this Lease for each Unit(the "Initial Lease Term") shall begin on the Initial Closing Date or ClosingDate applicable to such Unit as specified in the Lease Supplement applicable tosuch Unit (respectively, the "Term Commencement Date") and shall terminate withrespect to such Unit on June 30, 2002 (the "Initial Lease Term ExpirationDate"), subject to earlier termination pursuant to Articles X, XIII and XVII.Subject and pursuant to the terms of Section 1.4, Lessee may elect one or moreRenewal Terms at the end of the Initial Lease Term or any expiring Renewal Termwith respect to all Units of Equipment then subject to this Lease. TheTermination Value payable during the Initial Lease Term in respect of any Unitof Equipment suffering an Event of Loss shall be as determined on Schedule I tothe applicable Lease Supplement. Section 1.4. Renewal Terms. So long as no Unmatured Lease Default orLease Event of Default shall have occurred and be continuing, Lessee may, asprovided in Section 17.2 hereof, renew this Lease as to all, but not less thanall of the Units for one or more consecutive one year renewal terms (eachone-year term, a "Renewal Term"), provided, however, that (i) Lessee only mayelect one Renewal Term at a time and (ii) notwithstanding anything to thecontrary contained herein, Lessee only shall be entitled to elect a total offour (4) Renewal Terms. Such Renewal Term shall commence upon the day followingthe Initial Lease Term Expiration Date or upon the day following the expirationof the immediately preceding Renewal Term, as the case may be. The TerminationValue payable during the Renewal Term in respect of any Unit of Equipmentsuffering an Event of Loss shall be in an amount as determined on Schedule I tothe applicable Lease Supplements. Section 1.5. Right, Title and Interest. The Equipment is leased to theLessee without any representation or warranty, express or implied, by the Lessorand subject to the rights of parties in possession, the existing state ofLessor's right, title and interest (including, without limitation, all Liensother than Lessor Liens) and all Applicable Law. The Lessee shall in no eventhave any recourse against the Lessor for any defect in or exception to Lessor'sright, title and interest to the Equipment other than resulting from LessorLiens attributable to the Lessor. Section 1.6. Delivery; Inspection And Acceptance By Lessee. Upondelivery of each Unit of Equipment, Lessee shall inspect and accept theEquipment and shall execute and deliver to Lessor a Lease Supplement containinga complete description of the Unit of Equipment accepted; whereupon, as betweenLessor and Lessee, the same shall be deemed to have been finally accepted byLessee pursuant to this Lease. All expenses incurred in connection with Lessor'spurchase of the Equipment (including shipment, delivery and installation) shallbe the responsibility of Lessee and shall be paid upon demand. If Lessee shall,for reasonable cause, -2- 93refuse to accept delivery of any Unit of Equipment, Lessee will be assigned allrights and shall assume all obligations of Lessor as purchaser of the Equipment. ARTICLE II RENT Section 2.1. Rent. (a) During the Initial Lease Term and each Renewal Term with respect toeach Unit of Equipment, Lessee shall, on each Payment Date, pay to Lessor BasicRent for such Unit of Equipment, all as set forth in the ParticipationAgreement. (b) Lessee's inability or failure to take possession of all or anyportion of a Unit of Equipment upon the entering into of the initial LeaseSupplement for such Equipment shall not delay or otherwise affect Lessee'sobligation to pay Rent for such Equipment in accordance with the terms of thisLease. Section 2.2. Payment of Rent. Rent shall be paid absolutely net to eachPerson entitled thereto, so that this Lease shall yield to such Person the fullamount thereof, without setoff, deduction or reduction. Section 2.3. Supplemental Rent. Lessee shall pay to Lessor or any otherPerson entitled thereto any and all Supplemental Rent promptly as the same shallbecome due and payable, and if Lessee fails to pay any Supplemental Rent, Lessorand such other Persons shall have all rights, powers and remedies provided forherein or by law or equity or otherwise. Lessee shall pay to Lessor, asSupplemental Rent, among other things, on demand, to the extent permitted byApplicable Law, interest at the applicable Overdue Rate on any installment ofBasic Rent with respect to any Unit of Equipment not paid when due for theperiod for which the same shall be overdue and on any payment of SupplementalRent not paid when due or demanded by Lessor for the period from the due date orthe date of any such demand, as the case may be, until the same shall be paid.The expiration or other termination of Lessee's obligations to pay Basic Renthereunder shall not limit or modify the obligations of Lessee with respect toSupplemental Rent. Unless expressly provided otherwise in this Lease, in theevent of any failure on the part of Lessee to pay and discharge any SupplementalRent as and when due, Lessee shall also promptly pay and discharge any fine,penalty, interest or cost which may be assessed or added under any agreement towhich Lessee is a party or which is authorized in writing by Lessee with a thirdparty for nonpayment or late payment of such Supplemental Rent, all of whichshall also constitute Supplemental Rent. Section 2.4. Method of Payment. Notwithstanding anything to thecontrary in any of the Operative Documents, each payment of Rent, or otheramounts payable by Lessee to Lessor under this Lease or any other OperativeDocument (other than payments of Supplemental Rent that are Excluded Amounts)shall be made by Lessee to the Administrative Agent as agent of Lessor under theParticipation Agreement (or, if all Loans and all other amounts owing to theLenders under the Operative Documents have been paid in full and all Commitmentsof the Lenders have been permanently terminated, to the Owner Participant) priorto 11:00 A.M., eastern standard time, to the account specified in Section 5.5 ofthe Participation Agreement, in -3- 94immediately available funds consisting of lawful currency of the United Statesof America on the date when such payment shall be due. Payments received after11:00 A.M., eastern standard time on the date due shall, for the purpose ofSection 13.1(a), hereof be deemed received on such day; provided, however, thatfor the purposes of the second sentence of Section 2.3 hereof, such paymentsshall be deemed received on the next succeeding Business Day and subject tointerest at the Overdue Rate as provided in such Section 2.3. In the event theLessee makes a Rent payment on a day other than a Payment Date (if otherwiserequired), Lessee shall pay any Break Costs associated with such payment. Allpayments of Supplemental Rent payable directly to the Trustee, which areExcluded Amounts, shall be made to the Trustee to the account specified inSection 18.1 hereof. ARTICLE III NET LEASE This Lease is a net lease and Lessee acknowledges and agrees thatLessee's obligations hereunder shall be absolute and unconditional under any andall circumstances and shall be paid without notice or demand and without anyabatement, reduction, suspension, diminution, deferral, setoff, defense,counterclaim or recoupment whatsoever, including, without limitation, anyabatement, reduction, suspension, diminution, deferral, setoff, defense,counterclaim or recoupment due or alleged to be due to, or by reason of, anypast, present or future claims which Lessee may have against Lessor, OwnerParticipant, any assignee, Administrative Agent, Collateral Agent, any vendor ormanufacturer of the Equipment or any part or Unit thereof, any Lender or anyother Person, either under this Lease or otherwise, for any reason whatsoever,nor, except as otherwise expressly provided herein, shall this Lease terminate,or the obligations of Lessee be otherwise affected for any reason whatsoever,including any defect in or damage to or loss of possession or loss of use ordestruction of the Equipment or any part or Unit thereof, the condition, design,operation or fitness for use thereof, any Liens or rights of others with respectto the Equipment or any part or Unit thereof, any prohibition or interruption ofor other restriction against Lessee's use, operation or possession of theEquipment or any part or Unit thereof, or any interference with such use,operation or possession by any Person or entity (including confiscation,requisition or other taking by any Governmental Authority, any Person actingunder Governmental Authority or otherwise, or action of any public or privatePerson, or for any other reason whatsoever), the invalidity or unenforceabilityor lack of due authorization of this Lease, or any other Operative Document, anydefect in the title to, compliance with plans or specifications for condition,design or fitness for use of all or any of the Equipment, any insolvency of orany bankruptcy, reorganization or other proceeding against Lessee, Lessor or anyother Person, or for any other cause whether similar or dissimilar to theforegoing, any present or future law to the contrary notwithstanding, it beingthe intention and agreement of the parties hereto, and the basis of the bargain,that (to the extent permitted by Applicable Law) Rent and other amounts payableby Lessee hereunder shall continue to be payable in full in all events in themanner and at the times herein provided unless and until the obligation to paythe same shall be terminated pursuant to the express provisions of this Lease.To the extent permitted by Applicable Law, Lessee hereby waives any and allrights which it may now have or which at any time hereafter may be conferredupon it, by statute or otherwise, to terminate, cancel or quit this Lease orsurrender any Unit of Equipment except in accordance with the express termshereof. Each Rent or other payment made by Lessee hereunder shall be final andLessee shall not seek to recover all or any part of such payment (except for anyexcess payment made in error) from -4- 95Lessor, Owner Participant, Administrative Agent, Collateral Agent, or any Lenderfor any reason whatsoever. Without limiting the generality of the foregoing, Lessee covenants thatit will remain obligated under this Lease in accordance with its terms, and willnot take any action to terminate (except in accordance with the expressprovisions hereof), rescind or avoid this Lease for any reason, notwithstandingany insolvency, bankruptcy, reorganization or other proceeding affecting Lessoror Owner Participant, or any property of Lessor or Owner Participant, or anyaction which may be taken by any receiver, trustee or liquidation (or othersimilar official) or by any court. Nothing in this Article III or in any other provision of this Leaseshall preclude any separate, independent claim (not by way of abatement orreduction of any amount at any time payable by Lessee hereunder) by Lessee forthe breach of any representation, covenant, undertaking or agreement made hereinand in any other Operative Document for the benefit of Lessee by Lessor, OwnerParticipant or any other Person. ARTICLE IV OWNERSHIP AND MARKING OF EQUIPMENT Section 4.1. Retention of Title. Lessor, as between Lessor and Lessee,shall and hereby does retain full legal title to the Equipment notwithstandingthe delivery thereof to and possession and use thereof by Lessee. Section 4.2. Duty to Number and Mark Equipment. Lessee will cause eachUnit of Equipment to be kept marked with its reporting marks and numbered withone of its unit numbers as set forth in Annex A to each Lease Supplement, andwill, from and after each Closing Date, keep and maintain plainly, distinctly,permanently and conspicuously such other markings as from time to time may berequired by law in order to protect the title of Lessor to such Unit ofEquipment and its rights under this Lease. Lessee will replace promptly any suchunit numbers or reporting marks that may be removed, defaced, obliterated ordestroyed. Lessee will not change the reporting marks or unit number of any Unitof Equipment unless and until a statement of new reporting marks and unitnumbers to be substituted therefor shall have been delivered to Collateral Agentand Lessor and filed, recorded or deposited in all applicable public offices. -5- 96 Section 4.3. Prohibition Against Certain Designations. Except as aboveprovided, Lessee will not allow the name of any Person to be placed on any Unitof Equipment as a designation that might be interpreted as a claim of ownership;provided, however, that Lessee may cause the Equipment to be lettered with thenames or initials or other insignia customarily used by Lessee or its affiliatesor a Sublessee on similar equipment used by Lessee or its Affiliates or aSublessee of the same or a similar type for convenience of identification ofLessee or its affiliates or a Sublessee to use the Equipment under this Lease. ARTICLE V DISCLAIMER OF WARRANTIES; QUIET ENJOYMENT Section 5.1. Disclaimer of Warranties; Warranty Assignments. (a) LESSEE ACKNOWLEDGES AND AGREES THAT (I) THE EQUIPMENT AND EACH UNITTHEREOF IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY ANDACCEPTABLE TO LESSEE, (II) LESSEE IS SATISFIED THAT THE EQUIPMENT AND EACH UNITTHEREOF IS SUITABLE FOR ITS PURPOSES, (III) NEITHER LESSOR NOR ANY PARTICIPANTIS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (IV) THE EQUIPMENT ANDEACH UNIT THEREOF IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS ANDGOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED AND THE STATE ANDCONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS LEASEWITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY LESSOR OR ANY PARTICIPANT, AND(V) AS BETWEEN LESSOR, ANY PARTICIPANT AND LESSEE, LESSEE LEASES THE EQUIPMENTAND EACH ITEM THEREOF, ON AN "AS-IS, WHERE-IS" BASIS WITHOUT WARRANTY ORREPRESENTATION EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,INCLUDING, WITHOUT LIMITATION, WARRANTIES OR REPRESENTATIONS REGARDING THETITLE, CONDITION, FITNESS FOR A PARTICULAR PURPOSE DESIGN, DESCRIPTION,OPERATION OR MERCHANTABILITY THEREOF, IT BEING AGREED THAT ALL SUCH RISKS, ASBETWEEN LESSOR, ANY PARTICIPANT AND LESSEE, ARE TO BE BORNE BY LESSEE. Theprovisions of this Section have been negotiated by Lessor and Lessee and areintended to be a complete exclusion and negation of any representations orwarranties of Lessor or Owner Participant, express or implied, with respect tothe Equipment or any Unit thereof that may arise pursuant to any law now orhereafter in effect, or otherwise. (b) Unless a Lease Event of Default shall have occurred and becontinuing and (except for any Lease Event of Default arising under Section13.1(g) hereof) Lessor shall have thereafter sent written notice to Lesseerevoking the authority granted by this sentence, and so long as the Equipmentshall be subject to this Lease and Lessee shall be entitled to possession of theEquipment hereunder, Lessor authorizes Lessee, at Lessee's expense, to assertfor Lessor's account, all rights and powers of Lessor under any manufacturer's,vendor's or dealer's warranty on the Equipment or any part thereof; provided,however, that Lessee shall indemnify, protect, save, defend and hold harmlessLessor from and against any and all claims, and all costs, expenses, damages,losses and liabilities incurred or suffered by Lessor in connection therewith,as a result of, or incident to, any action by Lessee pursuant to the foregoingauthorization, and that Lessee shall provide Lessor with prior written notice ofany action Lessee proposes to take -6- 97on Lessor's behalf pursuant to the foregoing authorization. Any payments made byany such vendor or manufacturer pursuant to such warranty for any Unit ofEquipment shall be payable to Lessee so long as no Unmatured Lease Default orLease Event of Default shall have occurred and be continuing and after theoccurrence and during the continuance of an Unmatured Lease Default or a LeaseEvent of Default shall be paid to the Collateral Agent so long as the Lien ofthe Security Agreement shall not have been discharged and, thereafter, shall bepaid to Lessor. Such payment is to be used to repair or replace damagedcomponents in accordance with Article X hereof, if feasible, and if not used,such amount shall be paid promptly to Lessor, provided, that, so long as theLien of the Security Agreement shall not have been discharged, such amount shallbe paid promptly to Collateral Agent. (c) Lessor shall have no responsibility or liability to Lessee or anyother Person with respect to any of the following: (i) any liability, loss ordamage caused or alleged to be caused directly or indirectly by any Unit ofEquipment or by any inadequacy thereof or deficiency or defect therein or by anyother circumstances in connection therewith; (ii) the use, operation orperformance of any Unit of Equipment or any risks relating thereto; (iii) lossof business or anticipated profits or consequential damages; or (iv) thedelivery, operation, servicing, maintenance, repair, improvement or replacementof any Unit of Equipment. Lessee's delivery of a Lease Supplement shall beconclusive evidence as between Lessee, any Lender, Owner Participant and Lessorthat all Units of Equipment described therein are in all the foregoing respectssatisfactory to Lessee, and Lessee will not assert any claim of any naturewhatsoever against Lessor or any Participant based on any of the foregoingmatters. Section 5.2. Quiet Enjoyment. So long as no Lease Event of Defaultshall have occurred and be continuing, and subject to Lessor's rights underArticle XI hereof, Lessor agrees that, following the execution and delivery ofeach Lease Supplement, Lessee shall be entitled to the quiet use and enjoymentof the Equipment subject to such Lease Supplement in accordance with this Leaseand such Lease Supplement. Such right of quiet enjoyment is independent of, andshall not affect Lessor's rights otherwise to initiate legal action to enforcethe obligations of Lessee under this Lease. ARTICLE VI SUBSTITUTION AND EXCHANGE OF UNITS OF EQUIPMENT (a) Subject to the provisions of subsection (d) hereof, and so long asno Unmatured Lease Default or Lease Event of Default shall have occurred and becontinuing, Lessee may (i) subject to the conditions hereof, sell a Unit orgroup of Units of Equipment (such group, a "Pool") during each calendar quarterprovided that on the last day of such calendar quarter Lessee shall, inaccordance with this Article VI, substitute new equipment for the Units ofEquipment that have been sold and (ii) substitute or exchange any Unit or Poolof Equipment for another Unit or Pool of Equipment that is substantially similarto the Unit or Pool of Equipment to be replaced in accordance with the terms ofthis Article VI (such new Unit or Pool of Equipment, collectively referred to as"Replacement Units"). If the Lessee shall elect or be required to substitute orexchange any Unit or Pool of Equipment pursuant to the preceding sentence, theLessee shall, except as otherwise provided herein, on the last day of eachcalendar quarter, at its sole cost and expense, deliver to the Lessor withoutcost to the Lessor full warranty -7- 98bills of sale for the Replacement Units specifically identifying suchReplacement Units (accompanied by a certificate of the Lessee, signed by aResponsible Officer of the Lessee, stating that such Replacement Units complywith the requirements of this Article VI), which Replacement Units meet (or willmeet when the substitution or exchange is completed) the following conditions: (1) they shall be free and clear of all Liens other than Permitted Equipment Liens and would in all other respects comply with the requirements of this Lease; (2) each Replacement Unit or Pool of Replacement Units shall have a utility, expected residual value and remaining useful life at least equal to the Unit or Pool of Equipment, as the case may be, to be replaced and be in as good condition and operating order as such Unit or Pool of Equipment, assuming that such Unit or Pool of Equipment had been maintained in accordance with this Lease provided, however, that the number of Replacement Units shall not exceed 150% of the number of Units being replaced; (3) the Replacement Unit or Pool of Replacement Units, as the case may be, shall have a Fair Market Sales Value and net book value at least equal to the then current Fair Market Sales Value and net book value of the Unit or Pool of Equipment that is being replaced and Lessor shall have the right to verify such values prior to the proposed substitution; (4) title to all Replacement Units has vested in the Lessor pursuant to documentation reasonably acceptable to the Lessor; (5) the Lessee shall execute and make all Security Interest Filings necessary or desirable to protect the interests of the Lessor, the other Participants, the Administrative Agent and the Collateral Agent in the Replacement Units concurrently with consummating such substitution or exchange; (6) the Lessee and the Lessor shall enter into a Lease Supplement subjecting such Replacement Units to the Lease; and -8- 99 (7) the Lessee shall have furnished to Owner Participant and each Lender (so long as the Lien of the Security Agreement shall not have been discharged) an opinion of counsel to the effect that (A) the Bills of Sale and Lease Supplement have been duly authorized, executed, and delivered and constitute legal, valid and binding obligations of the Lessee (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity), (B) the Bills of Sale are effective to transfer, and do transfer, title to the Replacement Units to the Lessor, and (C) all filings, recordings and other action necessary or appropriate to perfect and protect the Lessor's and Collateral Agent's (so long as the Lien of the Security Agreement shall not have been discharged) respective interests in the Replacement Units, including without limitation the Security Interest Filings, have been accomplished. Notwithstanding anything to the contrary contained herein, if, during any calendar quarter, Lessee shall sell Units of Equipment, the aggregate Equipment Cost of which exceeds $1,000,000 (and for which Replacement Units have not been substituted), Lessee shall promptly notify Lessor and shall be required to substitute Replacement Units for the Units which have been sold within ten (10) days following the last sale of Units (which together with such Units previously sold equal $1,000,000 or more) rather than on the last day of the applicable calendar quarter, as provided above; provided further, however, that if, during any calendar quarter, Lessee contemplates a sale of Units, the aggregate Equipment Cost of which, when added to the aggregate Equipment Cost of all other Units previously sold during such calendar quarter (and for which Replacement Units have not been substituted), would exceed $2,000,000, Lessee shall provide Lessor not less than ten (10) days prior notice of such sale and Lessee shall not consummate such sale unless, on the date of such sale, Lessee provides Replacement Units to Lessor in accordance with this Article VI. (b) Upon transfer of the Replacement Units to Lessor and compliancewith the requirements of paragraph (a): (i) each Replacement Unit shall becomethe property of the Lessor; (ii) the Lessor will be subrogated to all claims ofthe Lessee, if any, against third parties to the extent the same relate tophysical damage to or loss of such Replacement Units and (iii) the substitutedor exchanged property shall no longer be subject to this Lease, and the Lessorshall release any security interests, including, without limitation, the filingof any UCC termination statements or any other termination documentation withrespect to any Security Interest Filing made in respect of such ReplacementUnits and Lessor shall promptly convey the replaced Unit to Lessee withoutrecourse, representation or warranty as to any matter whatsoever except as tothe absence of all Lessor's Liens. For all purposes hereof, the ReplacementUnits shall, after such transfer, (A) be part of the Equipment leased hereunder,be subject to the relevant Lease Supplement and all other Operative Documents asUnits of Equipment, and (B) be deemed to be the Units of Equipment that werereplaced. No such substitution or exchange shall result in any change in BasicRent. (c) The Lessee shall pay, on an After-Tax Basis, all costs and expenses(including reasonable attorneys' fees and disbursements) incurred by the Lessor,the Administrative Agent, -9- 100the Collateral Agent and the Participants, and all taxes, fees and othergovernmental charges payable in connection with the substitution or exchange,whether or not such substitution or exchange is consummated and with respect toany documentation required to evidence such substitution or exchange inaccordance with the terms hereof. (d) Except as provided in subsection (a) above, at least ten (10)Business Days prior to the last day of each calendar quarter, Lessee shallprovide written notice to Lessor of each substitution event that Lessee intendsto complete on the last day of such calendar quarter. In the event that,pursuant to subsection (a) above, Lessee has substituted Equipment more thanonce per each quarterly period, which quarterly periods shall begin on January1, 2001, Lessee shall pay to Lessor an administrative fee in the amount of$2,500 for each separate substitution event (excluding the first substitution)during such quarterly period. Notwithstanding anything to the contrary containedin this Article VI, in no event shall Lessee be allowed to complete asubstitution of Units of Equipment during a calendar quarter if the EquipmentCost of the Units of Equipment with respect to which a substitution iscontemplated, when added to the Equipment Cost of all other Units of Equipmentthat already have been substituted during such calendar quarter and theimmediately preceding three (3) calendar quarters exceeds, or will exceed aftergiving effect to the contemplated substitution, 25% of the Equipment Cost of allUnits subject to the Lease during such annual period. ARTICLE VII RULES, LAWS AND REGULATIONS Lessee agrees to comply with all Applicable Laws of any GovernmentalAuthority (including all Environmental Laws) with respect to the inspection,use, maintenance, operation and overhaul of each Unit of Equipment subject tothis Lease, including, without limitation, procuring and maintaining in effectall licenses, registrations, certificates, permits, approvals or consentsrequired by any Authority . Subject to the provisions of Sections 8.1, in caseany equipment or appliance is required to be altered, added, replaced ormodified on any Unit of Equipment in order to comply with such Applicable Laws,Lessee agrees to make such alterations, additions, replacements and/ormodifications at its own expense and title thereto shall immediately be vestedin Lessor. ARTICLE VIII USE AND MAINTENANCE OF EQUIPMENT Section 8.1. Use and Maintenance of Equipment. (a) Lessee shall (i) use the Equipment solely in conduct of itsbusiness, for the purpose for which the Equipment was designed, in a careful andproper manner (and shall not permanently discontinue use of the Equipment) and(ii) operate, maintain, service and repair the Equipment, and maintain allrecords and other materials relating thereto in accordance and consistent with(1) all maintenance and operating manuals or service agreements, includingSupply Contracts, whenever furnished or entered into, including any subsequentamendments or replacements thereof, issued by the manufacturers of theEquipment; (2) the requirements of all insurance policies; (3) any purchase orsales agreement relating to such Equipment so as to preserve all of Lessee's andLessor's rights thereunder, including all rights to any warranties, -10- 101indemnities or other rights or remedies, (4) all Applicable Laws and (5) theprudent practice of other similar companies in the same business as Lessee, butin any event, to no lesser standard than that employed by Lessee for comparableequipment to be in good repair and operating condition and in at least the samecondition as when delivered to Lessee hereunder, except for ordinary wear andtear resulting despite Lessee's full compliance with the terms hereof. Lessee(x) shall at all times, maintain records indicating the principal place ofgarage of each Unit of Equipment subject to this Lease and shall provide copiesof such records to Lessor upon three (3) Business Days notice from Lessor and(y) shall not attach or incorporate the Equipment to or in any other item of ora part of such other item of equipment. (b) Lessee, within a reasonable time, will replace any parts of theEquipment which become worn out, lost, destroyed, damaged beyond repair orotherwise permanently rendered unfit for use, with new or reconditionedreplacement parts which are free and clear of all Liens, encumbrances or rightsof others and have a value, utility and remaining useful life at lease equal tothe parts replaced. Title to all such parts, improvements and additions to theEquipment immediately shall vest in Lessor, without cost or expense to Lessor orany further action by any Equipment and subject to the terms of this Lease as iforiginally leased hereunder. Except to the extent the same are replaced inaccordance with this Article VIII, Lessee shall not detach or otherwise removeany parts originally or from time to time attached to the Equipment, if suchparts are essential to the operation of the Equipment or cannot be detached fromthe Equipment without materially interfering with the operation of the Equipmentor adversely affecting the value, utility and remaining useful life which theEquipment would have had without the addition thereof. Lessee shall not make anymaterial alterations to the Equipment that would adversely affect the value,utility or remaining useful life of such Equipment without the prior writtenconsent of Lessor. (c) Lessee shall not operate or locate any Unit of Equipment, or sufferany Unit of Equipment to be operated or located, in any area excluded fromcoverage by any insurance policy required by the terms of Section 10.1 hereof.Lessee shall at no time assign, or permit any sublessee to assign, any Unit ofEquipment for the transport or storage of any Hazardous Materials. Lessee shallpromptly, and in all events within ten (10) Business Days after the occurrenceof such event, notify Lessor, Owner Participant and any Lender of any breach byLessee or any sublessee of the covenants or restrictions set forth in theimmediately preceding sentence of this paragraph. Not later than thirty (30)day's after receipt of such notice, Lessor shall be entitled to declare an Eventof Loss with respect to any Unit subject to such breach, in which event Lesseeshall comply with the requirements of Article X hereof. Lessee agrees that itwill not discriminate against any Unit of Equipment (as compared to othersimilar equipment owned or leased by Lessee) with respect to its use, operationor maintenance in contemplation of the expiration or termination of this Lease. (d) Lessee shall also maintain all records, logs and other materialsrequired by the Department of Transportation or any other Governmental Authorityhaving jurisdiction over the Equipment or Lessee to be maintained in respect ofthe Equipment. (e) At all times during the Term of this Lease, the Equipment will beand remain in the possession and control of Lessee, subject to the terms ofArticle XVI hereof. Lessee shall not operate the Equipment or permit theEquipment to be operated or located outside of the -11- 102contiguous forty-eight states of the United States, Alaska and Canada; provided,however, that Lessee shall be allowed incidental operation of the Equipment inMexico, provided, further, that at no time shall Lessee allow Units of Equipmentrepresenting more than 3% of the Total Equipment Cost to be located or operatedin Mexico. Lessee shall not use, and will not permit any other Person to use anyEquipment or allow the same to be used, for any unlawful purpose. Lessee shalluse and operate the Equipment or cause it to be used and operated only bypersonnel authorized by Lessee (subject to Article XVI hereof), and Lessee shalluse every reasonable precaution to prevent loss or damage to each Unit ofEquipment from fire and other hazards. Section 8.2. Additions and Improvements. Any parts installed orreplacements made by Lessee upon any Unit of Equipment pursuant to additions,improvements or pursuant to Lessee's obligation to maintain and keep theEquipment in good order, condition and repair under this Article VIII shall ineither case be considered accessions to such Unit of Equipment and title theretoimmediately shall be vested in Lessor without cost or expense to Lessor. Lesseeshall make no other additions or improvements to any Unit of Equipment unlessthe same are readily removable without causing damage to such Unit of Equipment,and provided that such additions, modifications and improvements do not diminishthe condition, Fair Market Sales Value, utility, remaining useful life orexpected residual value of such Unit of Equipment. Title to any such readilyremovable additions or improvements shall remain with Lessee. If Lessee shall atits cost cause such readily removable additions or improvements to be made toany Unit of Equipment, then, prior to the return of such Unit of Equipment toLessor hereunder of the delivery of such Unit to a third party purchaser of suchUnit, Lessee shall notify Lessor whether it intends to remove such readilyremovable additions and improvements and, thereafter, Lessee shall remove thesame at its own expense without causing any damage to such Unit of Equipment;provided, however, that Lessor may, by delivery of written notice to Lesseeprior to any such removal, elect to purchase any such readily removableadditions for a price equal to the Fair Market Sales Value thereof. In the eventthat such removal causes damage to the applicable Unit of Equipment, Lesseeshall promptly repair any such damage prior to the return of the Unit ofEquipment to the Lessor or to such third-party purchaser. Title to any readilyremovable addition or improvement which has not been so removed by Lessee fromany Unit of Equipment when such Unit is returned to Lessor pursuant to thisLease or delivered to a third party purchaser of such Unit shall thereupon bevested in Lessor or such purchaser. ARTICLE IX LIENS ON THE EQUIPMENT Section 9.1. Liens on the Equipment. Lessee represents and warrants toLessor that at the time a Unit of Equipment is accepted by it under this Lease,such unit will be free and clear of all Liens except (i) Lessor's Liens and (ii)Permitted Equipment Liens. Lessee will not directly or indirectly create, incur,assume or suffer to exist any Lien on or with respect to any Unit of theEquipment, title thereto or any interest therein except (i) Lessor's Liens and(ii) Permitted Equipment Liens. Lessee shall promptly, at its own expense, takesuch action as may be necessary to duly discharge any such Lien (and any claimwhich if unpaid might constitute or become such a Lien) not excepted above ifthe same shall arise at any time with respect to any Unit of the Equipment.Lessee shall notify Lessor upon becoming aware of any tax or other Lien (otherthan any Lien excepted above) that shall attach to the Equipment or any Unitthereof. -12- 103 Section 9.2. Security Interest Filings; Certificates of Title; LienNotations. Lessee shall perform the following actions to ensure that CollateralAgent shall have a first priority perfected Lien on all Equipment subject tothis Lease: (i) On or prior to the Closing Date for any Unit orreplacement pursuant to Article VI, Lessee shall cause all Security InterestFilings to be filed in all appropriate filing offices. (ii) Within fourteen (14) days of the initial Closing Date,Lessee shall cause to be completed and filed with all necessary GovernmentalAuthorities applications for new certificates of title with respect to each Unitof Equipment subjected to this Lease on such initial Closing Date, which newcertificates of title shall show Lessee as the owner of such Units of Equipmentand shall show Collateral Agent as lienholder thereof specifically as follows: "Fleet Capital Corporation, as Collateral Agent for the Lenders, as assignee of Wabash Statutory Trust-2000 One Financial Plaza 2nd Floor RI DE 03702C Providence, RI 02903 Attn: Steve Aalvik, Senior Vice President"Upon such filings, Lessee shall certify in writing to Collateral Agent that suchfilings have been made. Within thirty (30) days of the initial Closing Date,Lessee shall, subject to the Limited Power of Attorney, possess all of the newcertificates of title, provided, however, that so long as Lessee shall bediligently proceeding to obtain such new certificates of title from suchGovernmental Authorities, Lessee shall not be required to possess suchcertificates of title until sixty (60) days following the initial Closing Date.Upon receipt of such new certificates of title, Lessee shall certify in writingto Collateral Agent that it possesses such new certificates of title. (iii) On or prior to the Closing Date for any Unit (other thanthe initial Closing Date) or replacement pursuant to Article VI, Lessee shallcause to be completed and filed with all necessary Governmental Authoritiesapplications for new certificates of title with respect to each Unit ofEquipment subjected to this Lease on such Closing Date, which new certificatesof title shall comply with clause (ii) above. Upon such filings, Lessee shallcertify in writing to Collateral Agent that such filings have been made. Withinthirty (30) days of such Closing Date, Lessee shall, subject to the LimitedPower of Attorney, possess all of the new certificates of title, provided,however, that so long as Lessee shall be diligently proceeding to obtain suchnew certificates of title from such Governmental Authorities, Lessee shall notbe required to possess such certificates of title until sixty (60) daysfollowing such Closing Date. Upon receipt of such new certificates of title,Lessee shall certify in writing to Collateral Agent that it possesses such newcertificates of title. (iv) Lessee will, from time to time, do and perform any otheract and will execute, acknowledge, deliver, file, register and record (and willrefile, reregister or re-record whenever required) any and all furtherinstruments, required by law or reasonably requested by Lessor or OwnerParticipant, for the purpose of protecting Lessor's title to any Unit of -13- 104Equipment to the satisfaction of Lessor's or Owner Participant's counsel or forthe purpose of carrying out the intention of this Lease (including any suchfilings and recordings as shall be necessary to evidence any change in the nameof Lessee or any merger or consolidation thereof (and, at Lessor's expense, anysuch filings and recordings as shall be necessary to evidence any change in thename of Lessor or a successor trustee under the Trust Agreement)). Lessee willpay all costs, charges and expenses incident to any such re-recording orredepositing of any such instruments or incident to the taking of such action. ARTICLE X INSURANCE; PAYMENT FOR EVENT OF LOSS Section 10.1. Insurance Requirements. (a) Lessee will at all times after delivery and acceptance of each Unitof Equipment, at its own expense, carry and maintain or cause to be carried andmaintained (i) all-risk physical damage insurance with extended coverage in anamount not less than the greater of (x) the full replacement cost and (y) theTermination Value of all Units then subject to the Lease and (ii) publicliability insurance, including but not limited to third-party personal injury,death and property damage (including contractual liability insurance), inamounts not less than $5,000,000 in the aggregate and $1,000,000 per occurrence,and with no deductible, in each case against such risks and in such amounts asis customarily maintained by Lessee in respect of other equipment owned orleased by Lessee similar to the Equipment, and from financially sound andreputable insurance companies of recognized national standing having a creditrating of at least Best A-/IX, and in any event such coverage shall be inaccordance with customary standards and practices in the industry in whichLessee operates. Notwithstanding the foregoing, Lessee may self-insure withrespect to all risk physical damage insurance. (b) Such insurance policies shall: (i) name and insure Lessor, TrustCompany, Owner Participant, Collateral Agent, Administrative Agent and eachLender as additional insureds (each an "Additional Insured") under thecomprehensive liability insurance and, insure Collateral Agent as loss payeeunder the physical damage insurance, with the understanding that any obligationimposed on Lessee, including the liability to pay premiums, shall be the soleobligation of Lessee and not that of Lessor, (ii) provide that the insurer waiveits right of subrogation, set-off or counterclaim or any other deduction,whether by attachment or otherwise against each Additional Insured, (iii)provide that all such insurance is without right of contribution from any otherinsurance which might otherwise be maintained by any Additional Insured, (iv)provide therein or by endorsement that thirty (30) days prior written notice ofcancellation or modification in a manner materially adverse to any AdditionalInsured shall be given to each Additional Insured, as the case may be, and ten(10) days prior written notice of cancellation for nonpayment shall be given toeach Additional Insured, (v) provide that there is no recourse against eachAdditional Insured for payment of premium, commissions, direct calls,assessments or advances, and (vi) provide that the interests of each Additionalinsured shall not be invalidated by any action or inaction of Lessee or anyother Person. Prior to each Closing Date and annually thereafter at each policyanniversary date, Lessee shall furnish each Additional Insured with certificatesor other satisfactory evidence of maintenance of the insurance so required andshall furnish certificates evidencing renewals thereof as soon as practicablebut in no event later than five (5) Business Days prior to such renewal. Lesseeshall -14- 105furnish written notice to Lessor, Owner Participant, Collateral Agent,Administrative Agent and each Lender of any notice of cancellation, materialmodification, termination or lapse for non-payment of premiums with respect toany of the liability insurance provided pursuant to this Section within five (5)Business Days after the earlier of (x) the date upon which Lessee receives suchnotice from the insurance company providing such insurance and (y) the date uponwhich Lessee has actual knowledge of any such cancellation, materialmodification, termination or lapse for non-payment of premiums. (c) Nothing in this Section 10.1 shall prohibit any Additional Insuredfrom obtaining insurance for its own account at its cost, and any proceedspayable thereunder shall be as provided in the insurance policy relatingthereto; provided, however, that no such insurance may be obtained that wouldlimit or otherwise adversely affect the coverage of any insurance to be obtainedor maintained by Lessee pursuant to this Section 10.1. (d) If Lessee shall fail to maintain insurance as herein provided inSection 10.1, Lessor may at its option provide such insurance and, in suchevent, Lessee shall upon demand from time to time reimburse Lessor for the costthereof together with interest from the date of payment thereof at the OverdueRate, on the amount of the cost to Lessor of such insurance which Lessee shallhave failed to maintain. If after Lessor has provided such insurance, Lesseethen obtains the coverage provided for in Section 10.1 which was replaced by theinsurance provided by Lessor, and Lessee provides Lessor with evidence of suchcoverage reasonably satisfactory to Lessor, Lessor shall cancel the insurance ithas provided pursuant to the first sentence of this Section 10.1(d). In suchevent, Lessee shall reimburse Lessor for all costs to Lessor of cancellation,including without limitation any short rate penalty, together with interest fromthe date of Lessor's payment thereof at the Overdue Rate. Section 10.2. Casualty. (a) In the case of a Casualty affecting any Unit of Equipment that isnot an Event of Loss, any insurance proceeds shall be applied in accordance withthis Section 10.2(a). If the loss (or losses from a single incident or cause)covered by said physical damage insurance is less than $500,000, the proceeds ofsuch insurance shall be payable to Lessee provided that no Unmatured LeaseDefault or Lease Event of Default shall have occurred and be continuing and,after the occurrence and continuance of an Unmatured Lease Default or a LeaseEvent of Default, such proceeds shall be paid to Collateral Agent so long as theLien of the Security Agreement shall not have been discharged and thereaftershall be paid to Lessor. If such loss equals or exceeds $500,000, the proceedsof such insurance shall be payable to Collateral Agent or, if the Lien of theSecurity Agreement shall have been discharged, Lessor; provided that CollateralAgent or Lessor, as the case may be, shall, so long as no Unmatured LeaseDefault or Lease Event of Default has occurred or is then continuing (i) remitall such insurance proceeds to Lessee at such time as Lessee either (A) providesLessor evidence that the damage has been repaired and the Equipment has beenrestored to good working order and condition or (B) has paid to Lessor orCollateral Agent, as the case may be, the amounts otherwise due to Lessor orCollateral Agent, as the case may be, on loss of such Equipment or has effectedsubstitution for such Equipment pursuant to Section 10.3 hereof or (ii) uponreceipt of an invoice from the Person making such repair and evidence that thedamage has been repaired and the Equipment has been restored to good workingorder and condition, pay that portion of the insurance proceeds to such Personin -15- 106satisfaction of such invoice and remit the remainder of all such insuranceproceeds to Lessee. Any balance remaining after compliance with this Section10.2(a) with respect to such loss or damage shall be retained by Lessor, andafter the occurrence and during the continuance of an Unmatured Lease Default ora Lease Event of Default such payments shall be paid to Collateral Agent so longas the Lien of the Security Agreement shall not have been discharged andthereafter shall be paid to Lessor. (b) If an Unmatured Lease Default or Lease Event of Default hasoccurred and is continuing, any amounts which otherwise would be payable toLessee hereunder shall be retained by Lessor (or Collateral Agent, so long asthe Lien of the Security Agreement is outstanding) for application insatisfaction of Lessee's obligations hereunder upon the exercise of remediespursuant to Section 13.2, unless prior thereto, the Unmatured Lease Default orLease Event of Default is cured or waived. Section 10.3. Substitution or Payment of Termination Value upon anEvent of Loss. If an Event of Loss occurs with respect to a Unit or Units ofEquipment during the Term, Lessee shall, within thirty (30) days after Lesseereceives notice of (or otherwise obtains knowledge of) the occurrence of suchEvent of Loss, inform Lessor, Owner Participant and Collateral Agent in regardthereto and of its election to perform one of the following options (it beingagreed that if Lessee shall not have given notice of such election within thirty(30) days after Lessee receives notice of (or otherwise obtains knowledge of)such occurrence or if a Unmatured Lease Default or a Lease Event of Defaultshall then have occurred and be continuing, Lessee shall be obligated to performthe option set forth in the following subparagraph a(i); (i) substitute Replacement Units for such Unit or Units of Equipment in accordance with the provisions of Article VI hereof; provided however, that if Lessee shall not perform its obligation to effect such replacement under this subparagraph (a)(i) during the period of time provided in Article VI hereof, then on the next succeeding Payment Date after the end of such period, Lessee shall pay to Lessor or, so long as the Lien of the Security Agreement shall not have been discharged, Collateral Agent or, in the case of Supplemental Rent, to the Person entitled thereto, (A) the Termination Value for such Unit (computed as of such Payment Date by multiplying the Equipment Cost with respect to such Unit, as set forth on Annex A to the applicable Lease Supplement, with the applicable Termination Value Percentage set forth on Schedule I to such Lease Supplement opposite such Payment Date), plus (B) the Basic Rent and any Supplemental Rent due for such Unit of Equipment on such Payment Date, plus (C) all accrued and unpaid Basic Rent and any Supplemental Rent owing for such Unit of Equipment through any prior Payment Date; or (ii) on the Payment Date next following such notice of such Event of Loss, Lessee shall pay (A) the Termination Value for such Unit (computed as of such Payment Date), plus (B) the Basic Rent and any Supplemental Rent due for such Unit of Equipment on such Payment Date, plus (C) all accrued and unpaid Basic Rent and any Supplemental Rent owing for such Unit of Equipment through any prior Payment Date. Section 10.4. Rent Termination. Upon (but not until) payment of allsums required to be paid pursuant to Section 10.3 hereof in respect of any Unitor Units of Equipment with respect to -16- 107which an Event of Loss has occurred, the obligation to pay Rent for such Unit orUnits of Equipment shall terminate, but Lessee shall continue to pay Rent forall other Units of Equipment. Section 10.5. Disposition of Equipment. Upon payment of the TerminationValue as provided in Section 10.3 hereof, title to the Unit or Units ofEquipment suffering an Event of Loss shall vest in Lessee, as evidenced by abill of sale from Lessor transferring such Unit or Units to Lessee on an "as is,where is" basis without representation or warranty, express or implied, exceptas to the absence of Lessor Liens. Any proceeds up to the Termination Valuepayable in respect of an Event of Loss shall be applied to Lessee's obligationto pay such Termination Value or, if Lessee has previously paid such TerminationValue, to reimburse Lessee for such payment. Any proceeds in excess of theTermination Value payable in respect of an Event of Loss shall be allocated andpaid to Lessee. Section 10.6. Termination Value. The Termination Value of each Unit ofEquipment shall be an amount determined as of the date the Termination Value isto be paid as provided in this Article X (and not the date of the Event ofLoss). Section 10.7. Risk of Loss. Lessee shall bear and hereby assumes therisk of loss, damage, theft, destruction, confiscation or requisition, partialor complete, of or with respect to each Unit of Equipment from and after theClosing Date with respect to such Units and continuing until the expiration ofthe Term and, except as hereinabove in this Article X provided, shall not bereleased from its obligations hereunder in the event of any Event of Loss, withrespect to any Unit of Equipment from and after the date hereof and continuinguntil payment of the Termination Value and all Rent and other sums due on andprior to the date of payment of such Termination Value in respect of such Unitof Equipment has been made. So long as no Lease Event of Default has occurredand is continuing, Lessee shall be entitled to make all claims and proofs ofloss, damage theft, taking, destruction, confiscation or requisition, partial orcomplete, with respect to each Unit of Equipment and take all other stepsnecessary to collect the proceeds thereof. Section 10.8. Eminent Domain. If during the Term of this Lease the useof any Unit of Equipment is subject to a Condemnation which has not yet becomean Event of Loss or for a stated period which does not constitute an Event ofLoss, Lessee's obligation to pay all installments of Rent and other sums shallcontinue for the duration of such Condemnation unless and until the same shallbecome an Event of Loss. So long as no Unmatured Lease Default or Lease Event ofDefault shall have occurred and be continuing, Lessee shall be entitled toreceive and retain for its own account all sums payable for any such period bysuch Governmental Authority as compensation for such Condemnation. ARTICLE XI INSPECTION; REPORT (a) Lessor, Collateral Agent, any Lender and Owner Participant eachshall have the right, but not the obligation, during normal business hours, attheir respective sole cost and expense, except as provided below, by theirrespective authorized representatives to (i) inspect the Equipment; (ii) auditLessee's books and records with respect thereto; (iii) perform title -17- 108verifications and (iv) take extracts of books and records pertaining to theEquipment. Lessee shall make available to Lessor, Collateral Agent, any Lenderand Owner Participant the Equipment and Lessee's books and records with respectthereto, with such frequency as shall be reasonable; provided, however, that (a)such inspections and audits shall not interfere with Lessee's normal operationof the Units, and (b) any person exercising the right of inspection under thissection will comply with reasonable rules and restrictions regarding access toproperty on which the Equipment may be located. Lessee shall pay the actualcosts and expenses of one such audit of Lessee's books and records per eachcalendar quarter beginning with the first calendar quarter provided that Lessorshall have the right to perform such audits more frequently than once perquarter. During the continuance of a Unmatured Lease Default related to theEquipment or any Lease Event of Default, such inspections and audits shall be atLessee's sole cost and expense, provided, further that if certain Units ofEquipment are subject to any Sublease, Lessee shall inform Lessor, OwnerParticipant, Collateral Agent and each Lender of the location of such Units ofEquipment and to whom it is sublet and shall use reasonable efforts to permitLessor and each Participant to inspect the same. (b) Within 10 Business Days of the end of each calendar quarter, Lesseeshall provide to Lessor and Collateral Agent, a report indicating the sale andsubstitution activity of Units for the prior calendar quarter in a formsatisfactory in form and scope to Lessor and Collateral Agent which may beembodied in the notice required to be delivered pursuant to Article VI(d)hereof. ARTICLE XII RETURN OF THE EQUIPMENT UPON EXPIRATION OF TERM Section 12.1. Return Conditions. (a) Upon the expiration or earliertermination of the Term of this Lease, Lessee shall, unless Lessee has paidTermination Value and other amounts with respect thereto pursuant to Section17.2(c) of or has timely exercised its purchase option with respect theretopursuant to Section 17.1 hereof, at its own expense, return all Units ofEquipment to Lessor. Upon the return of such Equipment, Lessee shall at its owncost and expense have taken all necessary action to assure that each Unit ofEquipment shall: (i) be in the same condition as when delivered to Lesseehereunder, ordinary wear and tear resulting from proper use thereof excepted,(ii) be in such operating condition as is capable of the Unit performing at itsoriginally intended use, (iii) have been used, operated, serviced and repairedin accordance with, and otherwise complying with, Article VIII hereof, (iv) befree and clear of all Liens whatsoever except Permitted Equipment Liens; (v)meet the standards (including all safety and environmental standards) then ineffect for equipment of the same type and age as the Equipment, (vi) haveattached or affixed thereto, all parts to which Lessor has title hereunder andhave removed therefrom all parts and property to which Lessee has title thereto(unless Lessor has exercised its option to purchase the same pursuant to theterms hereof), (vii) be capable of performing the functions for which it wasdesigned, with necessary certifications - in full force and effect, (viii) atLessor's election, either (x) be returned empty but suitable for transportingthe commodity last carried or (y) be cleaned in such manner as to be suitablefor human entry and inspection, (ix) be in compliance with all Applicable Laws,(x) be free of any marks, special paint or insignia, other than those requiredby Section 4.2 hereof and (xi) in any event be in a condition in compliance withall provisions of this Lease and any requirements specified for such Unit in theLease Supplement applicable to such Unit. -18- 109 (b) In addition to and not in limitation of the foregoing, that portioneach Unit of Equipment comprised of any trailer or refrigeration unit shall bein "good and efficient working order" and shall comply with the followingrequirements: (i) General Condition. All equipment originally furnished with any Unit of Equipment, or the substantial equivalent thereof, shall be installed and intact, without alterations or modifications other than as recommended by the manufacturer and approved in writing by the Lessor. All decals, numbers and other customer identification shall be removed from each unit by Lessee or Lessee's agent in a manner satisfactory to the Lessor. Lessee shall pay any reasonable costs if Lessor effects such removal after surrender. The cost of physical damage repairs shall not exceed $50 for any Unit of Equipment. (ii) Bodies. Lessee shall repair to the manufacturer's specifications, any holes or perforations to walls, interior liner, insulation materials, door seals and floors. (iii) Refrigeration Equipment. Refrigeration units shall be in good working order, the compressor shall operate to factory specified capacities and BTU ratings, diesel engine oil pressure shall register a minimum of 40lbs. The refrigeration unit engine will pull its rated load at factory specified RPM without excessive exhaust or oil leakage and there shall be no oil in the cooling system nor water in the oil. The foregoing items shall be tested and checked by an authorized dealer of the manufacturer of the refrigeration unit. (iv) Tires and Brakes. Brake drums or rotors shall not be cracked and brake linings shall have an average of 50% remaining wear with no less than 35% on any one lining. Tires shall be of matched generic type and tread design, will have an average of 50% remaining tread with no less than 35% remaining on any one tire. (v) Documents and Records. Upon surrender Lessee shall submit to Lessor, with each Unit of Equipment, maintenance and repair records, mileage records, diagrams, records, logs and other similar documents and all inspection, modification and overhaul records, or copies of all of the foregoing, in the Lessee's possession or the possession of any third-party maintenance organization. Lessee shall also submit registration certificates, clear certificates of title, current Federal highway use tax payment receipts and each Unit of Equipment shall have current Federal Highway Inspection documentation status records at time of return. Lessee shall return the Equipment by delivering it to such place withinthe continental United States as Lessor shall specify. (c) Upon the request of Lessor, and at Lessor's sole expense, Lesseeshall cooperate with Lessor in obtaining the valid and effective issuance, or,as the case may be, transfer or amendment of all governmental action necessaryor, in the reasonable opinion of Lessor, desirable for the ownership of any Unitof Equipment by Lessor or any transferee, sublessee or assignee thereof. -19- 110 Section 12.2. Inspection of Equipment. If Lessee shall return theEquipment to Lessor pursuant to Section 17.2(b), during the last ninety (90)days of the Term of this Lease, Lessee shall, at the request of Lessor, makereasonable arrangements for the inspection of the Units. Lessor and Lessee eachagree, if requested by the other, that a representative thereof will performjointly with the other an inspection of the Equipment, or an appropriaterepresentative sampling thereof, to insure compliance with the provisions ofSection 12.1 at such time and location and following such inspection standardsas shall be mutually agreeable to Lessor and Lessee. If pursuant to suchinspection any Unit of Equipment is deemed not in the condition required bySection 12.1, Lessee, at its expense and risk, shall within thirty (30) daysthereafter make such repairs and perform such work as shall be necessary toplace such Unit of Equipment in the condition required by Section 12.1. Lesseewill provide Lessor with notice when such Unit of Equipment has been repaired soas to be in the condition required by Section 12.1. Upon such redelivery of anUnit of Equipment, Lessee agrees to provide to Lessor originals or true,correct, complete and legible copies of all manuals, drawings, diagrams,records, logs and other materials and inspection, modification, overhaul andmaintenance records applicable thereto and then in the possession of Lessee. Section 12.3. Specific Performance. The assembling, delivery in therequired condition, storage, insurance and transporting of the Equipment asherein before provided are of the essence of this Lease, and upon application toany court of equity having jurisdiction thereover, Lessor shall be entitled to adecree against Lessee requiring specific performance of the covenants of Lesseeto so assemble, deliver in the required condition, store, insure and transportthe Equipment. ARTICLE XIII LEASE DEFAULT Section 13.1. Events of Default. Any of the following events shallconstitute a Lease Event of Default hereunder: (a) Lessee shall fail to make payment of (i) any Basic Rent within five(5) days of the date due or (ii) any Early Termination Payment, TerminationValue, or Maximum Lessee Risk Amount on the date due therefor; or (b) Lessee shall fail to make payment of any Supplemental Rent (otherthan any Supplemental Rent referred to in clause (a) of this Section 13.1) dueand payable within five (5) days after receipt of written notice thereof; or (c) Lessee shall fail to observe or perform any of its obligationsunder Section 17.3 after giving notice of its election to return the Equipmentpursuant to Section 17.2; or any insurance required to be maintained pursuant toArticle X of this Lease shall fail to be in full force and effect; or (d) Guarantor shall default under any of its obligations under theGuaranty or fail to assume or perform any term, covenant or condition of theGuaranty; or (e) any Obligor shall fail to observe or perform any term, covenant orcondition applicable to it under any Operative Document to which it is party(other than those described in -20- 111the foregoing clause (a), (b), (c) or (d) of this Section 13.1, which defaultsshall be subject to cure periods only as set forth in such clauses) and, in eachsuch case, such failure shall remain unremedied for thirty (30) days after theearlier of (x) written notice thereof and (y) the date on which the applicableObligor shall have knowledge thereof; provided, however, that if such failure iscapable of cure and the applicable Obligor shall have commenced to cure suchfailure within such thirty-day period, then such cure period shall be extendedfrom thirty (30) days to ninety (90) days so long as the applicable Obligor isat all times during such extended period diligently taking action reasonablysatisfactory to the Lessor and Lenders to cure or remedy such failure; or (f) any representation or warranty made or deemed made by any Obligorherein or in any Operative Document or which is contained in any certificate,document or financial or other statement furnished at any time under or inconnection with any Operative Document shall prove to have been incorrect, falseor misleading in any material respect on or as of the date made or deemed madeand either (i) the fact or condition which made such representation of warrantyincorrect, false or misleading is not curable or remediable or (ii) the fact orcondition which made such representation of warranty incorrect, false ormisleading shall not have been cured or remediated within thirty (30) days afterthe earlier of (x) written notice thereof and (y) the date on which theapplicable Obligor shall have knowledge thereof; or (g) (i) any Obligor shall commence any case, proceeding or other action(A) under any existing or future law of any jurisdiction, domestic or foreign,relating to bankruptcy, insolvency, reorganization or relief of debtors, seekingto have an order for relief entered with respect to it, or seeking to adjudicateit a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,winding-up, liquidation, dissolution, composition or other relief with respectto it or its debts, or (B) seeking appointment of a receiver, trustee,custodian, conservator or other similar official for it or for all or anysubstantial part of its assets, or any Obligor shall make a general assignmentfor the benefit of its creditors; or (ii) there shall be commenced against anyObligor any case, proceeding or other action of a nature referred to in clause(i) above which (A) results in the entry of an order for relief or any suchadjudication or appointment or (B) remains undismissed, undischarged or unbondedfor a period of sixty (60) days; or (iii) there shall be commenced against anyObligor any case, proceeding other action seeking issuance of a warrant ofattachment, execution, distraint or similar process against all or anysubstantial part of its assets which results in the entry of an order for anysuch relief which shall not have been vacated, discharged, or stayed or bondedpending appeal within sixty (60) days from the entry thereof; or (iv) anyObligor shall take any action in furtherance of, or indicating its consent to,approval of, or acquiescence in, any of the acts set forth in clause (i), (ii)or (iii) above; or (v) any Obligor shall generally not, or shall be unable to,or shall admit in writing its inability to, pay its debts as they become due; or (h) any Operative Document or any Lien granted under any OperativeDocument shall, taken as a whole, terminate, cease to be effective against, orcease to be the legal, valid, binding and enforceable obligation of any Obligor;or (i) any Lien (other than a Permitted Equipment Lien) shall be filed,levied or otherwise attached against any Unit of Equipment, and such Lien shallnot be removed, bonded or satisfied within ten (10) days of Lessee's knowledgethereof, -21- 112 (j) by order of a competent court or governmental authority, Lesseeshall suspend all or substantially all of its commercial operations for thirty(30) days or more, or Lessee shall voluntarily suspend all or substantially allof its commercial operations; (k) any Obligor shall directly or indirectly contest the effectiveness,validity, binding nature of enforceability of any Operative Document or any Liengranted under any Operative Document; or (l) the termination of any necessary permit or any other license orpermit which termination materially affects Lessee's ability to meet itsfinancial or performance obligations under the Operative Documents; or (m) any judgments or orders for the payment of money in excess of$1,000,000 shall be rendered against Lessee or Guarantor, and either suchjudgement is not discharged within sixty (60) days following the renderingthereof or there shall be any period during which a stay of enforcement of suchjudgment or order, by reason of an appeal or a bond pending appeal, shall not bein effect; or (n) all or a material part of the Equipment is destroyed or suffers anactual or constructive loss or material damage in connection with any Casualtyor Condemnation, and in any such case, the Equipment ceases to be operationalfor a period beyond the Expiration Date or beyond the later of (i) one hundredeighty (180) days after the receipt of any insurance awards or condemnationproceeds in connection with such Casualty or Condemnation and (ii) three hundredsixty (360) days after the occurrence of such Casualty or Condemnation, unless,in any such case, Lessee shall have submitted to the Lessor a plan ofrestoration or repair of the Equipment and the Lessor, in its sole discretion(after consultation with the other Participants) shall have consented to suchplan of restoration or repair. Section 13.2. Remedies. Upon the occurrence of any Lease Event ofDefault of the type described in clause (g) of Section 13.1, all Commitmentsshall automatically terminate and the Termination Value for all Equipment thenoutstanding, together with all accrued Basic Rent, Supplemental Rent and feesand other obligations of Lessee accrued under the Operative Documents, shallautomatically become due and payable, without presentment, demand, protest orother notice of any kind, all of which are hereby waived by Lessee. Upon theoccurrence of any Lease Event of Default other than a Lease Event of Default ofthe type described in clause (g) of Section 13.1, and at any time thereafterduring the continuance of such event, the Lessor may, and at the request of theRequired Participants shall, by notice to Lessee, take either or both of thefollowing actions, at the same or different times: (i) terminate theCommitments, and thereupon the Commitments shall terminate immediately, and (ii)declare the Total Equipment Cost then outstanding to be due and payable in whole(or in part in which case any portion of the Total Equipment Cost not sodeclared to be due and payable may thereafter be declared to be due andpayable), and thereupon the Total Equipment Cost (or the portion thereof sodeclared to be due and payable), together with all accrued Basic Rent,Supplement Rent and all fees and other obligations of Lessee accrued under theOperative Documents, shall become due and payable immediately, withoutpresentment, demand, protest or other notice of any kind, all of which arehereby waived by Lessee. In addition, upon the occurrence of any Lease Event ofDefault and at any time thereafter so long as such Lease Event of Default iscontinuing, the Lessor may, and at -22- 113the request of the Required Participants shall, do one or more of the followingas the Lessor or the Required Participants in its (or their) sole discretionshall determine, without limiting any other right or remedy the Lessor may haveon account of such Lease Event of Default: (a) The Lessor may, by notice to Lessee, rescind or terminate thisLease as to any Unit of the Equipment or all of the Equipment as of the datespecified in such notice; provided, however (i) no reletting, reentry or takingof possession of the Equipment (or any Unit thereof) by the Lessor will beconstrued as an election on the Lessor's part to terminate this Lease unless awritten notice of such intention is given to Lessee, (ii) notwithstanding anyreletting, reentry or taking of possession, the Lessor may at any timethereafter elect to terminate this Lease for a continuing Lease Event of Defaultand (iii) no act or thing done by the Lessor or any of its agents,representatives or employees and no agreement accepting a surrender of any Unitof the Equipment shall be valid unless the same be made in writing and executedby the Lessor; (b) The Lessor may (i) demand that Lessee, and Lessee shall upon thewritten demand of the Lessor, return the Equipment promptly to the Lessor in themanner and condition required by, and otherwise in accordance with all of theprovisions of, Articles VIII, IX and XII hereof as if the Equipment were beingreturned at the end of the Initial Lease Term, and the Lessor shall not beliable for the reimbursement of Lessee for any costs and expenses incurred byLessee in connection therewith and (ii) without prejudice to any other remedywhich the Lessor may have for possession of the Equipment, and to the extent andin the manner permitted by Applicable Law, enter upon the Equipment and takeimmediate possession of (to the exclusion of Lessee) the Equipment or any partthereof and expel or remove Lessee and any other Person who may be occupying theEquipment, by summary proceedings or otherwise, all without liability to Lesseefor or by reason of such entry or taking of possession, whether for therestoration of damage to property caused by such taking or otherwise and, inaddition to the Lessor's other damages, Lessee shall be responsible for allcosts and expenses incurred by the Administrative Agent, the Collateral Agent,the Lessor, the Owner Participant and/or the Lenders in connection with anyreletting, including, without limitation, reasonable brokers' fees and all costsof any alterations or repairs made by the Administrative Agent, the Lessor orany Lender; (c) As more fully set forth in the Security Agreement, the Lessor maysell all or any Unit of the Equipment at public or private sale, as the Lessormay determine; (d) The Lessor may, at its option, elect not to terminate this Leaseand continue to collect all Basic Rent, Supplemental Rent, and all other amountsdue to the Lessor (together with all costs of collection) and enforce Lessee'sobligations under this Lease as and when the same become due, or are to beperformed, and at the option of the Lessor, upon any abandonment of theEquipment by Lessee or re-entry of same by the Lessor, the Lessor may enforce,by suit or otherwise, all other covenants and conditions hereof to be performedor complied with by Lessee hereunder and to exercise all other remediespermitted by Applicable Law; (e) Unless the Equipment has been sold in its entirety, the Lessor may,whether or not the Lessor shall have exercised or shall thereafter at any timeexercise any of its rights under clause (b), (c) or (d) of this Section 13.2with respect to the Equipment or any Unit thereof, demand, by written notice toLessee specifying a date (a "Termination Date") not earlier than five (5)Business Days after the date of such notice, that Lessee purchase the Equipmentor a -23- 114Unit or Units of Equipment on such Termination Date for a price equal to theTermination Value of such Unit or Units plus all accrued and unpaid Basic Rentand all other amounts due and owing under the Operative Documents with respectto such Unit or Units; (f) The Lessor may exercise any other right or remedy that may beavailable to it under Applicable Law, including any and all rights or remediesunder the Security Agreement Documents, or proceed by appropriate court action(legal or equitable) to enforce the terms hereof or to recover damages for thebreach hereof. Separate suits may be brought to collect any such damages for anyperiod(s), and such suits shall not in any manner prejudice the Lessor's rightto collect any such damages for any subsequent period(s), or the Lessor maydefer any such suit until after the expiration of the Initial Lease Term, inwhich event such suit shall be deemed not to have accrued until the expirationof the Initial Lease Term; (g) The Lessor may retain and apply against the Total Equipment Costand all other amounts due and owing by Lessee under the Operative Documents allsums which the Lessor would, absent such Lease Event of Default, be required topay to, or turn over to, Lessee pursuant to the terms of this Lease and uponpayment in full of the Total Equipment Cost plus all accrued and unpaid BasicRent and all other amounts due and owing under the Operative Documents from suchsums, the Equipment shall be conveyed to Lessee; (h) If a Lease Event of Default shall have occurred and be continuing,the Lessor, to the extent permitted by Applicable Law, as a matter of right andwith notice to Lessee, shall have the right to apply to any court havingjurisdiction to appoint a receiver or receivers of the Equipment, and Lesseehereby irrevocably consents to any such appointment. Any such receiver(s) shallhave all of the usual powers and duties of receivers in like or similar casesand all of the powers and duties of the Lessor in case of entry, and shallcontinue as such and exercise such powers until the date of confirmation of thesale of the Equipment, unless such receivership is sooner terminated; (i) To the maximum extent permitted by law, Lessee hereby waives thebenefit of any appraisement, valuation, stay, extension, reinstatement andredemption laws now or hereafter in force and all rights of marshaling in theevent of any sale of the Equipment, or any interest therein; (j) The Lessor shall be entitled to enforce payment of the indebtednessand performance of the obligations secured hereby and to exercise all rights andpowers under this instrument or under any of the other Operative Documents orother agreement or any laws now or hereafter in force, notwithstanding some orall of the obligations secured hereby may now or hereafter be otherwise secured,whether by mortgage, security agreement, pledge, lien, assignment or otherwise.Neither the acceptance of this instrument nor its enforcement, shall prejudiceor in any manner affect the Lessor's right to realize upon or enforce any othersecurity now or hereafter held by the Lessor, it being agreed that the Lessorshall be entitled to enforce this instrument and any other security now orhereafter held by the Lessor in such order and manner as the Lessor maydetermine in its absolute discretion. No remedy herein conferred upon orreserved to the Lessor is intended to be exclusive of any other remedy herein orby law provided or permitted, but each shall be cumulative and shall be inaddition to every other remedy given hereunder or now or hereafter existing atlaw or in equity or by statute. Every -24- 115power or remedy given by any of the Operative Documents to the Lessor or towhich it may otherwise be entitled, may be exercised, concurrently orindependently, from time to time and as often as may be deemed expedient by theLessor. In no event shall the Lessor, in the exercise of the remedies providedin this instrument (including, without limitation, in connection with theassignment of rents to Lessor, or the appointment of a receiver and the entry ofsuch receiver onto all or any part of the Equipment), be deemed a "mortgagee inpossession", and the Lessor shall not in any way be made liable for any act,either of commission or omission, in connection with the exercise of suchremedies. Lessee acknowledges and agrees that upon the declaration of a LeaseEvent of Default the amount due and owing by it to the Lessor hereunder shall bethe Total Equipment Cost plus all other amounts then owing under the OperativeDocuments (including all accrued and unpaid Contingent Payments) and that, tothe maximum extent permitted by law, Lessee waives any right to contest theTotal Equipment Cost plus such other amounts as the liquidated sum due uponacceleration of this instrument. If, pursuant to the exercise by the Lessor of its remedies pursuant tothis Section 13.2, the Total Equipment Cost, all accrued and unpaid Basic Rentand all other amounts due and owing from Lessee under this Lease and the otherOperative Documents have been paid in full, then the Lessor shall remit toLessee any excess amounts received by the Lessor and, at the sole cost andexpense of Lessee, return the Equipment to Lessee. The obligation to deliversuch excess to Lessee shall survive this Lease. Lessee shall be liable, except as otherwise provided above, for any andall unpaid Rent due hereunder before or during the exercise of any of theforegoing remedies and for all reasonable legal fees and other costs andexpenses incurred by reason of the occurrence of any Unmatured Lease Default orLease Event of Default or the exercise of Lessor's remedies with respectthereto, including the repayment in full of any costs and expenses ofinvestigation and of repairing or modifying any Unit of Equipment in order tocause it to be in compliance with all maintenance and regulatory standardsimposed by this Lease. No receipt of money by Lessor from Lessee after a termination of thisLease by Lessor shall reinstate, continue or extend this Lease or affect anynotice theretofore given to Lessee or operate as a waiver of the right of Lessorto enforce the payment of Basic Rent, Supplemental Rent, and any other amountsdue from Lessee hereunder, it being agreed that after the commencement of suitfor possession of the Equipment, or after final order or judgment for thepossession of the Equipment, Lessor may demand, receive and collect any moneysdue or thereafter falling due without in any manner affecting such suit, orderjudgment, all such moneys collected being deemed payments on account of the useand possession of the Equipment or, at the election of Lessor, on account ofLessee's liability hereunder. Lessor, without further notice, may, but shall be under no obligationto, retake such Units of Equipment wherever found, without Lessor incurring anyliability by reason of such retaking, whether for the restoration of damage toproperty caused by such retaking or otherwise. Section 13.3. Waivers. Lessee waives the following, to the fullestextent permitted by law: (a) any notice of re-entry or the institution of legalproceedings to obtain re-entry or -25- 116possession; (b) any right of redemption, re-entry or repossession except asexpressly provided herein; (c) the benefit of any laws now or hereafter in forceexempting property from liability for rent or for debt or limiting the Lessorwith respect to the election of remedies; and (d) any other rights which mightotherwise limit or modify any of the Lessor's rights or remedies under thisArticle XIII, provided, however, in no event shall Lessor be entitled to recoverdamages in duplication of damages previously recovered by Lessor. Lessee herebywaives any and all existing or future claims of any right to assert any offsetagainst the Rent payments due hereunder, and agrees to make the Rent paymentsregardless of any offset or claim which may be asserted by Lessee or on itsbehalf in connection with the lease of the Equipment. Except as otherwiseprovided in this Lease, Lessee, to the full extent effective under ApplicableLaw, hereby waives all statutory or other legal requirements for any notice ofany kind, any other requirements with respect to the enforcement of Lessor'srights under this Lease and any and all rights of redemption. No delay oromission to exercise any right, power or remedy accruing to Lessor upon anybreach or Unmatured Lease Default by Lessee under this Lease shall impair anysuch right, power or remedy of Lessor, nor shall any such delay or omission beconstrued as a waiver of any breach or Unmatured Lease Default, or of anysimilar breach or Unmatured Lease Default thereafter occurring. No waiver byLessor of any Lease Event of Default shall in any way be or be construed to be,a waiver of any future or subsequent Lease Event of Default. The failure ofLessor to insist upon the strict performance of any provision or to exercise anyoption, right, power or remedy contained in this Lease shall not be construed asa waiver or relinquishment thereof for the future. Receipt by Lessor of anyBasic Rent or Supplemental Rent or any other sum payable hereunder withknowledge of the breach of any provision contained in this Lease shall notconstitute a waiver of such breach, and no waiver by Lessor of any provision ofthis Lease shall be deemed to have been made unless made under signature of anauthorized representative of Lessor, provided, that any breach or UnmaturedLease Default once so waived in writing, shall not be deemed to be continuingfor any purposed of this Lease. Section 13.4. Notice of Lease Event of Default. Lessee also agrees tofurnish to Lessor, Owner Participant, Collateral Agent and each Lender, promptlyupon becoming aware of any condition which constituted or constitutes aUnmatured Lease Default or a Lease Event of Default under this Lease, writtennotice specifying such condition and the nature and status thereof. ARTICLE XIV RETURN OF EQUIPMENT UPON DEFAULT Section 14.1. Lessee's Duty to Return. If Lessor shall terminate thisLease pursuant to Article XIII hereof, Lessee shall forthwith deliver possessionof the Equipment to Lessor. For the purpose of delivering possession of any Unitof Equipment to Lessor as above required, Lessee shall at its own cost, expenseand risk (except as hereinafter stated): (a) forthwith deliver such Unit to places in the continental UnitedStates as Lessor shall reasonably designate in accordance with Article XIIhereof; or (b) permit Lessor to store such Units of Equipment for one year on thepremises of Lessee without charge for insurance, rent or storage, and duringsuch period of storage Lessee -26- 117shall continue to maintain all insurance required by Section 10.1 hereof andmaintain the Units of Equipment as provided hereby and thereafter deliver suchUnits as provided in clause (a). Section 14.2. Lessor Appointed Lessee's Agent. Without in any waylimiting the obligation of Lessee under the foregoing provisions of this ArticleXIV, Lessee hereby irrevocably appoints Lessor as the agent and attorney-in-factof Lessee, with full power and authority (which power is coupled with aninterest), at any time during the continuance of a Lease Event of Default whileLessee is obligated to deliver possession of any Units of Equipment to Lessorand is not doing so in a commercially reasonable manner, to demand and takepossession of such Unit in the name and on behalf of Lessee from whosoever shallbe at the time in possession of such Unit. ARTICLE XV ASSIGNMENT BY LESSOR For the purpose of providing funds for financing the purchase of theEquipment, Lessee acknowledges and agrees that (i) Lessor has assigned,transferred, conveyed, sold and/or encumbered this Lease, the Equipment and theRent payments (other than Excluded Amounts) hereunder to Collateral Agent,subject to the terms and conditions of the Security Agreement, (ii) that Lesseeshall pay directly to Collateral Agent all Rent payments (other than ExcludedAmounts) and other sums due or to become due under this Lease and (iii) that theEquipment leased hereunder has been mortgaged by Lessor under the SecurityAgreement in favor of Collateral Agent, and that, subject to the terms andconditions of the Security Agreement, Collateral Agent shall be entitled toexercise the rights and privileges of Lessor hereunder. The rights of CollateralAgent under the Security Agreement and the rights of any Person under anyfurther such assignment, transfer or conveyance shall be subject to Lessee'sright to possess and use the Equipment so long as no Lease Event of Default hasoccurred and is continuing. ARTICLE XVI ASSIGNMENTS BY LESSEE; USE AND POSSESSION Section 16.1. Lessee's Rights to the Equipment & Sublease. So long asno Lease Event of Default shall have occurred and be continuing, Lessee shall beentitled to the possession and use of the Equipment in accordance with the termsof the Lease. Without the prior written consent of Lessor and Collateral Agent,Lessee shall not assign, transfer or encumber its leasehold interest under thisLease in respect of any Unit of Equipment, except as permitted in this ArticleXVI. LESSEE ALSO SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (SUCHCONSENT NOT TO BE UNREASONABLY WITHHELD OR DELAYED) ENTER INTO ANY SUBLEASE WITHRESPECT TO, PART WITH THE POSSESSION OR CONTROL OF, OR SUFFER OR ALLOW TO PASSOUT OF ITS POSSESSION OR CONTROL, ANY UNIT OF EQUIPMENT. No sale, assignment orsublease, whether authorized in this Section or in violation of the termshereof, shall relieve Lessee of its obligations, and Lessee shall remainprimarily liable hereunder. Any unpermitted sale, assignment, transfer,encumbrance, delegation or sublease by Lessee shall be void ab initio.Notwithstanding the foregoing, Lessee may, subject to the following terms andconditions, sublease the Equipment to unrelated third parties (each such party a"Sublessee") only in the ordinary course of business as Lessee normally leasessuch Equipment, pursuant to the terms and -27- 118provisions hereof and pursuant to written subleases satisfying the conditionshereof (hereinafter referred to as a "Sublease" and, collectively, the"Subleases"). On the date hereof, each of Lessee's Subleases are in the form attachedhereto as Exhibit B. Prior to the second Closing Date, each new Sublease enteredinto after the second Closing Date shall (a) be for a term not extending beyondthe Term hereof, (b) prohibit sub-subleasing, or the loss of possession orcontrol of the Equipment in any way, other than in the manner contemplated bythis Section, by the Sublessee, (c) expressly provide that the rights of anySublessee who receives possession by reason of a Sublease shall be subject andsubordinate to each and every term, condition and provision of this Lease,including Lessor's right of repossession pursuant to Articles XIII and XIV ofthis Lease and to terminate such Sublease upon such repossession, (d) providethat such Sublease is freely assignable by Lessee, and (e) prohibit Sublesseefrom carrying Hazardous Materials on any Unit of Equipment. No Sublease shall inany way discharge or diminish any of Lessee's obligations hereunder, and Lesseeshall remain primarily liable hereunder for the performance of all the terms,conditions and provisions of this Lease to the same extent as if such Subleasehad not occurred. Upon entering into any Sublease with a term exceeding twelvemonths, Lessee shall deliver to Lessor, at Lessor's request, a copy thereof and,at Lessor's request, assign such Sublease to Lessor as security for Lessee'sobligations hereunder. Upon Lessor's request, Lessee shall provide to Lessor areport indicating: (i) the status of any Sublease account which is more thanthirty (30) days delinquent, (ii) the location of the principal garage of eachUnit of the Equipment, and (iii) the Sublessee of each Unit of the Equipment.Lessor shall have the right at any time and from time to time to conduct acomplete field inspection of all of the Equipment, whether the Equipment islocated on Lessee's premises or on the premises of any Sublessee to whom Lesseehas leased any or all of the Equipment hereunder. Section 16.2. Additional Provisions Regarding Subleases. (a) Notwithstanding the provisions of any Sublease, Lessee herebyacknowledges that it is now and continues to be obligated and bound by all ofthe provisions of this Lease, including but not limited to the provisionsrelating to the obligation to pay Rent, notwithstanding any delegation of dutiesor other term of the Sublease. Any such delegation shall be effective only asbetween Lessee and Sublessee. Lessee further acknowledges that it is notauthorized to dispose of the Equipment (except by sublease in accordance withthe terms of Section 16.1 or by sale or substitution in accordance with ArticleVI hereof). (b) Notwithstanding the assignment granted by Lessee to Lessor pursuantto Section 18.10 hereof, Lessee shall cause Sublessee to pay Lessee all rentaland other sums payable under the Subleases until Lessor delivers to Lesseenotice of an Unmatured Lease Default or Lease Event of Default under this Lease.Upon giving such notice to Lessee, Lessor may notify Sublessee (or, if requestedby Lessor, Lessee shall notify Sublessee) to pay directly to Lessor all rentaland other sums payable and to become payable under the Subleases. UponSublessee's receipt of such notice, Lessee hereby authorizes and directsSublessee to pay Lessor all rental and other sums payable and to become payableunder the Subleases; provided, however, that so long as no Unmatured LeaseDefault or Lease Event of Default has then occurred, Lessor shall retain onlysuch of the rentals herein assigned as are required from time to time todischarge Lessee's obligations under this Lease and shall remit any excess toLessee. If any remittance is -28- 119received by lessee relating to such Subleases, such remittances immediately willbe delivered to Lessor bearing the endorsement "Pay to the order of WabashStatutory Trust - 2000. If the remittance is in a form which precludes anendorsement, Lessee shall hold all such funds in trust for Lessor andimmediately pay the amount of the remittance to Lessor. Lessee hereby appointsLessor its attorney-in-fact to negotiate any remittance which is received byLessor from Sublessee after a Lease Event of Default and made payable to Lessee.Notwithstanding the foregoing, if Lessee receives the proceeds of any insurancemaintained by a Sublessee as a result of a Casualty suffered by subleasedEquipment, Lessee immediately will remit such insurance proceeds to Lessor. (c) Lessee agrees that at any time and from time to time, upon thewritten request of Lessor, Lessee will promptly and duly execute deliver orcause to be duly executed and delivered any and all further instruments anddocuments as Lessor may deem desirable to perfect its security interest in theSubleases, Inventory and Accounts Receivable. Lessee shall deliver to Lessor theoriginal certificates of title with respect to the Equipment, subject to theprovisions of the Limited Power of Attorney; and shall retain possession of alloriginal executed copies of the Subleases (provided, however, that upon a LeaseEvent of Default, Lessor may require Lessee to deliver to Lessor the originalexecuted Subleases). (d) Upon Lessor's request, Lessee shall provide to Lessor a reportindicating: (i) the status of any Sublease account which is more that thirty(30) days delinquent, (ii) the location of the principal garage of each Unit ofthe Equipment, and (iii) the Sublessee of each of the Equipment. Lessor shallhave the right at any time and from time to time to conduct a complete fieldinspection of all of the Equipment, whether the Equipment is located on Lessee'spremises or on the premises of any Sublessee to whom Lessee has leased any orall of the Equipment hereunder. ARTICLE XVII EARLY TERMINATION OPTION; END OF TERM OPTIONS Section 17.1. Early Termination Option for all of the Equipment. (a) At any time during the Term of this Lease, and so long as no LeaseEvent of Default shall have occurred and be continuing hereunder, Lessee shallhave the option to terminate this Lease with respect to all but not less thanall of the Equipment. To exercise such option, Lessee shall give Lessor anirrevocable written notice of Lessee's intention to terminate this Lease, whichnotice shall (i) state that Lessee desires to terminate this Lease as to theEquipment and refer specifically to this Section 17.1, and (ii) specify the datefor such termination (which shall be the Payment Date not less than forty (40)nor more than seventy-one (71) days after the date of such notice, but in noevent after the Expiration Date, (such date, the "Early Termination Date"). Uponsuch election and satisfaction of the terms and conditions set forth in thisSection 17.1, this Lease shall terminate on the Early Termination Date.Notwithstanding the foregoing, in the event Lessee shall fail to perform itsobligations in strict conformance with this Section 17.1, this Lease and each ofthe obligations and duties of Lessee shall continue as if such notice shallnever have been delivered unless otherwise agreed to by Lessor and Lessee shallbe responsible for all costs and expenses incurred by Lessor, Owner Participant,Collateral Agent, Administrative Agent and any Lenders in connection therewith. -29- 120 (b) For purposes of this Section 17.1, "Early Termination Payment"means an amount equal to (i) the Termination Value of all but not less than allof the Equipment computed as of the Early Termination Date, plus (ii) all BasicRent then due and owing with respect to the Equipment, plus (iii) all other Rentdue for the Equipment on the Early Termination Date, plus (iv) all accrued andunpaid Rent owing for periods prior to the Early Termination Date, plus (v) anyBreak Costs associated with such early termination. (c) Upon payment in full of the Early Termination Payment andsatisfaction of all other conditions set forth herein in connection with atermination of this Lease with respect to the Equipment pursuant to this Section17.1, Lessor shall convey to Lessee or its designee its title thereto pursuantto one or more instruments reasonably satisfactory to the parties thereto butsubject to the following sentence. Lessor's sale of the Equipment hereundershall be on an as-is, where-is basis, without any recourse to, or representationor warranty by, Lessor except as to its ownership thereof and the absence of anyLien placed on the Equipment by or through Lessor, Owner Participant, any Lenderor any successor thereto. Lessee shall pay, or reimburse Lessor for the paymentof, all applicable Taxes imposed as a result of such sale, and all fees, costsand expenses of such sale incurred by Lessor, and any other amounts for which,if not paid, Lessor will be liable or which, if not paid, would constitute aLien on the Equipment and such obligation shall survive the termination of thisLease. Section 17.2. End of Term Options. At the end of the Initial Lease Termand each Renewal Term, as the case may be, Lessee shall have the option toeither (a) renew this Lease pursuant to Section 1.4 hereof (except at the end ofthe fourth Renewal Term), (b) return all but not less than all of the Equipmentin accordance with Article XII hereof, in which case, Lessee shall be obligatedto market the Equipment in accordance with the provisions of Section 17.3 hereofor (c) purchase all but not less than all of the Equipment for a purchase priceequal to the Termination Value of all Equipment and the Basic Rate due andpayable for the Equipment on the last day of the Term of this Lease and allSupplemental Rent due on such date. Lessee shall notify Lessor of its electionin writing at least 180 days prior to the expiration of the Initial Lease Termor Renewal Term, as the case may be. In the event that Lessee fails to deliver anotice to Lessor pursuant to this Section 17.2, Lessee shall be deemed (i)during the Initial Lease Term and the first three (3) Renewal Terms, to haveelected to renew this Lease and (ii) during the fourth Renewal Term, to haveelected to purchase all but not less than all of the Equipment pursuant toSection 17.2(c) hereof on the last day of the Initial Lease Term or RenewalTerm, as the case may be. Section 17.3. Lessee Marketing Obligations. (a) In the event thatLessee shall have elected to return the Equipment, provided that no Lease Eventof Default has occurred and is continuing and provided that Lessor has nototherwise notified Lessee, Lessee, subject to the terms and conditions hereofand in consultation with Lessor, shall be obligated to market the Equipmentduring the Marketing Period, provided, however, that the marketing obligationsshall terminate upon a sale of the Equipment in accordance with Section 17.3(b).During the Marketing Period, Lessee, as agent for Lessor, at its own cost andexpense, shall use diligent efforts, either by itself or through a nationallyrecognized firm of semi-trailer inventory marketers reasonably satisfactory toLessor (the "Marketing Agent"), to solicit bona fide bids for the Equipment fromprospective purchasers who are financially capable of purchasing the Equipmentfor cash on an as-is, where-is basis, without recourse or warranty. Upon therequest -30- 121of Lessor and at Lessee's sole cost and expense, Lessee shall provide Lessorwith a written report describing in reasonable detail Lessee's efforts duringthe Marketing Period to obtain bona fide bids for the purchase of the Equipment,including, without limitation, a list of all brokers retained and Personsapproached for the purpose of soliciting bids to purchase the Equipment. Allbids received by Lessor or Lessee prior to the end of the Marketing Period shallbe certified by Lessor or Lessee, as the case may be, in writing, stating thename and address of the bidder and the amount of such bid. During the MarketingPeriod, Lessor shall have the right, but not the obligation, to solicit bonafide bids for the Equipment from prospective purchasers simultaneous withLessee's obligations to market the Equipment hereunder. (b) Marketing Sales. Not later than the expiration of the MarketingPeriod and not earlier than the expiration of the Lease and with the priorwritten consent of Lessor, Lessee, as agent for Lessor, shall sell the Equipmentto the cash bidder submitting the highest bid. Lessor's obligation to sell theEquipment is subject to the following: (i) Lessor shall have actually received(x) the proceeds from the sale of the Equipment in immediately available funds,which funds shall be applied in accordance with the provisions of Section17.3(c) hereof; and (y) the deficiency payment, if any, which is payable underSection 17.3(c) hereof; (ii) Lessee shall have the right to match the amount ofsuch bid, acquire ownership of the Equipment and compel the release of thisLease and the Lease Supplement by paying to Lessor the amount of such bid plussuch deficiency, if any, in immediately available funds, which shall be appliedin accordance with the provisions of Section 17.3(c) hereof; and (iii) Lessorshall not be obligated to agree to any proposed sale of the Equipment or toterminate this Lease or the Lease Supplement if the Net Proceeds of Sale for theEquipment will be less than the Maximum Lessor Risk Amount applicable to theEquipment at such time and in such case Lessor shall have the right to requireLessee to return the Equipment in accordance with Article XII hereof provided,however, that any election by Lessor to withhold such consent shall not reduceor alleviate Lessee's obligation to pay the Maximum Lessee Risk Amount pursuantto Section 17.3(c) hereof. (c) Marketing Period Adjustment. (i) This Section 17.3(c)(i) shallapply only to a sale of the Equipment to a third party or Lessee during theMarketing Period pursuant to Section 17.3(b) hereof. If the Net Proceeds of Salefor the Equipment are less than the Termination Value, Lessee shall, at the timeof such sale, pay to Lessor in immediately available funds an amount equal tothe deficiency between such Net Proceeds of Sale and Termination Value as anadjustment to the Rent payable under this Lease, provided, however, that if noUnmatured Lease Default or Lease Event of Default shall have occurred and becontinuing hereunder, the amount of the deficiency payable by Lessee withrespect to the Equipment shall not exceed the Maximum Lessee Risk Amount. If theNet Proceeds of Sale for the Equipment equal or exceed Termination Value, Lessorshall pay the amount of any such excess to Lessee solely from any such proceeds. (ii) If, upon the expiration of the Marketing Period, a sale of the Equipment to a third party or to Lessee pursuant to Section 17.3(b) hereof has not been consummated or Lessee has not made all payments to Lessor required pursuant to Section 17.3(c)(i) hereof, then Lessee shall, on the last day of the Marketing Period, pay to Lessor, in immediately available funds, as an adjustment to the Rent payable under this Lease the following amounts: the sum of (A) either (x) if on the last day of the Marketing Period no Unmatured Lease Default or Lease Event of Default shall have occurred and be -31- 122 continuing hereunder, an amount equal to the Maximum Lessee Risk Amount, or (y) if on the last day of the Marketing Period an Unmatured Lease, Default or Lease Event of Default shall have occurred and be continuing hereunder, the Termination Value of the Equipment and (B) the Basic Rent due and payable for the Equipment on the last day of the Marketing Period and all Supplemental Rent. In the event Lessee shall pay the amounts set forth in (A)(x) and (B), if Lessor shall subsequently sell the Equipment to a third party after the expiration of the Marketing Period, Lessor shall remit to Lessee the excess of the Net Proceeds of Sale over all amounts owed the Lenders and the Owner Participant under the Operative Documents. Lessee shall remain liable for the payment of, and upon the consummation by Lessor of the sale of the Equipment after the expiration of the Marketing Period, Lessee shall pay, or reimburse Lessor for or Lessor shall deduct from any amounts remitted to Lessee, all applicable Taxes imposed as a result of such sale, all fees, costs and expenses, including without limitation, all applicable asset management expenses, sale expenses and interest carrying costs of such sale incurred by Lessor, and any other amounts for which, if not paid, Lessor will be liable or which, if not paid, would constitute a Lien on the Equipment, and such obligation shall survive the termination of this Lease. (d) Payments and Obligations During Marketing Period. During theMarketing Period, Lessee covenants and agrees that Lessee shall continue toobserve all of its obligations under this Lease, including its obligation to payRent. (e) Termination Provisions. If no sale of the Equipment has beeneffected during the Marketing Period, then: (i) Lessee shall, forthwith provide to the Lessor or its designee all records and all other information, documentation and manuals relating to the maintenance, storage and insurance of the Equipment delivered to it, Guarantor or the Marketing Agent by Lessee or otherwise developed during the Marketing Period (including, without limitation, names and addresses of all service providers utilized during the Marketing Period, and the terms and conditions, and documentation, relating thereto); (ii) Lessee shall, or shall cause the Marketing Agent, if any, to thereafter consult in good faith with Lessor or its designees as to offerees of the Equipment contacted, amounts offered for the Equipment and for other non-proprietary marketing information developed over the Marketing Period in connection with the attempted disposition of the Equipment; (iii) Lessee, Guarantor and any Marketing Agent shall forthwith relinquish all control over, and deliver to Lessor or its designees, the Equipment and all books and records relating thereto and cease all marketing efforts with respect to the Equipment; and (iv) Lessee shall forthwith pay all accrued and unpaid sums required to be paid under Section 17.3(d) hereof to the extent arising and accrued during the Marketing Period. -32- 123 Upon satisfaction of the obligations set forth in clauses (i) through(iv) above, Lessee shall have no further obligations hereunder, except thosewhich by their terms survive the termination of this Lease. (f) Miscellaneous Marketing Matters. (i) Further Assurances. Upon, or at any time after, the termination of the Marketing Period, Lessee shall perform such acts as shall be reasonably requested of it by Lessor in order to carry out the provisions of Section 17.3(d) hereof. (ii) Certain Indemnities. During the Marketing Period, Lessee shall continue to indemnify and hold harmless the Indemnitees as provided in Articles VII and VIII of the Participation Agreement and such indemnities shall survive the expiration or earlier termination of this Lease and of the Term and the Marketing Period. (iii) Marketing Agent. All reasonable fees and expenses of any Marketing Agent shall be borne by Lessee and the Marketing Agent shall have no claim or Lien on the Equipment or any Unit thereof with respect thereto. ARTICLE XVIII MISCELLANEOUS Section 18.1. Payments to Lessor. All payments to be made to Lessor under the Operative Documents by wiretransfer of immediately available funds shall be made to: State Street Bank and Trust Company ABA #: 011-000-028 Account #: 9903-990-1 Attn: Peter Murphy Ref: APEX/Wabash Statutory Trust-2000All payments to be made to Collateral Agent under the Operative Documents bywire transfer of immediately available funds shall be made to: Fleet National Bank ABA #: 011500010 Account Name: Fleet Capital Leasing Account #: 015552 776700101 Attn: Leslie Tordoff Ref: Wabash Statutory Trust-2000 Section 18.2. Right of Lessor to Perform. If Lessee shall fail tocomply with any of its covenants herein contained, Lessor may, but shall not beobligated to, make advances to perform the same and to take all such action asmay be necessary to obtain such performance. Any payment so made by Lessor andall costs and expenses (including, reasonable attorneys' fees and expenses)incurred in connection therewith shall be payable by Lessee to Lessor upondemand as -33- 124Supplemental Rent hereunder, with interest thereon at the Overdue Rate. No suchaction shall be deemed a repossession of any of the Equipment, and no suchadvance, performance or other act shall be deemed to relieve Lessee from anydefault hereunder. Section 18.3. Covenant of Quiet Enjoyment. During the Term and so longas no Unmatured Lease Default or Lease Event of Default shall have occurred andbe continuing, Lessor covenants and agrees that Lessee shall have the right touninterrupted use and enjoyment of each Unit subject hereto on the terms andconditions provided herein without any interference from Lessor or OwnerParticipant or those claiming through or against Lessor (other than claims ofmechanics, suppliers, materialmen and laborers for work or services performed ormaterials furnished in connection with the Equipment or any Unit thereof arisingout of the right of Lessor to perform for Lessee as set forth in Section 18.2hereof), including, but not limited to, any assignee or lender or mortgagee ofLessor or Owner Participant. For purposes of this Section 18.3, the delivery ofnotices of default or nonperformance delivered to Lessee under and pursuant toSection 13.1 shall not be deemed to constitute a violation of this Section 18.3. Section 18.4. Estoppel Certificates. Each party hereto agrees that atany time and from time to time during the term of this Lease, it will promptly,but in no event later than 21 days after request by the other party hereto,execute, acknowledge and deliver to such other party or to any prospectivepurchaser, assignee or mortgagee designated by such other party, a certificatestating, to the best of such party's knowledge, (a) that this Lease isunmodified and in full force and effect (or if there have been anymodifications, that this Lease is in full force and effect as modified, andsetting forth any modifications); (b) the date to which Basic Rent, SupplementalRent and other sums payable hereunder have been paid; (c) whether or not thereis an existing Unmatured Lease Default by Lessee in the payment of Basic Rent orany other sum of money due or required to be paid hereunder, and whether or notthere is any other existing Unmatured Lease Default by Lessee with respect towhich a notice of default has been served or of which the signer has actualknowledge, and, if there is any such Unmatured Lease Default, specifying thenature and extent thereof; and (d) whether or not there are any setoffs,defenses or counterclaims against enforcement of the obligations to be performedhereunder existing in favor of the party executing such certificate. Section 18.5. No Merger. Lessee agrees that there shall be no merger ofthis Lease or of any sublease under this Lease or of any leasehold orsubleasehold estate hereby or thereby created with the ownership interest in theEquipment or any part thereof by reason of the fact that the same person, firm,corporation or other entity may acquire or own or hold, directly or indirectly,(a) this Lease or any sublease or any leasehold or subleasehold estate createdhereby or thereby or any interest in this Lease or any such sublease or in anysuch leasehold or subleasehold estate and (b) (i) the ownership interest in theEquipment or any part thereof or (ii) the beneficial interest in the Equipment.This Lease shall not be terminated for any cause except as expressly providedherein and any instrument of transfer shall so provide. Section 18.6. Third-party Beneficiaries. Nothing in this Lease shall bedeemed to create any right in any Person not a party hereto (other than OwnerParticipant, Collateral Agent, Administrative Agent and each Lender and thepermitted successors and assigns of any such Person and any party hereto) andthis instrument shall not be construed in any respect to be a contract in wholeor in part for the benefit of a third party except as aforesaid. -34- 125 Section 18.7. Execution in Counterparts. This Lease, and any leasesupplemental hereto, may be executed in several counterparts, each of which soexecuted shall be deemed to be an original and in each case such counterpartsshall constitute but one and the same instrument. To the extent, if any, thatthis Lease and the Lease Supplements shall constitute chattel paper (within themeaning of any applicable Uniform Commercial Code provision), no securityinterest in this Lease and the Lease Supplements may be created through thetransfer or possession of any counterpart other than the original counterpart,which shall be identified for such purposes as the counterpart containing thereceipt therefor executed by Collateral Agent as mortgagee under the SecurityAgreement on the signature pages hereof or thereof. Section 18.8. Currency. All amounts and moneys referred to in thisLease shall be construed to mean money which at the time is lawful money of theUnited States of America. Section 18.9. Notices. Unless otherwise specifically provided herein,all notices, consents, directions, approvals, instructions, requests and othercommunications required or permitted by the terms hereof to be given to anyPerson shall be given in writing by United States mail, by nationally recognizedcourier service and any such notice shall become effective five (5) BusinessDays after being deposited in the mails, certified or registered return receiptrequested with appropriate postage prepaid or one Business Day after delivery toa nationally recognized courier service specifying overnight delivery and shallbe directed to the address of such Person as indicated on Schedule I to theParticipation Agreement. From time to time any party may designate a new addressfor purposes of notice hereunder by written notice to each of the other partieshereto in accordance with this Section. Section 18.10. Grant of Security Interest. Lessee shall be the owner ofthe Equipment on the certificates of title with respect thereto. The Equipmentshall be subject to this Lease. As security for its obligations under thisLease, Lessee does hereby grant to Lessor a first priority security interest in,and assigns, sets over and transfers to Lessor, its successors and assigns, allof its right, title and interest in, to, under and with respect to: (i) theEquipment, including any Replacement Units, (ii) all books and records relatingto the Equipment; (iii) all property that may, from time to time, be subjectedto this Lease and the Lien hereof by a Lease Supplement or otherwise; (iv) anyand all Subleases and all extensions and renewals thereof; (v) all rent and anyand all other sums of whatever nature due, now or hereafter, under or pursuantto the Subleases (including without limitation, the price paid pursuant to theexercise by any Sublessee of any purchase option contained in any Sublease) orin connection with the Equipment; (vi) to the extent the Equipment covered bythis Lease may constitute or be deemed to be Lessee's inventory ("Inventory"),such Inventory, which shall mean all Equipment offered or furnished under anycontract of service or intended for lease, any and all additions, attachments,accessories, rentals, accounts and contracts with respect to the Equipment whichmay now exist of hereafter arise, together with all rights thereunder and allrental and other payments and purchase options due and to become due thereunder,any and all proceeds payable for such property, all insurance, bonds and/orother proceeds of the property and all returned or repossessed Equipment now orat any time or times hereafter in possession of or under the control of Lesseeor Lessor; (vii) all accounts receivable now owned by Lessee or hereafteracquired or owned by Lessee, solely to the extent that such accounts arise orresult from any lease or other disposition of any of the Equipment or theInventory, including, but not limited to, any Sublease or any right of Lessee topayment for Equipment leased whether or not evidenced -35- 126by an instrument or chattel paper, and whether or not such right has been earnedby performance (such accounts, "Accounts Receivable"); (viii) all proceeds ofany insurance maintained with respect to any of the foregoing, all proceeds ofany condemnation, expropriation or requisition payable with respect to any ofthe foregoing and all proceeds payable or received with respect to an Event ofLoss, and (ix) all other products and proceeds of the foregoing. Lessor shallcontinue to retain the security interests granted herein in all of theforegoing, as security for the prompt payment when due of Rent and all othersums due and owing to Lessor pursuant to the terms of this Lease and theperformance and observance by Lessee of all the agreements, covenants andprovisions herein, until Lessee shall have made such payments and shall haveduly performed and observed all such agreements and covenants and provisionsthen required hereunder. Notwithstanding anything to the contrary containedherein, Lessor shall not exercise the rights granted to it hereunder unless anduntil an Unmatured Lease Default or Lease Event of Default has occurred and iscontinuing. Section 18.11. Headings, etc. The Table of Contents and headings of thevarious Articles and Sections of this Participation Agreement are forconvenience of reference only and shall not modify, define, expand or limit anyof the terms or provisions hereof. Section 18.12. GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BEGOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING ANYCONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OFTHE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,VALIDITY AND PERFORMANCE. Section 18.13. Severability. Any provision of this Lease that isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction. Section 18.14. Liability Limited. (a) The parties hereto agree that except as specifically set forthherein or in any other Operate Document, the Trustee shall have no personalliability whatsoever to any other Participant, the Lessee, the Guarantor ortheir respective successors and assigns for any claim or obligation based on orin respect hereof or any of the other Operative Documents (including, withoutlimitation, the repayment of the Loans) or arising in any way from thetransactions contemplated hereby or thereby and recourse, if any, shall besolely had against the Trust Estate (it being acknowledged and agreed by eachparty hereto that all such personal liability of the Trustee is expressly waivedand released as a condition of, and as consideration for, the execution anddelivery of the Operative Documents by the Trustee); provided, however, that theTrustee shall be liable in its individual capacity (a) for its own willfulmisconduct or gross negligence, (b) breach of any of its representations,warranties or covenants under the Operative Documents, or (c) for any Tax basedon or measured by any fees, commission or compensation received by it for actingas the Trustee as contemplated by the Operative Documents. It is understood andagreed that the Trustee shall have no personal liability under any of the -36- 127Operative Documents as a result of acting pursuant to and consistent with any ofthe Operative Documents. Section 18.15. Further Assurances. The parties hereto shall promptlycause to be taken, executed, acknowledged or delivered, at the sole expense ofthe Lessee, all such further acts, conveyances, documents and assurances as theother parties may from time to time reasonably request in order to carry out andpreserve the security interests and liens (and the priority thereof) intended tobe created pursuant to this Lease, the other Operative Documents, and thetransactions thereunder (including, without limitation, the preparation,execution and filing of any and all Uniform Commercial Code financing statementsand other filings or registrations which the parties hereto may from time totime request to be filed or effected); provided, however, that the Lessee shallnot be required to pay expenses pursuant to this Section to the extent arisingfrom a breach or alleged breach by the Lenders or the Owner Participant of anyagreement entered into in connection with the assignment or participation of anyLoan or Equity Investment. The Lessee, at its own expense and without need ofany prior request from any other party, shall take such action as may benecessary (including any action specified in the preceding sentence), or as sorequested, in order to maintain and protect all security interests provided forhereunder or under any other Operative Document. Section 18.16. SUBMISSION TO JURISDICTION. THE LESSEE HEREBY SUBMITS TOTHE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THEDISTRICT OF THE COMMONWEALTH OF MASSACHUSETTS FOR PURPOSES OF ALL LEGALPROCEEDINGS ARISING OUT OF OR RELATING TO THIS PARTICIPATION AGREEMENT OR ANY OFTHE OTHER OPERATIVE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. THELESSEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTIONWHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCHPROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDINGBROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. Section 18.17. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY ANDINTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OFANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,THIS PARTICIPATION AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OFCONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OFANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOTSEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH AJURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 18.16HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NOEXCEPTIONS. EACH OBLIGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL ANDSUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACHOTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS AMATERIAL INDUCEMENT FOR EACH OF THE LESSOR AND THE -37- 128LENDERS ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVEDOCUMENT. Section 18.18. Nature of Transaction. Lessee and Lessor intend that thetransactions evidenced by this Lease and the Operative Documents constituteoperating leases pursuant to FASB 13 for accounting purposes. To the extent thatthis Lease and the Operative Documents reflect the lease form alone, they do sofor convenience only. For purposes of all income, franchise and other taxesimposed upon or measured by income, Lessee and Owner Participant intend thatthis Lease and the transaction contemplated by the Operative Documents shall betreated as a loan to Lessee secured by the Equipment, with Lessee as owner ofthe Equipment, and that all payments to Lessor hereunder of Basic Rent,Termination Value, Net Proceeds of Sale or any deficiency pursuant to Section17.3 shall be treated as payments of principal and interest, as appropriate.Guarantor and the Owner Participant may only take deductions, credits,allowances and other reporting positions on their respective returns, reportsand statements which are consistent with such treatment, unless required to dootherwise by an appropriate taxing authority or pursuant to a clear change inApplicable Law (an "Inconsistent Position"); provided, however, that if (i) anappropriate Governmental Authority or a clear change in Applicable Law requiresthe Owner Participant or Guarantor to take an Inconsistent Position, such partyshall promptly notify the other party and (ii) Owner Participant is required totake an Inconsistent Position (or does so pursuant to a notice from theGuarantor) other than due to a change in Applicable Law, Owner Participant shallpay to the Guarantor, or Guarantor shall pay to Owner Participant, as the casemay be, such amount or from time to time such amounts, as calculated by OwnerParticipant in its sole good faith discretion, as will put Owner Participant inthe same position on an After-Tax Basis as if all of its taxes referred to inthe first sentence of this Section 18.17 were calculated in accordance with thetreatment set forth therein. [Remainder of page intentionally left blank; signature pages follow.] -38- 129 IN WITNESS WHEREOF, the parties hereto have executed this Lease as ofthe date first set forth above. LESSOR: WABASH STATUTORY TRUST-2000, a Connecticut Statutory Trust By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Trustee By:______________________________________________ Name: Title: LESSEE: APEX TRAILER LEASING & RENTALS, L.P., a Delaware limited partnership By: Wabash National Corporation, a Delaware corporation, its general partner By:______________________________________________ Name: Title: 130 EXHIBIT A [Form of Lease Supplement] LEASE SUPPLEMENT NO. ____ Between WABASH STATUTORY TRUST - 2000, as Lessor and APEX TRAILER LEASING & RENTALS, L.P., as Lessee Dated as of ____________, 20__THIS LEASE SUPPLEMENT NO. ___ HAS BEEN MANUALLY EXECUTED IN COUNTERPARTS. TO THEEXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT NO. ___ CONSTITUTES CHATTEL PAPER (ASSUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANYAPPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE SUPPLEMENT NO. __MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF THISLEASE SUPPLEMENT NO. __ OTHER THAN COUNTERPART NO. 1. This is Counterpart No. __. 131 LEASE SUPPLEMENT NO. __, dated ____________, 20__, between WABASHSTATUTORY TRUST - 2000, a Connecticut business trust ("Lessor"), and APEXTRAILER LEASING & RENTALS, L.P., a Delaware limited partnership ("Lessee"). W I T N E S S E T H: WHEREAS, Lessor and Lessee have heretofore entered into that certainEquipment Lease, dated as of December 29, 2000 (herein called the "Lease") (allcapitalized terms used herein without definition shall have the meaningsspecified in Appendix A to the Participation Agreement dated as of December 29,2000 by and among Lessee, Guarantor, Lessor, Lenders, Fleet Capital Corporation,as Owner Participant and Fleet Capital Corporation, as Administrative Agent andCollateral Agent (as the same may be amended, modified or supplemented from timeto time, the "Participation Agreement")). The Lease provides for the executionand delivery from time to time of Lease Supplements, each substantially in theform hereof for the purpose of leasing specific Units of Equipment under theLease as and when delivered by Lessor to Lessee in accordance with the termsthereof; WHEREAS, the Lease relates to the Units of Equipment described below; NOW, THEREFORE, in consideration of the premises and other good andsufficient consideration, Lessor and Lessee hereby agree as follows: 2. Lessor has hereby delivered and leased to Lessee under the Lease,and Lessee has accepted and leased from Lessor under the Lease, as of the datehereof, the Units of Equipment more particularly identified on Annex A attachedhereto. 3. The aggregate Equipment Cost for the Equipment leased hereunder is$____________(1) 4. The aggregate amount of Advances attributable to the Equipmentleased hereunder is $________________(1)* 5. The aggregate principal amount of Loans attributable to theEquipment leased hereunder is $________________.(2) 6. The aggregate amount of Equity Investments attributable to theEquipment leased hereunder is $_________.(3)---------- (1) The aggregate Equipment Cost for the Equipment leased hereunder andthe aggregate amount of the Advances attributable to the Equipment leasedhereunder shall be the same amount and shall be determined as set forth in thedefinition of the "Equipment Cost". (2) The aggregate principal amount of the Loans attributable to theEquipment leased hereunder shall be equal to 96% of the Equipment Cost for theEquipment leased hereunder. (3) The aggregate amount of Equity Investments attributable to theEquipment leased hereunder shall be equal to 4% of the Equipment Cost of theEquipment leased hereunder. Lease Supplement No. 132 7. The amount of the Additional Collateral or the amount of the Letterof Credit is $______________. 8. The Equipment Cost for each Unit of Equipment described on Annex Ashall be the amount set forth opposite such Unit of Equipment on Annex A.(4) 9. The Initial Lease Term for the Equipment leased hereunder shallcommence on the date hereof and, except as otherwise provided in the Lease,shall end on June 30, 2002. 10. Lessee hereby confirms its agreement to pay Lessor, in accordancewith the terms of Article I of the Lease, Basic Rent and Supplemental Rent forthe Equipment leased hereunder throughout the Initial Lease Term and any RenewalTerm in accordance with Article I of the Lease. 11. The Maximum Lessee Risk Percentage with respect to the Equipmentleased hereunder, as of each Payment Date, is set forth on Schedule I attachedhereto. 12. The Maximum Lessor Risk Percentage with respect to the Equipmentleased hereunder, as of each Payment Date, is set forth on Schedule I attachedhereto. 13. All of the terms and provisions of the Lease are herebyincorporated by reference in this Lease Supplement to the same extent as iffully set forth herein. 14. This Lease Supplement may be executed in any number of counterparts(and each of the parties hereto shall not be required to execute the samecounterpart). Each counterpart of this Lease Supplement, including a signaturepage executed by each of the parties hereto, shall be an original counterpart ofthis Lease Supplement, but all of such counterparts together shall constituteone instrument. 15. This Lease Supplement shall in all respects be governed by, andconstrued in accordance with, the laws of the State of New York, including allmatters of construction, validity and performance.---------- (4) The sum of the Equipment Costs for all Units of Equipment describedon Annex A shall equal the Equipment Cost for the Equipment leased hereunder. -2- 133 IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplementto be duly executed on the day and year first above written. WABASH STATUTORY TRUST - 2000, Lessor By: State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Trustee By:_______________________________________ Name: Title: APEX TRAILER LEASING & RENTALS, L.P., Lessee By:________________________________________________ Name: Title: 134 ANNEX A DESCRIPTION OF LEASED EQUIPMENT Unit of Leased Equipment Unit Markings Principal Garage Equipment Cost ------------------------ ------------- ---------------- -------------- 135 Schedule I Payment Dates Occurring After Term Termination Value Maximum Lessee Maximum Lessor Commencement Date Percentage* Risk Percentage* Risk Percentage* 123456789...72*expressed as percentage of Equipment Cost of the Equipment (after payment ofBasic Rent on corresponding Payment Date). 136 Exhibit B [Attach Form of Sublease] 1 EXHIBIT 21.00 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK NAME OF STATE/COUNTRY OF % OF SHARES SUBSIDIARY INCORPORATION OWNED BY THE COMPANY (*) ---------- ------------- ------------------------ Wabash International, Inc. (Foreign Sales Corp.) U.S. Virgin Islands 100% Wabash National GmbH Germany 100% Fruehauf Trailer Services, Inc. Delaware 100% WNC Cloud Merger Sub, Inc. Arkansas 100% Cloud Oak Flooring Company, Inc. Arkansas 100% Wabash Funding Corp. Missouri 100% Wabash National L.P. Delaware 100%Apex Trailer Leasing & Rentals, L.P. Delaware 100% Wabash National Services L.P. Delaware 100% WTSI Technology Corp. Delaware 100% Wabash Technology Corp. Delaware 100% RoadRailer Bimodal Ltd. United Kingdom 100% Wabash do Brazil Brazil 100% RoadRailer Technology Development Company, Ltd. China 81% National Trailer Funding LLC Delaware 100% Continental Transit Corp Indiana 100% FTSI Canada, Ltd. Canada 100%* Includes both direct and indirect ownership by the parent, Wabash National Corporation 1 EXHIBIT 23.01 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTSAs independent public accountants, we hereby consent to the incorporation of ourreport included in this Form 10-K, into the Company's previously filedRegistration Statement File Nos. 33-49256, 33-65988, 33-90826, 333-29309 and333-54714. ARTHUR ANDERSEN LLPIndianapolis, Indiana,March 23, 2001.
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